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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
(Mark One)

    X             Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                   For the Fiscal Year Ended December 31, 2003

                Transition Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                    For the transition period from ___ to ___

                         Commission File Number: 0-22319
                            Patient Infosystems, Inc.
             (Exact Name of Registrant as Specified in its Charter)

            Delaware                                 16-1476509
            --------                                 ----------
   (State or other jurisdiction of                    (I.R.S. Employer
   incorporation or organization)                     Identification
                                                      No.)
      46 Prince Street
      Rochester, New York                                14607
      -------------------                                -----
   (Address of principal executive offices)            (Zip Code)
                  Registrant's telephone number, including area
                   code: (585) 242-7200 Securities registered
                      pursuant to Section 12(b) of the Act:
                                      None.

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

                     Common Stock, par value $.01 per share
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports)  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days:Yes _X_  No___

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

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes ___ No _X_

As of March 25, 2004,  the  aggregate  market value of the voting and  nonvoting
common  stock  held by  nonaffiliates  of the  registrant  was  $12,084,880  and
2,416,976 shares of common stock were outstanding.

As of March 30, 2004,  there were 6,002,854  shares of the issuer's common stock
outstanding.


            Portions of the Proxy Statement for the Registrant's 2002
               Annual Meeting of Stockholders to be filed prior to
            April 30, 2002 are incorporated by reference in Part III.
--------------------------------------------------------------------------------
<PAGE>

                                     PART I

Item 1. Description of Business.

General

     Patient Infosystems,  Inc. ("Patient  Infosystems") was incorporated in the
State of Delaware on  February  22, 1995 under the name DSMI Corp.,  changed its
name to Disease State Management, Inc. on October 13, 1995, and then changed its
name to  Patient  Infosystems,  Inc.  on June  28,  1996.  Patient  Infosystems'
principal executive offices are located at 46 Prince Street, Rochester, New York
14607 and its telephone number is 585-242-7200.  Patient  Infosystems'  Internet
address is www.ptisys.com.

     Patient   Infosystems  is  a  health  management   solutions  company  that
integrates  clinical  expertise  with  advanced  Internet,  call center and data
management  capabilities.  Founded  in 1995  as a  disease  management  company,
Patient  Infosystems has evolved to offer a comprehensive  portfolio of products
and services  designed to improve patient clinical outcomes and quality of life,
reduce  healthcare  costs and facilitate  patient-provider-payor  communication.
These products are now marketed under the label Care Team Connect for Health.

     Patient Infosystems has historically marketed its services to a broad range
of  clients,   including  self-insured  employers  and  trust  funds,  insurance
companies,  pharmaceutical  and  medical  equipment  and  device  manufacturers,
pharmacy benefit managers  ("PBMs"),  other healthcare  payors,  such as managed
care  organizations  ("MCOs") and  healthcare  providers,  including  integrated
delivery  networks   ("IDN's").   Current  marketing  efforts  are  targeted  to
self-insured  employers,  employer  groups,  union health and welfare funds, and
others who pay for the health care of defined populations.

     During its first two years of operations,  Patient  Infosystems  emphasized
the  development  of pure disease  management  programs,  which  accounted for a
substantial  portion of its revenue  through 1997.  However,  beginning in 1998,
Patient Infosystems devoted resources to the development of broader applications
of its  technology  platform,  and its  additional  products grew to account for
nearly 45% of the total  revenue of Patient  Infosystems  during the fiscal year
ended December 31, 2002.  During 2003, the Company further  expanded its product
mix to include  services in support of providers and their clinical  improvement
efforts.   These  services  include  support  for   development,   training  and
maintenance of clinical registry software,  consultative services in improvement
methodologies and support of web-based informational and reporting resources. On
December  31,  2003,  Patient  Infosystems   acquired  the  assets  of  American
Caresource  Corporation  ("ACS").  ACS provides  ancillary  benefits  management
services,  including a network of ancillary  specialty providers and value-added
services  that  assist  our  clients  control  the cost of a range of  ancillary
medical services.

     The Care Team Connect portfolio now represents 40% percent of the Company's
revenue;  innovation and improvement services for providers represent 60% of the
2003 revenue.


<PAGE>



Products and Capabilities

Care Team Connect for Health

          Care Team Connect for Health, which is Patient Infosystems'  principal
     product line, provides a complete solution for population health management
     that can be  marketed  as a  comprehensive  solution  or a set of  discrete
     services that complement a client's existing operations.  Care Team Connect
     integrates a number of components  that had  historically  been marketed by
     the Company as stand alone  products.  During the 2002 year,  the  clinical
     content of these components was revised and all components were migrated to
     an updated technology platform.  During 2003, the Care Team Connect product
     was expanded to include certain wellness  services,  as well as utilization
     management  and case  management  services,  provided  through  subcontract
     relationships  with partner  organizations.  Care Team Connect includes the
     following:

     o  24-hour nurse help/triage line,
     o  Population analysis and identification,
     o  Disease management services,
     o  Care management,
     o  Smoking cessation program,

     Nurse help line

          The Care Team Connect for Health nurse help line is a triage,  advice,
     referral and health-counseling  service that provides employees and members
     with  round-the-clock  access to registered nurses who use  algorithm-based
     assessment  tools and have access to provider  and/or network  information.
     The help line can provide users with  information  about a specific  health
     problems or answers to their  health-related  questions.  Use of nationally
     recognized  clinical  algorithms  assist  callers in  determining  the most
     cost-effective  options for acute care treatment and has  effectively  been
     able to  reduce  the use of  emergency  rooms  and  after  hours  physician
     contact.  Through the Nurse Help Line,  individuals  may also be identified
     for referral into disease management or case management  intervention.  The
     nurse help line is operated from Patient  Infosystems'  Utilization  Review
     Accreditation Commission ("URAC") accredited call center.

     Population analysis and identification

          As  part  of its  disease  management  services,  Patient  Infosystems
     provides  comprehensive  medical and  pharmaceutical  claims  analysis that
     includes the administration of proprietary  algorithms to identify patients
     with  chronic  disease and then  stratifies  them by level of risk for high
     resource utilization.

          The  stratification  algorithm  employed is  categorical  in nature as
     patients are classified into low,  moderate,  high and critical  groupings.
     The data  employed in the  algorithm  are both  nominal  (using claim codes
     known as "ICD9" and  procedure  codes  known as "CPT") and ratio  (usage of
     resources).  The nominal  data  determines  the  presence  of a  particular
     chronic condition and thus identifies patients with a specific condition. A
     combination  of the nominal and ratio data, as defined in the algorithm for
     each condition, determines the risk level for the individual patient.

          Following identification and stratification, patients/employees can be
     enrolled into the appropriate  (low,  moderate or high) disease  management
     intervention program.

          The first  time the  claims  analysis  is  completed  on the  client's
     historical  claims data,  the client will be provided with a summary report
     that  profiles  its  population  as related to health care  dollars  spent,
     prevalence  of disease,  and the numbers of identified  at-risk  members by
     risk  level.  Claims  data is used on a  retrospective  basis to assess the
     financial  impact of the Care Team Connect  programs and calculate  savings
     and return on investment.

     Disease management services

          Patient  Infosystems'  disease  management  services  are provided for
     individuals  with  a  diagnosis  of  asthma,  diabetes,   hypertension,  or
     congestive heart failure.  These services are comprehensive in approach and
     focus on both the medical  and  behavioral  aspects of chronic  health care
     management.  The programs involve clinical  assessments and the delivery of
     messages on  self-care,  medication  compliance  and  treatment  adherence.
     Through monitoring and on-going  assistance,  they empower the participants
     to become  more  proficient  and  proactive  in managing  their  disease or
     condition. By including 24-hour access to the nurse help line, participants
     always have a place to turn for  questions  or issues that arise with their
     disease.  The long-term  goal of Patient  Infosystems'  disease  management
     services is a judicious use of health care  resources  through  health care
     education, as well as reinforcement of the provider's treatment plan.

          The disease  management  programs are based on  nationally  recognized
     treatment   guidelines  for  each  disease  state.   The  programs  provide
     condition-specific  assessment,  support and education with  behavior-based
     interventions  according to the patient's  identified  risk level.  Each of
     Patient  Infosystems' chronic condition management programs is reviewed and
     updated as needed on an annual basis to assure that these programs  reflect
     current knowledge and practices in clinical management.

          Disease management  interventions include various components according
     to the  risk  level  of the  target  individual.  These  components  are as
     follows:

     ---------------------------------------------------------------------
                     o  Quality of life surveys
     Low risk:       o  Reminders
                     o  Static educational mailings
                     o  24-hour nurse help line
     ---------------------------------------------------------------------
                     o  Nurse engagement
     Moderate risk:  o  Quality of life surveys
                     o  Chronic condition management program
                     o  Reminders
                     o  Static educational mailings
                     o  24-hour nurse help line
     ---------------------------------------------------------------------
                     o  Nurse engagement
     High risk:      o  Quality of life surveys
                     o  "Gold" chronic condition management program
                     o  Telemonitoring signs and symptoms assessment
                     o  Reminders
                     o  Static educational mailings
                     o  24-hour nurse help line
     ----------------------------------------------------------------------
                     o  Dedicated registered nurse as disease care
     Critical risk:       manager
                     o  Baseline clinical assessment and treatment
                          action plan
                     o  Regularly scheduled on-going clinical patient
                          assessments
     ----------------------------------------------------------------------

          Disease management program components

          Nurse engagement call

               All moderate,  high and critical risk disease management programs
          begin with a nurse engagement call. The nurse care counselor  explains
          the specific program for which the member is targeted and the benefits
          of the  program,  while  starting  to  build a  relationship  with the
          member. The nurse care counselor confirms the patient's  acceptance to
          participate and obtains pertinent member information.

               The  nurse  intervention  assesses  specific  areas  of  clinical
          management based on national clinical practice guidelines. Specific to
          each disease, these include the following types of information:

          o  Healthcare utilization.
          o  Disease status.
          o  Functional status.
          o  Quality of care.
          o  Treatment adherence and self-care practices.
          o  Education/knowledge.
          o  Motivation and program evaluation.

               The assessment focuses on the most important health behaviors the
          patient must manage in order to effectively  control symptoms of their
          disease.

          Chronic condition management program

               Moderate  risk  patients  are  enrolled in our chronic  condition
          management programs. Each of the chronic condition management programs
          utilize a combination of telephone and mail  interventions  to monitor
          patients    while    providing    educational     information    about
          disease-specific treatment guidelines.

               By   providing   unique,   individually   tailored   intervention
          strategies,   Patient   Infosystems   provides   each   patient   with
          personalized,  educational feedback and positive  reinforcement,  both
          verbally   and  through   written   communication.   Each   telephonic
          intervention  also  generates  an on-demand  published  report for the
          patient's physician/case manager.

          "Gold" chronic condition management program

               High risk patients are enrolled in our "gold"  chronic  condition
          management program.  The "gold" program includes all of the components
          of the chronic condition  management  programs  described  previously,
          plus the incorporation of symptom assessment and monitoring throughout
          the duration of the contract.

          Quality of life re-assessment and on-going monitoring

               Quality of life surveys are  periodically  administered to assess
          patients' functional status.

          Educational mailings

               During the re-assessment and on-going  monitoring  portion of the
          program,  patients  receive  disease-specific  educational or reminder
          mailings.

          Reminders

               Patients are  periodically  reminded of preventive  measures they
          should take to better manage their health.


          Disease care management for critical risk patients

               Disease care management is a specialized  clinical  intervention.
          The highly specialized clinical support by a registered nurse provides
          the  management  and   coordination   of  patient  care  services  for
          critical-risk individuals in a population.

          The program's key functions are the following:

          1.   One-on-one support by a dedicated registered nurse.

          2.   Establishing  an  extensive  baseline  clinical   assessment  and
               treatment action plan.

          3.   Regularly  scheduled  on-going clinical patient  assessments that
               include extensive disease monitoring and surveillance.

               All  facets  of the  individual's  care are  comprehensively  and
          regularly   reviewed   by  the  disease   care   manager  and  regular
          communication is made with all members of the health care team.

               At any point during a disease care  management  intervention,  if
          the patient is assessed to require even more intense  management,  the
          Nurse will connect the patient with traditional case management.

     Care management services

          Care  management   programs  include  the  components  of  utilization
     management and case management and ensure that participants receive quality
     medical care at the best possible  price,  while  maximizing plan benefits.
     The programs assist in avoiding unnecessary expenditures with an objective,
     information-intensive   approach  that  combines   clinical  judgment  with
     accepted practice patterns.

          Care  management  services  are  provided  through  subcontracts  with
     partner  companies that are accredited by URAC. All policies and procedures
     reflect  compliance with URAC standards and are further developed to ensure
     compliance  with  the  legislative  requirements  of the  states  in  which
     utilization review functions are performed.

          The data collected from the Care Team Connect for Health interventions
     is stored in an integrated  information  warehouse which links the numerous
     programs and services.  This integrated data warehouse  allows our clients,
     the patient's  providers and other associated  service  providers access to
     program data as necessary in order to best manage the member's health.

     Smoking Cessation Services

          During  2003,  Patient  Infosystems  began  providing  the call center
     operations for a smoking  cessation  program which is owned by and marketed
     by Behavioral Solutions. Patient Infosystems has the right to independently
     market this program for direct sales.

Provider innovation and improvement support

          In 2003, Patient Infosystems  expanded its role in services to certain
     federally funded health centers that are sponsored by the Bureau of Primary
     Healthcare  through the Institute for Healthcare  Improvement  that promote
     disease  management  programs  directly  to the  providers  in  the  health
     centers.

     Population Health Disease Management Systems and Strategies

          Patient  Infosystems  provides  technical  assistance  to  the  health
     centers   relative  to  management  of  chronic   disease.   This  includes
     organizations such as the federal  government,  health plans, state primary
     care  associations,  and  the  National  Association  of  Community  Health
     Centers.

     Learning Organization Services

          Patient  Infosystems  serves  as  a  teaching  organization  promoting
     improvement in care delivery systems.  This includes  logistics support for
     learning  sessions,  training;  recruitment,  development  and  support  of
     faculty,  subject  matter  experts in key topics;  training in  improvement
     methods and knowledge management of best practices.  Topics include chronic
     disease  management,  idealized  clinical  practice design and the business
     case for planned care. Patient Infosystems  collaborates with the Institute
     for Healthcare Improvement on such initiatives.

     Technical assistance

          Patient   Infosystems   assists  with  the   development  of  clinical
     registries used to more  effectively  manage patients with chronic disease.
     Patient   Infosystems   services   include  (i)  project   management   and
     Implementation of a patient registry for federally qualified health centers
     through   a   national   initiative   known  as  the   Health   Disparities
     Collaboratives and (ii) Patient Infosystems  provides technical  assistance
     in web based reporting applications for clinical outcomes.  This project is
     administered  as  a  subcontract   through  the  Institute  for  Healthcare
     Improvement.

     Outcome Assessment, Data Collection and Reporting

          Patient Infosystems collects data about clinical,  financial,  quality
     of life and satisfaction. This data is analyzed and outcomes are reported.

Ancillary benefits management

          Ancillary  healthcare  services include a broad array of services that
     supplement  or support  the care  provided  by  hospitals  and  physicians,
     including the non-hospital,  non-physician services associated with surgery
     centers,   free-standing   diagnostic  imaging  centers,  home  health  and
     infusion, durable medical equipment, orthotics and prosthetics,  laboratory
     and many other services.  These ancillary services are provided to patients
     as benefits under Group Health plans and Workers Compensation plans.

     o  Home Health Services         o  Pain Management
     o  Surgical Centers             o  Pharmacy
     o  Laboratory Services          o  Respiratory Services
     o  Home Infusion therapy        o  Sleep Studies
     o  Chiropractic Services        o  Sub-Acute and Skilled Nursing facilities
     o  Diagnostic Imaging/Radiology o  Hospice Services
     o  Dialysis Services            o  Bone Growth Stimulators
     o  Durable Medical Equipment    o  OrthoticsOandaProstheticspy/Rehab

          ACS manages the  administration of these  non-hospital,  non-physician
     services.

          Through its contracts with over 5000 ancillary service providers (with
     over 13,000 sites nationwide), ACS is able to offer its clients direct cost
     savings  in the  form of  discounted  rates  for  contracted  services  and
     administrative cost savings by functioning as a single point of contact for
     managing  a  comprehensive  array  of  ancillary  benefits.   ACS  benefits
     management  services include processing the claims submitted by its covered
     providers,  re-pricing  the  claims,  submitting  the claims  for  payment,
     receiving and disbursing  claims payments and performing  customer  service
     functions for its clients and contracted providers.  For preferred provider
     organization  ("PPO"),   third  party  administrator  ("TPA")  and  similar
     clients,   contracting   with  ACS  also   allows  the  clients  to  market
     comprehensive, efficient and affordable ancillary service benefits to their
     payor customers.

          As part  of its  ancillary  benefits  management  services,  ancillary
     providers  submit  claims  at  full  retail  charges  to ACS  for  services
     performed  for  covered  members.  ACS  re-prices  these  claims  under the
     relevant  payor fee  schedules,  performs  electronic  conversion and HIPAA
     formatting  services,  and submits the re-priced  claims to the appropriate
     payors.  After adjudication of the claims by the Payor, the Payor issues an
     Explanation  of  Benefits  and check for each claim.  In most cases,  these
     checks  are sent to ACS.  ACS then pays the  providers  under the  relevant
     provider fee schedules.  The difference between the amounts received by ACS
     from its clients and the amounts  paid by ACS to its  contracted  providers
     represents ACS gross margin on its benefits management services.

          Value-added  services  that ACS  provides to its  clients  include the
     following:

     Ancillary network analysis.  ACS analyzes the available claims history from
     each client and develops a specific plan to meet their needs. This analysis
     identifies  high-volume  providers that are not already in ACS network. ACS
     attempts to contract with such  providers to maximize  discount  levels and
     capture rates.

     Ancillary out-of-network negotiations.  For services performed by providers
     outside of the ACS network, ACS negotiates a discounted rate for the client
     on a case specific basis.

     Ancillary  custom network.  ACS customizes its network to meet the needs of
     each client. In particular, ACS reviews the "out-of-network" claims history
     through its network  analysis  service and  develops a strategy to create a
     network that efficiently serves the client's needs. This may involve adding
     additional  providers for a client and removing  providers the client wants
     excluded from their network.

     Ancillary reimbursement.  ACS uses its network analysis to develop a single
     reimbursement level for all ancillary providers. ACS also processes denials
     and appeals for its clients and for its contracted providers.

     Ancillary  network  management.  ACS  manages  ancillary  service  provider
     contracts,  reimbursement and credentialing for its clients.  This provides
     administrative  benefits to ACS clients and reduces the burden on providers
     who  typically  must  supply  credentialing  documentation  and  engage  in
     contract negotiation with separate payors.

     Ancillary   utilization   management  support.  ACS  provides  support  for
     utilization and case management efforts used by each payor. ACS facilitates
     preauthorization   at  the  point  of  referral  based  on  pre-established
     criteria.  ACS also "flags" cases for  follow-up,  review,  and  concurrent
     reviews to ensure all the payor  guidelines  are  followed by each  service
     provider  and the  efficacy  of  services  and  progress  of the patient is
     satisfactory.  There  are a large  number  of high  demand  cases  that are
     subject to case management  efforts.  For those cases, ACS helps coordinate
     the  supporting  documentation  and  preparation  of  reports to manage and
     monitor progress and establishment of reserves for specific claims.

     Ancillary  systems  integration.  ACS has  created a  proprietary  software
     system that  enables it to manage many  different  customized  accounts and
     includes the following modules:

     o  Provider network management
     o  Credentialing
     o  Eligibility management and card printing
     o  Claims and case referral management
     o  Data transfer management/EDI
     o  Repricing and auto-adjudication
     o  Multi-level reimbursement management
     o  Posting, EOB, check, and e-funds processes
     o  Customer service management
     o  Directory management
     o  Claim repricing / adjudication
     o  Advanced data reporting

          Ancillary reporting.  ACS provides a complete suite of reports to each
     client monthly.  The reports cover  contracting  efforts and capture rates,
     discount  levels,  referral volumes by service category and complete claims
     and utilization reports.

          Ancillary claims management.  ACS provides claims management  services
     through its  operation  in  Pittsboro,  Indiana.  ACS can manage  ancillary
     claims flow,  both  electronic  and paper,  and integrate into the client's
     process  electronically  or through  repriced  paper  claims.  ACS can also
     perform a number of customized processes that add additional value for each
     client.  As  part  of  the  claims  management  process,  ACS  manages  the
     documentation   requirements  specific  to  each  payor.  When  claims  are
     submitted from the service  provider without  required  documentation,  ACS
     works with the provider to get the  documentation  so that the claim is not
     denied by the payor. This also saves labor costs for the payors.

          ACS  estimates  that  at  least  80% of all  claims  in ACS  ancillary
     categories  are submitted by paper.  ACS is able to provide a conversion of
     these paper claims into the  HIPAA-compliant  Electronic  Data  Interchange
     ("EDI") form through its scanning operations.

Sales and Marketing

     Through  1997,  Patient  Infosystems'  efforts  focused  primarily  on  the
development  of  disease  management   programs.   Beginning  in  1998,  Patient
Infosystems began aggressively  marketing the other services that its technology
platform  can   provide,   including   demand   management,   patient   surveys,
pharmaceutical  support  programs and outcomes  analysis.  During 2002 and 2003,
Patient  Infosystems  has marketed its  integrated  Care Team Connect for Health
product.  Its  target  market  is the  organization  that pays for  health  care
services on behalf of its members,  employees or  beneficiaries.  These industry
organizations  include  several  groups:   insurance  companies,   managed  care
organizations,  third  party  administrators  (TPA's),  Taft-Hartley  health and
welfare funds, purchasing coalitions, and self-funded employer groups.

     Sales and marketing  efforts for the ACS product line are currently focused
on healthcare payor organizations as well as certain  value-added  re-sellers in
the form of TPAs or PPOs. ACS spent several years developing its business model,
know-how,  infrastructure,  client base and  provider  base and until 2001,  ACS
focused on managing  ancillary benefits in the Workers  Compensation  market. In
early 2001, ACS expanded and refocused its business to address the management of
ancillary  benefits in the Group  Health  market.  It launched  its Group Health
initiatives by marketing to healthcare networks such as TPAs and PPOs. As of the
end of 2003,  ACS began to focus  its  marketing  efforts  on the  direct  payor
community.  This is in  alignment  with the  marketing  focus  for the Care Team
Connect product line.

     Patient Infosystems  currently employs a sales and marketing staff of three
persons to market its services. The Ancillary Network of ACS is marketed through
one full time sales  person and  independent  contractors  providing  additional
commission salespersons. In addition, the senior members of Patient Infosystems'
management are actively engaged in marketing Patient Infosystems' programs.

     Patient  Infosystems has agreements in place with several  organizations to
co-market Patient  Infosystems'  products and services.  These agreements are in
place with CBCA,  formerly USI  Administrators,  Inc.,  Gilsbar,  and Behavioral
Solutions. CBCA and Gilsbar are third-party administrators; Behavioral Solutions
is a subsidiary of Nelson Communications and the developers of the Quitting Your
Way  smoking  cessation  program.  These  agreements  permit  either  company to
co-market and sub-contract for the services of the other company.

Competition

     The market for health care  information  products and services is intensely
competitive.  Competitors  vary in size and in scope and breadth of products and
services  offered,  and Patient  Infosystems  competes with various companies in
each of its disease target markets.  Patient  Infosystems'  competitors  include
specialty  health care companies,  health care  information  system and software
vendors,  health care  management  organizations,  pharmaceutical  companies and
other  service  companies  within  the  health  care  industry.  Many  of  these
competitors  have  substantial  installed  customer  bases  in the  health  care
industry and the ability to fund significant product development and acquisition
efforts.  Patient Infosystems also competes against other companies that provide
statistical and data management  services,  including clinical trial services to
pharmaceutical companies.

Research and Development

     Research and development  expenses consist  primarily of salaries,  related
benefits and administrative costs allocated to Patient Infosystems' research and
development  personnel.  These personnel are actively involved in the conversion
of Patient  Infosystems'  technology  platform  to a fully  web-enabled  design.
Patient Infosystems' research and development expenses were $131,782, or 2.3% of
total revenues for the fiscal year ended December 31, 2003, $105,614, or 4.5% of
total  revenues,  for the fiscal year ended December 31, 2002, and $190,731,  or
12.0%, of total revenues,  for the fiscal year ended December 31, 2001.  Patient
Infosystems  anticipates  that the amount spent on research and development will
remain  relatively  constant  in future  periods as it  continues  its  internal
process to update its products.

Government Regulation

     The  health  care  industry,  including  the  current  business  of Patient
Infosystems and the expanded  operations of Patient  Infosystems,  including the
business of ACS, following the closing of the acquisition described in the Asset
Purchase Agreement,  is subject to extensive  regulation by both the Federal and
state  governments.  A number  of  states  have  extensive  licensing  and other
regulatory  requirements  applicable  to  companies  that  provide  health  care
services.  Additionally,  services  provided to health  benefit plans in certain
cases are subject to the provisions of the Employee  Retirement  Income Security
Act of 1974, as amended ("ERISA").

     Furthermore,  state laws govern the  confidentiality of patient information
through statutes and regulations that safeguard privacy rights. In addition,  on
August  21,  1996  Congress   passed  the  Health   Insurance   Portability  and
Accountability Act of 1996 ("HIPAA"),  P.L. 104-191.  This legislation  required
the Secretary of the  Department of Health and Human  Services to adopt national
standards for electronic health  transactions and the data elements used in such
transactions.  Patient  Infosystems  and its customers may be subject to Federal
and state laws and  regulations  that govern  financial  and other  arrangements
among health care providers.  Furthermore, Patient Infosystems and its customers
may be  subject  to  federal  and  state  laws  and  regulations  governing  the
submission of false  healthcare  claims to the  government  and private  payers.
Possible sanctions for violations of these laws and regulations  include minimum
civil penalties between $5,000-$10,000 for each false claim and treble damages.

     Therefor,   Patient   Infosystems  must   continually   adapt  to  changing
regulations. If Patient Infosystems' fails to comply with these applicable laws,
the company may be subject to fines, civil penalties, or criminal prosecution.

Employees

     As of March 1, 2004, Patient  Infosystems had 90 full time and 37 part-time
employees.

<PAGE>

                                  RISK FACTORS

Forward-Looking Statements

     When used in this and in future  filings  by Patient  Infosystems  with the
Securities and Exchange  Commission,  in Patient Infosystems' press releases and
in oral statements made with the approval of an authorized  executive officer of
Patient  Infosystems,  the words or phrases  "will  likely  result,"  "expects,"
"plans," "will continue," "is anticipated," "estimated," "project," or "outlook"
or similar  expressions  (including  confirmations  by an  authorized  executive
officer of Patient  Infosystems  of any such  expressions  made by a third party
with respect to Patient  Infosystems) are intended to identify  "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995.  Patient  Infosystems  wishes to  caution  readers  not to place  undue
reliance on any such forward-looking  statements, each of which speak only as of
the date made.  Such  statements are subject to certain risks and  uncertainties
that could cause actual results to differ  materially from  historical  earnings
and  those  presently  anticipated  or  projected.  Patient  Infosystems  has no
obligation to publicly  release the result of any revisions  that may be made to
any forward-looking statements to reflect anticipated or unanticipated events or
circumstances occurring after the date of such statements.

     An investment in Patient Infosystems' common stock is speculative in nature
and involves a high degree of risk. No investment in Patient Infosystems' common
stock  should be made by any person who is not in a position  to lose the entire
amount of such investment.

Working Capital Shortfalls;  Urgent Need for Working Capital, Possible Cessation
of Operations

     Patient  Infosystems  has never earned a profit and has  depended  upon the
over  $30m that the  Company  has  raised to date  through  its  initial  public
offering,  private  placements  of its equity  securities  and debt, to fund its
working capital requirements.  Patient Infosystems incurred an operating loss of
approximately $0.6 million with a net loss of approximately $3.4 million for the
year ended  December 31, 2003 and had an  approximate  $2.8  million  deficit in
working capital and shareholders' equity of approximately $2 million at December
31, 2003. As of December 31, 2003, Patient  Infosystems had total liabilities of
$7,174,782 and a working capital deficit of $2,808,649.  Since May 2003, Patient
Infosystems' operation has been supported  substantially by its operational cash
flow.  On December  31,  2003,  Patient  Infosystems  acquired the assets of and
assumed the  liabilities  for  American  Caresource  Corporation  and placed the
operational  assets and  liabilities  into a wholly-owned  subsidiary,  American
Caresource  Holdings,  Inc.  ("ACS").  It is  anticipated  that ACS will require
significant  additional  working capital until it can fund its operational needs
from  operational  cash flow, if at all.  Existing  working capital will last no
more than a few months, and the Company  anticipates that it will be required to
raise at least an additional $2 million in 2004 to sustain the operation of ACS.
As with any  forward-looking  projection,  no assurances can be given concerning
the  outcome  of  Patient   Infosystems'   actual  financial  status  given  the
substantial  uncertainties  that exist.  There can be no assurances that Patient
Infosystems  can raise either the required  working  capital through the sale of
its securities or that Patient  Infosystems  can borrow the  additional  amounts
needed.  If it is unable to  identify  additional  sources of  capital,  Patient
Infosystems will likely be forced to curtail its operations or the operations of
ACS.  As a result of the  above,  the  Independent  Auditors'  Report on Patient
Infosystems'  consolidated financial statements appearing at Item 13 includes an
emphasis paragraph  indicating that Patient  Infosystems'  recurring losses from
operations  and  negative  working  capital  raise  substantial  doubt about its
ability to continue as a going concern. The accompanying  consolidated financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

ACS' History of Operating Losses

     ACS has incurred  losses in each of the past four years and has not,  since
its  inception,  operated  profitability.  There  can be no  assurance  that the
acquisition  of ACS will  result in an  increase  in  revenue  or cash  flows of
Patient Infosystems.

     During the last six months,  ACS has received  written  notification of the
termination  of  contractual  relations  from Pinnacol  Assurance and two of its
other customers  which in the aggregate  accounted for over 56% of ACS' revenues
during the  fiscal  year ended  December  31,  2003.  The  termination  of these
contracts will result in a significant  reduction of ACS'  revenues.  Although a
variety of reasons may be provided for the  termination  of each of the customer
agreements, the termination of such an extensive amount of customer business may
reflect  a  substantial  level of  customer  dissatisfaction  with the  services
provided  by ACS.  Although  Patient  Infosystems  believes  that it can provide
assistance to ACS and that in combination with Patient Infosystems,  ACS will be
able to provide better  services,  no assurance can be given that more customers
will not  terminate  their  relationships  with ACS following the closing of the
Acquisition.  In addition,  ACS generally does not have long-term contracts with
its other customers. Significant declines in the level of use of ACS services by
one or more of its remaining  customers could have a material  adverse effect on
ACS' business and results of operations.  Additionally, an adverse change in the
financial condition of any of these customers,  including an adverse change as a
result of a change in governmental or private reimbursement programs, could have
a material adverse effect on its business.

History of Operating Losses; Continued Limited Patient Enrollment

     Patient  Infosystems  has  incurred  losses  in  every  quarter  since  its
inception in February 1995. Patient  Infosystems'  ability to operate profitably
is  dependent  upon its  ability  to  develop  and  market  its  products  in an
economically  successful manner. To date, Patient Infosystems has been unable to
do so. No  assurances  can be given  that  Patient  Infosystems  will be able to
generate revenues or ever operate profitably in the future.

     Patient Infosystems'  prospects must be considered in light of the numerous
risks, expenses,  delays and difficulties  frequently encountered in an industry
characterized  by  intense  competition,  as well as the risks  inherent  in the
development  of  new  programs  and  the   commercialization   of  new  services
particularly  given its failure to date to operate  profitably.  There can be no
assurance  that  Patient   Infosystems   will  achieve   recurring   revenue  or
profitability on a consistent basis, if at all.

     Patient Infosystems currently has patients enrolled in its disease-specific
programs.  Through January 2004, an aggregate of  approximately  775,000 persons
have been enrolled in Patient Infosystems'  programs.  While Patient Infosystems
has been able to enroll a sufficient number of patients to cover the cost of its
programs,  it still has not been able to generate sufficient  operational margin
to achieve a net profit.

Significant Customer Concentration

     During 2000, a significant  customer ceased operation of services  supplied
by Patient  Infosystems,  which had a material  adverse effect on the results of
operations.  As of December 31, 2003, Patient Infosystems now has more customers
than it did at  December  31,  2001 or 2002.  While  the  customer  base is more
diverse,  there is still a  significant  concentration  of Patient  Infosystems'
business in a small number of  customers,  with several of Patient  Infosystems'
most  significant  contracts  being  with  IHI,  CBCA  and CHA  Health.  Patient
Infosystems  expects that its sale of services will be  concentrated  in a small
number of customers for the foreseeable  future.  Consequently,  the loss of any
one of its customers could have a material adverse effect on Patient Infosystems
and its operations. There can be no assurance that customers will maintain their
agreements with Patient  Infosystems,  enroll a sufficient number of patients in
the programs developed by Patient Infosystems for Patient Infosystems to achieve
or maintain  profitability,  or that customers  will renew their  contracts upon
expiration, or on terms favorable to, Patient Infosystems.

     ACS'  five  largest  (including  its  non-continuing  customers)  customers
account for  approximately 85% of its revenues.  In addition,  ACS does not have
long-term  contracts  with  its  customers.  The  loss of one or  more of  these
customers,  or an adverse  change in the  financial  condition of one or more of
these  customers,  could  have a material  adverse  effect on the  business  and
results of operations of Patient Infosystems.

Consequences of the Need to Raise Additional Working Capital

     As Patient  Infosystems  seeks  additional  financing or  purchases,  it is
likely that it will issue a substantial  number of additional shares that may be
extremely  dilutive to the current  stockholders  and required  substantial  and
material charges to earnings which will impact the net loss  attributable to the
common  shareholders.  As a result,  the value of  outstanding  shares of common
stock could decline further.

Only One Independent Director; No Separate Audit Committee

     The Board of Directors of Patient  Infosystems  now only  consists of three
persons. One director, Mr. Chaufournier,  is also the Chief Executive Officer of
Patient  Infosystems.  It is  anticipated  that it will be  difficult to attract
additional independent directors to join the Board of Directors.  Currently, the
Board  of  Directors  meets  as the  Audit  Committee.  There  is  currently  no
independent  director  who  qualifies  as a qualified  audit  committee  finance
expert.  The Company is seeking to identify  additional persons who can serve as
independent  members of the Board of  Directors  and who may serve as members of
its Audit Committee.

Terminability of Agreements

     Patient   Infosystems'  current  services  agreements  with  its  customers
generally  automatically  renew and may be terminated by those customers without
cause upon notice of between 30 and 90 days. In general,  customer contracts may
include  significant  performance  criteria  and  implementation  schedules  for
Patient  Infosystems.  Failure to satisfy such  criteria or meet such  schedules
could result in termination of the agreements.

New Concept; Uncertainty of Market Acceptance;  Limitations of Commercialization
Strategy

     In connection with the  commercialization  of Patient  Infosystems'  health
information  system,  Patient  Infosystems is marketing  relatively new services
designed to link patients,  health care providers and payors in order to provide
specialized disease management services for targeted chronic diseases.  However,
at this time,  services  of this type have not gained  general  acceptance  from
Patient  Infosystems'  customers.  This is still  perceived to be a new business
concept in an industry  characterized by an increasing number of market entrants
who have introduced or are developing an array of new services. As is typical in
the case of a new  business  concept,  demand  and market  acceptance  for newly
introduced services are subject to a high level of uncertainty, and there can be
no  assurance  as to  the  ultimate  level  of  market  acceptance  for  Patient
Infosystems'  system,  especially  in the  health  care  industry,  in which the
containment of costs is emphasized.  Because of the subjective nature of patient
compliance,  Patient Infosystems may be unable, for an extensive period of time,
to develop a significant  amount of data to demonstrate  to potential  customers
the  effectiveness  of its  services.  Even after such time, no assurance can be
given  that  Patient  Infosystems'  data  and  results  will  be  convincing  or
determinative  as to the success of its system.  There can be no assurance  that
increased  marketing  efforts  and the  implementation  of Patient  Infosystems'
strategies  will result in market  acceptance  for its services or that a market
for Patient Infosystems' services will develop or not be limited.

Unpredictability of Patient Behavior May Affect Success of Programs

     The ability of Patient  Infosystems to monitor and modify patient  behavior
and to provide information to health care providers and payors, and consequently
the success of Patient Infosystems' disease management system, is dependent upon
the accuracy of information received from patients.  Patient Infosystems has not
taken and does not expect that it will take,  specific measures to determine the
accuracy of information  provided to Patient  Infosystems by patients  regarding
their medical histories. No assurance can be given that the information provided
to Patient Infosystems by patients will be accurate. To the extent that patients
have  chosen not to comply  with  prescribed  treatments,  such  patients  might
provide  inaccurate  information to avoid  detection.  Because of the subjective
nature of medical  treatment,  it will be difficult for Patient  Infosystems  to
validate or confirm any such information. In the event that patients enrolled in
Patient  Infosystems'  programs provide inaccurate  information to a significant
degree,   Patient  Infosystems  would  be  materially  and  adversely  affected.
Furthermore,  there can be no assurance  that patient  interventions  by Patient
Infosystems will be successful in modifying patient behavior,  improving patient
health or reducing costs in any given case.  Many  potential  customers may seek
data from Patient  Infosystems with respect to the results of its programs prior
to retaining it to develop new disease  management  or other health  information
programs. Patient Infosystems' ability to market its system to new customers may
be limited if it is unable to demonstrate successful results for its programs.

Competition

     The market for health care  information  products and services is intensely
competitive  and we expect this  competition  to increase.  Patient  Infosystems
competes with various  companies in each of its disease target markets.  Many of
Patient   Infosystems'   competitors  have   significantly   greater  financial,
technical, product development and marketing resources than Patient Infosystems.
Furthermore,  other major information,  pharmaceutical and health care companies
not  presently  offering  disease  management  or other health care  information
services may enter the markets in which Patient  Infosystems intends to compete.
In  addition,  with  sufficient  financial  and other  resources,  many of these
competitors may provide services similar to those of Patient Infosystems without
substantial  barriers.  Patient  Infosystems  does not possess any patents  with
respect to its integrated information capture and delivery system.

     Patient  Infosystems'  competitors include specialty health care companies,
health care  information  system and software  vendors,  health care  management
organizations,  pharmaceutical  companies and other service companies within the
health care  industry.  Many of these  competitors  have  substantial  installed
customer  bases in the health care industry and the ability to fund  significant
product development and acquisition  efforts.  Patient Infosystems also competes
against other companies that provide  statistical and data management  services,
including clinical trial services to pharmaceutical companies.

     Patient Infosystems believes that the principal  competitive factors in its
market are the ability to link patients,  health care providers and payors,  and
provide the relevant health care information at an acceptable cost. In addition,
Patient  Infosystems  believes  that the  ability to  anticipate  changes in the
health care  industry  and  identify  current  needs are  important  competitive
factors.  There can be no assurance that  competitive  pressures will not have a
material adverse effect on Patient Infosystems.

Substantial Fluctuation in Quarterly Operating Results

     Patient  Infosystems'  results of operations have fluctuated  significantly
from quarter to quarter as a result of a number of factors, including the volume
and timing of sales and the rate at which customers implement disease management
and  other  health  information   programs  within  their  patient  populations.
Accordingly,  Patient  Infosystems'  future  operating  results are likely to be
subject to variability  from quarter to quarter and could be adversely  affected
in any particular quarter.

Dependence on Data Processing and Telephone Equipment

     The business of Patient Infosystems is dependent upon its ability to store,
retrieve,  process  and  manage  data  and to  maintain  and  upgrade  its  data
processing  capabilities.  Interruption of data processing  capabilities for any
extended length of time, loss of stored data, programming errors, other computer
problems or  interruptions  of telephone  service could have a material  adverse
effect on the business of Patient Infosystems.

Quality Control

     Patient  Infosystems  has developed  quality control  measures  designed to
insure that information obtained from patients is accurately  transcribed,  that
reports covering each patient contact are delivered to health care providers and
patients  and  that  Patient   Infosystems'   personnel  and   technologies  are
interacting  appropriately  with  patients  and health care  providers.  Quality
control systems include random monitoring of telephone calls, patient surveys to
confirm patient  participation and effectiveness of the particular program,  and
supervisory reviews of telephone agents.

Patient  Infosystems  may have  difficulty  integrating the business of ACS with
existing operations

     The  acquisition of ACS will involve the  integration of a company that has
previously  operated  in an  entirely  different  business  than that of Patient
Infosystems.  Patient  Infosystems  cannot  assure you that the  integration  of
Patient Infosystems with ACS will be successfully completed without encountering
difficulties  or  experiencing  the  loss  of  key  Patient  Infosystems  or ACS
employees,  customers or suppliers,  or that the benefits from such  integration
will be realized.  In addition,  Patient  Infosystems cannot assure you that the
management  teams of ACS and Patient  Infosystems  will be able to  successfully
work with each other.

Government Regulation

     The  health  care  industry,  including  the  current  business  of Patient
Infosystems and the expanded  operations of Patient  Infosystems,  including the
business  of ACS,  is subject to  extensive  regulation  by both the Federal and
state  governments.  A number  of  states  have  extensive  licensing  and other
regulatory  requirements  applicable  to  companies  that  provide  health  care
services.  Additionally,  services  provided to health  benefit plans in certain
cases are subject to the provisions of the Employee  Retirement  Income Security
Act of 1974, as amended ("ERISA") and may be affected by other state and Federal
statutes.  Generally,  state laws  prohibit the practice of medicine and nursing
without a license.  Many  states  interpret  the  practice of nursing to include
health  teaching,  health  counseling,  the provision of care  supportive to, or
restorative  of,  life and well  being and the  execution  of  medical  regimens
prescribed by a physician.  Accordingly,  to the extent that Patient Infosystems
assists  providers in improving  patient  compliance by  publishing  educational
materials  or  providing  behavior  modification  training  to  patients,   such
activities could be deemed by a state to be the practice of medicine or nursing.
Although Patient Infosystems has not conducted a survey of the applicable law in
all 50 states, it believes that it is not engaged in the practice of medicine or
nursing.  There  can  be  no  assurance,   however,  that  Patient  Infosystems'
operations  will not be challenged as  constituting  the unlicensed  practice of
medicine or nursing.  If such a challenge were made  successfully  in any state,
Patient  Infosystems could be subject to civil and criminal penalties under such
state's law and could be required to restructure its contractual arrangements in
that state.  Such  results or the  inability  to  successfully  restructure  its
contractual  arrangements,  could  have a  material  adverse  effect on  Patient
Infosystems.

     Patient  Infosystems is subject to state laws governing the confidentiality
of patient information. A variety of statutes and regulations exist to safeguard
privacy and  regulating the  disclosure  and use of medical  information.  State
constitutions  may provide  privacy rights and states may provide private causes
of action for  violations  of an  individual's  "expectation  of privacy."  Tort
liability  may  result  from   unauthorized   access  and  breaches  of  patient
confidence. Patient Infosystems intends to comply with state law and regulations
governing medical information privacy.

     In  addition,  on August 21,  1996  Congress  passed  the Health  Insurance
Portability  and  Accountability  Act of  1996  ("HIPAA"),  P.L.  104-191.  This
legislation  required  the  Secretary  of the  Department  of  Health  and Human
Services to adopt national standards for electronic health  transactions and the
data  elements  used in such  transactions.  The  Secretary is required to adopt
safeguards  to  ensure  the  integrity  and   confidentiality   of  such  health
information.  Violation of the standards is punishable by fines and, in the case
of negligent or  intentional  disclosure  of  individually  identifiable  health
information,  imprisonment. The Secretary has promulgated final rules addressing
the  standards,  however,  the  implementation  time line  extends into 2003 and
beyond.  Although Patient Infosystems intends to comply with all applicable laws
and regulations  regarding medical information  privacy,  failure to do so could
have an adverse effect on Patient Infosystems' business.

     Patient  Infosystems  and its customers may be subject to Federal and state
laws and regulations that govern financial and other  arrangements  among health
care providers.  These laws prohibit  certain fee splitting  arrangements  among
health care  providers,  as well as direct and indirect  payments,  referrals or
other  financial  arrangements  that are  designed  to induce or  encourage  the
referral of patients to, or the  recommendation  of, a  particular  provider for
medical  products  and  services.  Possible  sanctions  for  violation  of these
restrictions include civil and criminal penalties. Specifically, HIPAA increased
the  amount  of civil  monetary  penalties  from  $2,000  to  $10,000.  Criminal
penalties range from misdemeanors, which carry fines of not more than $10,000 or
imprisonment for not more than one year, or both, to felonies, which carry fines
of not more than $25,000 or imprisonment  for not more than five years, or both.
Further,  criminal violations may result in permanent  mandatory  exclusions and
additional  permissive  exclusions from  participation  in Medicare and Medicaid
programs.

     Furthermore,  Patient  Infosystems  and its  customers  may be  subject  to
federal  and  state  laws and  regulations  governing  the  submission  of false
healthcare claims to the government and private payers.  Possible  sanctions for
violations of these laws and regulations include minimum civil penalties between
$5,000-$10,000 for each false claim and treble damages.

     Regulation  in the  health  care  field  is  constantly  evolving.  Patient
Infosystems is unable to predict what government regulations,  if any, affecting
its business may be promulgated  in the future.  Patient  Infosystems'  business
could be  adversely  affected by the  failure to obtain  required  licenses  and
governmental  approvals,  comply  with  applicable  regulations  or comply  with
existing or future laws, rules or regulations or their interpretations.

Significant and Extensive Changes in the Health Care Industry

     The health care  industry is subject to changing  political,  economic  and
regulatory  influences that may affect the procurement  practices and operations
of health care industry participants. Several lawmakers have announced that they
intend to propose programs to reform the U.S. health care system. These programs
may contain proposals to increase governmental involvement in health care, lower
reimbursement  rates and otherwise change the operating  environment for Patient
Infosystems and its targeted  customers.  Health care industry  participants may
react to these  proposals  and the  uncertainty  surrounding  such  proposals by
curtailing  or  deferring  certain  expenditures,  including  those for  Patient
Infosystems'  programs.  Patient Infosystems cannot predict what impact, if any,
such changes in the health care industry  might have on its business,  financial
condition and results of operations. In addition, many health care providers are
consolidating  to create larger health care  delivery  enterprises  with greater
regional market power. As a result, the remaining enterprises could have greater
bargaining  power,  which  may lead to price  erosion  of  Patient  Infosystems'
programs.  The failure of Patient  Infosystems to maintain adequate price levels
could have a material adverse effect on its business.

Dependence on Customers for Marketing and Patient Enrollment

     Patient Infosystems has limited financial, personnel and other resources to
undertake extensive marketing  activities.  One element of Patient  Infosystems'
marketing strategy involves marketing specialized disease management programs to
pharmaceutical  companies and managed care  organizations,  with the intent that
those  customers will market the program to parties  responsible for the payment
of health care costs,  who will enroll  patients in the  programs.  Accordingly,
Patient  Infosystems,  will to a degree,  be dependent upon its customers,  over
whom it has no control, for the marketing and implementation of its programs and
for the receipt of valid patient  information.  The timing and extent of patient
enrollment is completely within the control of Patient  Infosystems'  customers.
Patient   Infosystems  has  faced  difficulty  in  receiving   reliable  patient
information from certain  customers,  which has hampered its ability to complete
certain of its projects.  To the extent that an adequate  number of patients are
not enrolled in the program,  or enrollment of initial patients by a customer is
delayed for any reason,  Patient  Infosystems'  revenue may be  insufficient  to
support its activities.

Control of Patient Infosystems

     The  executive  officers,  directors  and certain  stockholders  of Patient
Infosystems who  beneficially  own in the aggregate  approximately  87.5% of the
outstanding  common  stock  control  Patient  Infosystems.  As a result  of such
ownership,  these  stockholders,  in the event  they act in  concert,  will have
control  over the  management  policies of Patient  Infosystems  and all matters
requiring  approval by the  stockholders of Patient  Infosystems,  including the
election of directors.

Potential Liability and Insurance

     Patient  Infosystems will provide  information to health care providers and
managed care organizations upon which determinations affecting medical care will
be made.  As a result,  it could share in potential  liabilities  for  resulting
adverse medical consequences to patients. In addition, Patient Infosystems could
have  potential  legal  liability in the event it fails to record or disseminate
correctly  patient  information.  Patient  Infosystems  maintains  an errors and
omissions  insurance policy with coverage of $5 million in the aggregate and per
occurrence.  Although Patient Infosystems does not believe that it will directly
engage in the  practice of medicine or direct  delivery of medical  services and
has not  been a party  to any  such  litigation,  it  maintains  a  professional
liability  policy  with  coverage  of  $5  million  in  the  aggregate  and  per
occurrence.  There can be no assurance that Patient Infosystems'  procedures for
limiting liability have been or will be effective, that Patient Infosystems will
not be subject to litigation  that may  adversely  affect  Patient  Infosystems'
results of operations, that appropriate insurance will be available to it in the
future at acceptable cost or at all or that any insurance  maintained by Patient
Infosystems  will  cover,  as to scope or amount,  any  claims  that may be made
against Patient Infosystems.

Intellectual Property

     Patient Infosystems considers its methodologies,  processes and know-how to
be proprietary. Patient Infosystems seeks to protect its proprietary information
through  confidentiality  agreements  with its employees.  Patient  Infosystems'
policy is to have employees enter into  confidentiality  agreements that contain
provisions  prohibiting  the  disclosure of  confidential  information to anyone
outside  Patient  Infosystems.  In addition,  the policy  requires  employees to
acknowledge,  and,  if  requested,  assist in  confirming  Patient  Infosystems'
ownership of any new ideas,  developments,  discoveries or inventions  conceived
during employment, and requires assignment to Patient Infosystems of proprietary
rights to such matters that are related to Patient Infosystems' business.

Item 2. Description of Properties.

     Patient  Infosystems'  executive  and  corporate  offices  are  located  in
Rochester,  New York in approximately  6,500 square feet of leased office space.
American Caresource Holdings, Inc., a subsidiary of Patient Infosystems,  leases
18,400  square  feet of office  space in Irving, Texas and 7,500  square feet of
office space in Pittsboro,  Indiana.  These  operating  leases expire at various
times between April 30, 2004 and July 31, 2008. Patient  Infosystems  expects to
extend those leases that expire during 2004 for a minimum of 12 months.

     Patient  Infosystems  believes its offices are suitable to meet its current
needs.

Item 3. Legal Proceedings.

     Neither Patient Infosystems, nor any of its subsidiaries, is a party to any
material legal proceeding,  nor, to the knowledge of Patient Infosystems, is any
such proceeding threatened against it or any of its subsidiaries.

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

     On December 31, 2003,  Patient  Infosystems  held a special  meeting of its
stockholders to vote on the following proposals:

1.   Approval of an amendment to the Company's  Certificate of  Incorporation to
     increase the number of authorized  shares of capital  stock to  100,000,000
     divided into 80,000,000  shares of common stock,  par value $0.01 per share
     and 20,000,000 shares of preferred stock, par value $0.01 per share.

     Vote results, Proposal 1:

     ------------------------ ---------------------- -----------------------
              For                   Against                Abstain
     ------------------------ ---------------------- -----------------------
          48,170,647                445,940                 6,920
     ------------------------ ---------------------- -----------------------

     This proposal was approved by the majority of shares voted.

2.   Approval of an amendment to the Company's  Certificate of  Incorporation to
     change the Company's name to American CareSource Corporation.

     Vote results, Proposal 2:

     ------------------------ ---------------------- -----------------------
              For                   Against                Abstain
     ------------------------ ---------------------- -----------------------
          21,860,691              28,408,122                11,731
     ------------------------ ---------------------- -----------------------

     This proposal was NOT approved by the majority of shares voted.

3.   Approval of an amendment to the Company's  Certificate of  Incorporation to
     provide for a 1 for 12 reverse stock split.

     Vote results, Proposal 3:

     ------------------------ ---------------------- -----------------------
              For                   Against                Abstain
     ------------------------ ---------------------- -----------------------
          50,220,884                56,700                  2,890
     ------------------------ ---------------------- -----------------------

     This proposal was approved by the majority of shares voted.

4.   Approval of an amendment to the Company's Amended and Restated Stock Option
     Plan to increase  the number of  authorized  shares  reserved  for issuance
     under the plan from 1,680,000 to 3,500,000 shares.

     Vote results, Proposal 4:

     ------------------------ ---------------------- -----------------------
              For                   Against                Abstain
     ------------------------ ---------------------- -----------------------
          48,506,897                112,710                 3,900
     ------------------------ ---------------------- -----------------------

     This proposal was approved by the majority of shares voted.

<PAGE>

                                     PART II


Item 5. Market  Price for  Registrant's  Common  Equity and Related  Stockholder
     Matters.

(a)  Market Information

     Patient  Infosystems'  common  stock  is  traded  on  the  Over-the-Counter
Bulletin  Board (the "OTC Bulletin  Board") under the symbol PATY. The following
table  sets  forth,  for the  periods  indicated,  the range of high and low bid
quotations for Patient  Infosystems'  common stock as quoted on the OTC Bulletin
Board. The reported bid quotations  reflect  inter-dealer  prices without retail
markup,  markdown  or  commissions,  and may not  necessarily  represent  actual
transactions.  Prices set forth  below have been  adjusted to give effect to the
one for twelve  reverse  stock split which was approved by the  stockholders  on
December 31, 2003.

                          High    Low
       2002
       First Quarter     $2.40   $0.72
       Second Quarter    $2.40   $1.44
       Third Quarter     $3.60   $1.08
       Fourth Quarter    $6.12   $0.96

       2003
       First Quarter     $3.12   $1.68
       Second Quarter    $3.00   $0.96
       Third Quarter     $3.00   $0.96
       Fourth Quarter    $4.08   $1.32

(b)  Holders

     The  approximate  number of record holders of Patient  Infosystems'  common
stock as of February 27, 2004 is 89. The approximate number of beneficial owners
is in excess of 750.

(c)  Dividends

      Patient Infosystems has not declared cash dividends on its common stock.

     Patient Infosystems is obligated to declare 9% cumulative  dividends on its
Series C  Cumulative  Convertible  Preferred  Stock that was issued on March 31,
2000 and its Series D  Cumulative  Convertible  Preferred  Stock that was issued
between April 2003 and January 2004.

(d)  Recent sales of unregistered securities

     On February 24, 2004,  Patient  Infosystems  sold 592,500  shares of common
stock,  for  $1,185,000 to six  accredited  investors,  under an exemption  from
registration  pursuant  to Section  4(2) and Rule 506 of the  Securities  Act of
1933.  There was $68,250 of fees paid and a warrant to purchase 12,500 shares of
Patient  Infosystems  common stock for $2.00 per share issued in connection with
these funds. Patient Infosystems has agreed to file a registration  statement on
Form SB-2 for these shares by April 23, 2004.

     Between April 2003 and January 2004,  Patient  Infosystems  issued  840,118
shares  of  Series  D 9%  Cumulative  Convertible  Preferred  Stock  ("Series  D
Preferred Stock") under the terms of the Note and Stock Purchase Agreement dated
April 11, 2003 and amended on September 10, 2003.  There was no placement  agent
and no  commissions  were paid to any party.  These shares can be converted into
common  stock at a rate of 10  shares  of  common  stock to 1 share of  Series D
Preferred  Stock.  Each  share of Series D  Preferred  Stock has  voting  rights
equivalent to 10 shares of common  stock.  John  Pappajohn and Derace  Schaffer,
members of the Board of Directors of Patient Infosystems, held 424,233 and 5,318
shares of Series D Preferred  Stock  respectively.  There was no placement agent
and no commissions  were paid to any party. The proceeds from this issuance have
been used to repay debt and  support  the  operations  of  Patient  Infosystems'
subsidiary, American Caresource Holdings, Inc.

     On December 31, 2003,  $4,482,500 in debt and $438,099 of accrued  interest
owed to Mr.  Pappajohn and Dr.  Schaffer was converted into 2,928,986  shares of
Patient Infosystems' common stock, adjusted for the 1 for 12 reverse stock split
that was approved by the shareholders on December 31, 2003. This debt conversion
transaction  could  not occur  until the  stockholders  of  Patient  Infosystems
approved  the  amendment  to  the  Certificate  of   Incorporation   authorizing
sufficient  capital  stock on  December  31,  2003.  The shares  were  issued to
accredited  investors under an exemption from  registration  pursuant to Section
4(2) and Rule 506 of the  Securities Act of 1933.  There was no placement  agent
and  no  commissions  were  paid  to any  party.  A date  for a  meeting  of the
stockholders of Patient Infosystems has not yet been established.

     On March 31, 2000,  Patient  Infosystems  completed a private  placement of
100,000  shares of newly issued  Series C 9%  Cumulative  Convertible  Preferred
Stock ("Series C Preferred Stock"),  raising  $1,000,000 in total proceeds.  The
shares  were  sold  to  four  accredited  investors,  under  an  exemption  from
registration  pursuant  to Section  4(2) and Rule 506 of the  Securities  Act of
1933.  There was no placement  agent and no commissions  were paid to any party.
Due to the effect of the  anti-dilution  provisions  of the  Series C  Preferred
Stock and as a result of the  issuance  of the Series D Preferred  Stock,  these
shares  can be  converted  into  common  stock at a rate of ten shares of common
stock to one share of Series C Preferred Stock. Each share of Series C Preferred
Stock has voting rights  equivalent to 10 shares of common stock. John Pappajohn
and Derace Schaffer,  members of the Board of Directors of Patient  Infosystems,
purchased 50,000 and 25,000 shares of Series C Preferred Stock respectively. The
proceeds  from this  issuance  have been used to  support  Patient  Infosystems'
operations. In February 2004, certain holders of 25,000 shares of these Series C
Preferred Stock converted their shares into 250,000 shares of common stock.

     On June 6, 2001, Patient  Infosystems issued a total of 2,319,156 shares of
unregistered common stock to Mr. Pappajohn and Dr. Schaffer as consideration for
their  continued  financial  support of Patient  Infosystems.  Based upon recent
trading of Patient  Infosystems'  common stock at the time of issuance,  Patient
Infosystems  assigned  a fair  market  value  of $0.15  per  share or a total of
$347,873 to these  unregistered  shares and realized this amount as an operating
expense in June of 2001. The shares were issued to accredited investors under an
exemption  from  registration  pursuant  to  Section  4(2)  and  Rule 506 of the
Securities Act of 1933.  There was no placement  agent and no  commissions  were
paid to any party.

<TABLE>
<CAPTION>
                      Equity Compensation Plan Information

--------------------------------------------- -------------------- ---------------- ------------------------
                                                  Number of        Weighted-average      Number of
                                               securities to be      exercise            securities
                                               issued upon the       price of       remaining available
                                                 exercise of        outstanding     for future issuance
                                                 outstanding         options,           under equity
                                              options, warrants    warrants and      compensation plans
                                                  and rights          rights             (excluding
                                                                                         securities
                                                                                    reflected in column(a))
                                                     (a)                (b)                  (c)
--------------------------------------------- -------------------- ---------------- ------------------------
Equity compensation plans approved by
<S>                                                     <C>               <C>                  <C>
securities holders                                      101,160           $9.36                3,376,917
--------------------------------------------- -------------------- ---------------- ------------------------
Equity compensation plans not approved by
securities holders                                         -                -                       -
--------------------------------------------- -------------------- ---------------- ------------------------
Total                                                   101,160           $9.36                3,376,917
--------------------------------------------- -------------------- ---------------- ------------------------
</TABLE>

<PAGE>

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
     of Operations.

     Management's   discussion  and  analysis   provides  a  review  of  Patient
Infosystems'  operating results for the fiscal years ended December 31, 2003 and
2002, and its financial condition at December 31, 2003. The focus of this review
is on the  underlying  business  reasons  for  significant  changes  and  trends
affecting  the  revenues,   net  losses  and  financial   condition  of  Patient
Infosystems.  This review should be read in  conjunction  with the  accompanying
consolidated financial statements.

     In an effort to give investors a well-rounded view of Patient  Infosystems'
current  condition  and future  opportunities,  this Annual  Report on Form 10-K
includes forecasts by Patient  Infosystems'  management about future performance
and  results.   Because  they  are  forward-looking,   these  forecasts  involve
uncertainties.  They include risks of market  acceptance of, or preference  for,
Patient  Infosystems'  systems and services,  competitive forces, the impact of,
and  changes  in,  government  regulations,  general  economic  factors  in  the
healthcare industry, and other factors discussed in Patient Infosystems' filings
with the Securities and Exchange Commission.

Overview

     Patient  Infosystems  was formed on February  22,  1995.  Although  Patient
Infosystems  has completed the development of its core systems and has developed
several disease management  programs for specific diseases,  Patient Infosystems
is continuing  to refine its products for  additional  applications.  In October
1996,  Patient  Infosystems  began  enrolling  patients  in  its  first  disease
management  program and began substantial  patient contacts during 1998. Also in
1998,  Patient  Infosystems  expanded  its offered  products  to include  demand
management and health related surveys.

     On December 31, 2003, Patient  Infosystems  acquired  substantially all the
assets and  liabilities  of American  Caresource  Corporation  in  exchange  for
1,100,000  shares of  Patient  Infosystems  common  stock.  Patient  Infosystems
created a wholly-owned subsidiary, American Caresource Holdings, Inc. ("ACS"), a
Delaware corporation, and assigned the acquired assets and liabilities into this
subsidiary,  net of certain amounts which represented borrowings between Patient
Infosystems and American Caresource Corporation. ACS enters into agreements with
the   providers   of   ancillary   services   pursuant  to  which  ACS  provides
administrative   services  for  its  contracted  providers,   including  patient
scheduling  services,  call center services,  payor  contracting  services,  and
billing and collection services.  ACS also enters into agreements with preferred
provider organizations ("PPOs"),  third party administrators  ("TPAs"),  workers
compensation  benefits  administrators,   utilization  review  companies,   case
management  companies  and  other  healthcare  networks  pursuant  to which  ACS
provides ancillary benefits management services for these payor clients.

     Because the  acquisition  of assets and the  operation  of ACS  occurred on
December 31, 2003,  the 2003  consolidated  statement of  operations  of Patient
Infosystems does not include any ACS operational  results.  Patient  Infosystems
acquired  $1,118,567 of assets and assumed $2,368,327 of liabilities,  resulting
in a  deficiency  on the fair value of the net assets  acquired  of  $1,249,760.
During 2004, Patient  Infosystems will complete an independent  valuation of the
identifiable intangible assets acquired and any changes to the estimated amounts
will be offset by a corresponding change in goodwill.

     Patient Infosystems  currently has patients enrolled in more than 30 of its
disease-specific, demand management or survey programs. Through January 2004, an
aggregate of over 775,000  persons have been enrolled or participated in Patient
Infosystems'  programs.  Patient  Infosystems  has  never  been able to enroll a
sufficient number of patients to cover the administrative  cost of the business.
The enrollment of patients in Patient Infosystems'  programs has been limited by
several  factors,  including the limited  ability of clients to provide  Patient
Infosystems  with  accurate  information  with respect to the  specific  patient
populations and coding errors that necessitated  extensive  labor-intensive data
processing prior to program implementation.

     In response to these market dynamics, Patient Infosystems has taken several
tactical and strategic steps including, formal designation of internal personnel
at customer sites to assist clients with  implementation;  closer integration of
Patient  Infosystems' systems personnel with clients to facilitate accurate data
transfers;  promotion  of a  broader  product  line to enable  clients  to enter
Patient  Infosystems' disease management programs through a variety of channels;
fully  integrating  demand,  disease and case management  services to facilitate
internal mechanisms for patient referrals and providing the customers access and
control over their patients'  confidential  information  through targeted use of
Internet  technology.  The  clinical  design of the programs has been refined to
enable participation  through mail only, retaining those patients who previously
would have been unable to participate because of missing or inaccurate telephone
contact information. Patient Infosystems' demand management services and surveys
(general  health  and   disease-specific),   can  also  provide  mechanisms  for
enrollment  into  Patient  Infosystems'  disease  management  programs.  Patient
Infosystems  continues to develop capabilities or relationships that will enable
its  customers  to more  effectively  leverage  the data stored in their  legacy
systems.  Nevertheless,  no  assurance  can be given that  Patient  Infosystems'
efforts will succeed in increasing patient enrollment in its programs.

     Patient  Infosystems  has  entered  into  service  agreements  to  develop,
implement and operate  programs for: (i) patients who have recently  experienced
certain  cardiovascular  events;  (ii)  patients  who have been  diagnosed  with
primary  congestive heart failure;  (iii) patients  suffering from asthma;  (iv)
patients   suffering  from  diabetes,   (v)  patients  who  are  suffering  from
hypertension,  (vi) demand  management,  which provides access to nurses,  (vii)
case and  utilization  management  services  provided by a third  party,  (viii)
various  survey  initiatives  which assess,  among other  things,  satisfaction,
compliance of providers or payors to national  standards,  health status or risk
of  specific  health  related  events  and  (ix)  the  performance  of  specific
administrative and management functions on behalf of a customer. These contracts
provide  for fees  paid by its  customers  based  upon the  number  of  patients
participating in each of its programs, as well as initial program implementation
and set-up fees from customers.  To the extent that Patient  Infosystems has had
limited enrollment of patients in its programs,  Patient Infosystems' operations
revenue has been, and may continue to be, limited.

     Patient  Infosystems  has completed the  development of its primary disease
management programs, it anticipates that development revenue will continue to be
minimal  unless  and  until  Patient  Infosystems  enters  into new  development
agreements.  Substantially all of the development  revenue recognized during the
years ended  December  31, 2003,  2002 and 2001 of $51,110,  $36,239 and $78,632
related to requested feature  modification or customization.  These revenues are
recognized upon completion and delivery of the requested feature.

     Patient  Infosystems'  contracts typically call for a fee to be paid by the
customer for each patient  enrolled  for a series of program  services,  require
payment for services incrementally as they are delivered or require payment of a
fixed fee per  patient or member each month for bundled  program  services.  The
timing of  customer  payments  for the  delivery of program  services  varies by
contract. Revenues from program operations are recognized ratably as the program
services are delivered. The amount of the per patient fee varies from program to
program depending upon the number of patient contacts  required,  the complexity
of the  interventions,  the cost of the  resources  used and the  detail  of the
reports generated.

     Patient  Infosystems'   administration  and  management  services  cover  a
predefined set of deliverables and responsibilities  undertaken on behalf of the
customer.  The customer  pays for these  services on a monthly basis and Patient
Infosystems  recognizes  revenue  each month based upon the  services  provided.
During the year ended December 31, 2003,  revenues  received for  administrative
and  management  services  were the most  significant  source  of  revenue.  The
services  included:  assisting  organizations  with the  development of clinical
registries  used to  increase  effective  management  of patients  with  chronic
disease.  Patient  Infosystems is supporting the development,  including project
management and  implementation,  of a patient  registry for federally  qualified
health centers,  through a national  initiative known as the Health  Disparities
Collaboratives.  The  contract  for  these  services  is  renewed  annually.  No
assurances  can be given  that  Patient  Infosystems  will be able to retain his
source of revenue at its current level if at all.

     Revenues  from  operations of  $2,241,796  for the year ended  December 31,
2003,  which  includes  fees received by Patient  Infosystems  for operating its
programs,  is the most  strategically  important source of Patient  Infosystems'
revenues.  Patient  Infosystems is continuing to devote  significant  efforts to
increasing  the number of programs that are in operation,  as well as developing
resources  to expand its  products.  The revenue from these  services  currently
exceeds  the  cost to  provide  them,  but the  volume  of  patients  must  grow
substantially  in order to  provide  sufficient  operating  margin  to cover the
administrative overhead of Patient Infosystems.

     During  2003,  Patient  Infosystems  found  new  sources  of  revenue  that
increased  its revenue from $2.4 million for the fiscal year ended  December 31,
2002 to $5.7 million for the same period of 2003. Patient Infosystems maintained
control on costs and reduced its operating loss from $1.7 million for the fiscal
year ended  December 31, 2002 to $0.6  million for the same period of 2003.  The
most  significant  new  sources  of revenue  were (i)  Provider  Innovation  and
Improvement   support   services   provided  to  the  Institute  for  Healthcare
Improvement  which  provided $3.2 million of revenue in 2003 as compared to $0.1
million  in  2002,  (ii)  Care  Team  Connect  service  provided  to Park  Place
Entertainment  which  provided $0.6 million of new revenue in 2003 and (iii) the
Care Team Connect smoking  cessation  program which provided $0.5 million of new
revenue in 2003. No assurances can be given that revenue from these sources will
continue at their current level, if at all, in future periods.

     One  source  of  additional  new  revenue  in 2004 is ACS.  ACS  recognizes
revenues for ancillary  services when services by providers have been authorized
and performed and collections from payors are reasonably assured. Patient claims
revenues are  recognized by ACS as services are  provided.  Cost of revenues for
ancillary  services consist of expenses due to providers for providing  employee
(patient)  services  and ACS' related  direct  labor and overhead of  processing
invoices,  collections  and  payments.  ACS is not liable for costs  incurred by
independent contract service providers until payment is received by ACS from the
payors. ACS recognizes actual or estimated  liabilities to independent  contract
service providers as the related revenues are recognized. Patient claim costs of
revenue  consist of amounts due the  providers  as well as ACS' direct labor and
overhead to administer the patient  claims.  ACS has never operated at a profit,
and will  require  significant  growth in either  claims  volume  from  existing
contracts,  new  contracts or both in order to generate  sufficient  operational
margin to become profitable.  No assurances can be given that sufficient sources
of new revenue will be  identified  and other sources of capital will have to be
secured  by  Patient  Infosystems  to  support  these  operations.   If  Patient
Infosystems  in unable to generate  enough  working  capital either from its own
operations or through the sale of its equity securities,  ACS may be required to
curtail or cease operations.

     The sales cycle for  Patient  Infosystems  may be  extensive  from  initial
contact to contract  execution.  During these periods,  Patient  Infosystems may
expend  substantial  time,  effort and funds to prepare a contract  proposal and
negotiate  the  contract.  Patient  Infosystems  may be unable to  consummate  a
commercial relationship after the expenditure of such time, effort and financial
resources.

     During 2003, the pressure of working capital  shortfalls  eased for Patient
Infosystems. Patient Infosystems' had $123,998 of net cash provided by operating
activities during 2003. During 2003.  Patient  Infosystems  raised an additional
$3.5 million of working  capital and an additional  $1.6 million as of March 31,
2004, through and the sale of its equity securities.  These additional funds are
being used to provide  working  capital  for ACS.  Patient  Infosystems  and ACS
continue to incur losses and must  identify  substantial  additional  capital to
sustain its operations. ACS' working capital shortfall is currently being funded
by  Patient  Infosystems.   There  can  be  no  assurances  given  that  Patient
Infosystems  can raise either the required  working  capital through the sale of
its securities or that Patient  Infosystems  can borrow the  additional  amounts
needed.  In such  instance,  if Patient  Infosystems  is unable to identify  any
additional sources of capital,  it will likely be forced to curtail or cease its
operations or the operations of ACS. As a result of the above,  the  Independent
Auditors'  Report on  Patient  Infosystems'  consolidated  financial  statements
appearing  at Item 15 includes an emphasis  paragraph  indicating  that  Patient
Infosystems'  recurring  losses from  operations,  negative  working capital and
stockholders' deficit raise substantial doubt about Patient Infosystems' ability
to  continue  as  a  going  concern.  The  accompanying  consolidated  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

Results of Operations

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

     Revenues

     Revenues are comprised of revenues from operations  fees,  development fees
and licensing  fees.  Revenues  increased 141% to $5,687,293 for the fiscal year
ended  December 31, 2003 from  $2,355,677 for the fiscal year ended December 31,
2002. A summary of these revenues by category is as follows for the fiscal years
ended December 31:

Revenues                 2003           2002
--------           -------------- --------------
Operations Fees      $ 2,241,796    $ 2,125,522
Consulting Fees        3,391,867        168,606
Development Fees          51,110         36,239
Licensing Fees             2,520         25,310
                   -------------- --------------
Total                $ 5,687,293    $ 2,355,677
                   ============== ==============

     Revenues from operations fees increased 5.5% from $2,125,522 for the fiscal
year ended  December 31, 2002 to $2,241,796  for the fiscal year ended  December
31, 2003.  Operations  revenues are  generated as Patient  Infosystems  provides
services to its customers for their disease-specific  programs, patient surveys,
health risk  assessments,  patient  satisfaction  surveys,  physician  education
programs and marketing support programs.  Operations  revenues increased in 2002
due to the growth of its disease and demand management business despite the loss
of $1,125,823 of revenue from a customer who terminated as of December 31, 2002.
This growth is attributable  primarily to Park Place  Entertainment  which added
$622,067  of new  revenues  and a new  smoking  cessation  program  which  added
$491,362 of new revenues.  Patient  Infosystems  has devoted the majority of its
sales and marketing  efforts  toward  increasing  revenue from  operations,  and
anticipates  that it will retain most of its  existing  business and continue to
add additional new clients.  No assurances can be given that these revenues will
increase,  or that any change will be material to Patient Infosystems  operating
results.

     Revenues from consulting increased 1,912% from $168,606 for the fiscal year
ended  December 31, 2002 to  $3,391,867  for the fiscal year ended  December 31,
2003. This increase is due to Patient  Infosystems'  expanded role in support of
the Health Disparities Collaboratives funded by the Bureau of Primary Healthcare
and  administered  by the Institute for  Healthcare  Improvement.  Revenues from
consulting  may increase  during  2004.  No  assurances  can be given that these
revenues  will  increase,  or that  any  change  will  be  material  to  Patient
Infosystems operating results.

     Revenues from  development  fees  increased 41% from $36,239 for the fiscal
year ended  December 31, 2002 to $51,110 for the fiscal year ended  December 31,
2003. In 2002 and 2003, Patient  Infosystems  received  development  revenues in
connection with the enhancement of its existing programs.  Development  revenues
include  clinical,  technical and operational  design or modification of Patient
Infosystems'   primary  disease   management   programs.   Patient   Infosystems
anticipates that revenue from development fees will remain immaterial.

     Revenues from licensing fees decreased 90% from $25,310 for the fiscal year
ended  December 31, 2002 to $2,520 for the fiscal year ended  December 31, 2003.
Licensing  revenue  represents  amounts  that  Patient  Infosystems  charges its
customers,  either on a  one-time  only or  continuing  basis,  for the right to
enroll  patients  in, or the right to  license  other  entities,  certain of its
programs,  primarily Patient Infosystems' Internet-based Case Management Support
System. Patient Infosystems  anticipates that revenue from licensing will remain
immaterial in future periods.

     Costs and Expenses

     Cost of sales includes salaries and related benefits,  services provided by
third parties,  and other expenses  associated  with the  development of Patient
Infosystems'  customized  disease  state  management  programs,  as  well as the
operation of each of its disease state management programs.

     Cost of sales  increased  117.4% from  $1,914,464 for the fiscal year ended
December 31, 2002 to $4,162,759 for the fiscal year ended December 31, 2003. The
increase in these costs primarily reflects an $1,187,960  increase in the use of
outsourced  services and addition of $893,680 in staff costs related to the 141%
increase in revenue.

     Sales and marketing  expenses  increased 19.8% from $746,353 for the fiscal
year ended  December 31, 2002 to $893,833 for the fiscal year ended December 31,
2003.  These costs consist  primarily of salaries,  related  benefits and travel
costs, sales materials and other marketing related expenses.  Increased spending
in this area is  attributed  primarily to an $155,051  increase in staff related
expenses. It is anticipated that Patient Infosystems will need to invest heavily
in the sales and marketing  process in future  periods,  and intends to do so as
funds are available.  To the extent that Patient  Infosystems  has limited funds
available for sales and marketing, or cannot leverage its marketing partnerships
adequately,  it will  likely be unable  to  invest  in the  necessary  marketing
activities to generate substantially greater sales.

     General  and  administrative   expenses  include  the  costs  of  corporate
operations,  finance and accounting, human resources and other general operating
expenses of Patient Infosystems.  General and administrative  expenses decreased
12.2% from  $1,282,683 for the fiscal year ended December 31, 2002 to $1,125,926
for the fiscal year ended December 31, 2003.  Patient  Infosystems  expects that
general  and  administrative  expenses  will  increase  during  2004  due to the
addition of the administrative costs of its new subsidiary,  American Caresource
Holdings,  Inc. and then remain relatively  constant in future periods,  but may
experience fluctuations due to uncertainties related to financing costs.

     Research and development expenses consist primarily of salaries and related
benefits and administrative costs allocated to Patient Infosystems' research and
development  personnel for  development of certain  components of its integrated
information  capture and delivery system, its  Internet-based  software products
and its standardized disease state management programs. Research and development
expenses  decreased  24.8% from $105,614 for the fiscal year ended  December 31,
2002 to $131,782 for the fiscal year ended  December  31, 2003.  The addition of
American Caresource Holdings,  Inc. is expected to increase overall research and
development  expenses during 2004.  Patient  Infosystems  expects these costs to
remain approximately at 15% of its total investment into information  technology
resources.

     Financing  costs were $2,143,120 in 2003. This cost relates to the issuance
of equity to, and incurrence of debt from,  certain lenders pursuant to the Note
and Stock  Purchase  Agreement  dated April 10, 2003 and as amended on September
11, 2003,  pursuant to which the lenders  agreed to make short term loans to the
Company. The total value received by the lenders from the Company under the Note
and Stock Purchase  Agreement as amended was $8,852,458.  In accordance with APB
Opinion  No. 14, a portion of the cash  received  totaling  $2,143,120  for year
ended  December 31, 2003 is allocable to equity  resulting in a debt discount in
that same amount, which was fully amortized as of December 31, 2003.

     Other  Income/Expense  is  comprised  of  interest  expense  and  losses on
investments. The totals are as follows for the fiscal years ended December 31:

                                     2003              2002
                              ------------------ -----------------
      Interest expense           $ (753,685)       $ (535,269)
      Interest income               145,473
      Other income (expense)            376             4,345
                              ------------------ -----------------
      Total Expense              $ (607,836)       $ (530,924)
                              ------------------ -----------------

<PAGE>

     Interest expense is due to debt. Interest expense increased to $753,685 for
the fiscal year ended  December 31, 2003 from $535,269 for the fiscal year ended
December 31, 2002. The increase in interest  expense reflects the increased debt
required  to fund  operations  and obtain  capital  which was loaned to American
Caresource Corporation.

     Interest income was realized from loans to American Caresource Corporation,
which  offset  substantially  all interest  expense  which  Patient  Infosystems
incurred to obtain these funds.

     Patient Infosystems had no tax benefit in 2003 due, in part, to recording a
full valuation allowance to reduce its deferred tax assets. Patient Infosystems'
deferred tax assets consist primarily of the tax benefit associated with its net
operating loss carryforwards.

     Management of Patient  Infosystems  has  evaluated  the available  evidence
about  future  taxable  income  and other  possible  sources of  realization  of
deferred tax assets.  The  valuation  allowance  reduces  deferred tax assets to
zero, which represents management's best estimate of the amount of such deferred
tax assets that more likely than not will be realized.

     For the fiscal year ended December 31, 2003, Patient  Infosystems  recorded
$7,671,557 in dividends on  convertible  preferred  stock as compared to $90,000
for the year ended  December 31, 2002.  The increase was due to: (i) $153,257 of
dividends  on 830,100  shares of Series D 9%  Cumulative  Convertible  Preferred
Stock  ("Series D Preferred  Stock")  which was issued at various  times between
April and December 2003, (ii) a $2,143,120 beneficial conversion feature related
to shares of Series D Preferred  Stock issued to certain  lenders in  connection
with  borrowings  and (iii)  $5,285,180  beneficial  conversion  feature for the
shares of Series D Preferred Stock issued on December 31, 2003 upon the exercise
of the lender's option to convert their debt and accrued interest.

     Patient  Infosystems had a net loss attributable to common  stockholders of
$11,049,518 for the fiscal year ended December 31, 2003,  compared to $2,314,361
for the fiscal year ended December 31, 2002. This represents a loss of $3.25 per
basic and diluted share for 2003 and $2.36 for 2002,  after giving effect to the
1 for 12 reverse stock split which was approved by the  shareholders on December
31,  2003.

     Liquidity and Capital Resources

     At December 31, 2003, Patient  Infosystems had a working capital deficit of
$2,808,649  as compared to a working  capital  deficit of $6,135,451 at December
31, 2002. At December 31, 2003, Patient  Infosystems had a stockholders'  equity
of $1,936,376.  Through  December 31, 2003 these amounts  reflect the effects of
Patient  Infosystems'  continuing  losses that have been funded, in part, by the
issuance of equity and long term  borrowings of  $3,000,000  against its line of
credit.  Patient  Infosystems has never earned profits and, since its inception,
Patient  Infosystems has primarily funded its operations,  working capital needs
and  capital  expenditures  from  the  sale of its  equity  securities.  Patient
Infosystems is currently  maintaining it operations  only through the receipt of
proceeds from the sale of equity securities.  If these additional funds were not
available,   Patient   Infosystems  would  likely  be  required  to  reduce  its
operations, reduce or cease the operations of American Caresource Holdings, Inc.
or take other measures to curtail its losses.

     In December 1999,  Patient  Infosystems  established a credit  facility for
$1,500,000  guaranteed by Derace Schaffer and John  Pappajohn,  two directors of
Patient  Infosystems.  In March 2000,  the facility was  increased by $1,000,000
under substantially the same terms, also guaranteed by the same Board members.

     On March 28, 2001, Patient Infosystems entered into an Amended and Restated
Credit  Agreement  with Wells  Fargo  Bank Iowa,  N.A.  ("Wells  Fargo"),  which
extended  the term of Patient  Infosystems'  credit  facility  to March 31, 2002
under  substantially  the same terms. Dr. Schaffer and Mr. Pappajohn  guaranteed
this extension.

<PAGE>

     On March 28, 2002,  Wells Fargo extended the term of the credit facility to
March  31,  2003  under  substantially  the same  terms.  Dr.  Schaffer  and Mr.
Pappajohn also guaranteed this extension.

     On June 28, 2002, Patient Infosystems and Wells Fargo agreed on an addendum
to the Amended and Restated  Credit  Agreement which extends the credit facility
by an additional  $500,000,  increasing the total credit facility to $3,000,000.
Mr. Pappajohn and Dr. Schaffer also guaranteed this extended credit facility.

     On March 28, 2003,  Wells Fargo extended the term of the credit facility to
January  2, 2004  under  substantially  the same  terms.  Dr.  Schaffer  and Mr.
Pappajohn also guaranteed this extension.

     On December 31, 2003,  Patient  Infosystems and Wells Fargo further amended
the credit  facility and is due and payable on June 30, 2005.  Dr.  Schaffer and
Mr.  Pappajohn  also  guaranteed  this  extension.  In  consideration  for their
guarantees,  in  February  2004 the  Company  granted  to Dr.  Schaffer  and Mr.
Pappajohn  warrants  to  purchase  an  aggregate  of  47,500  shares of Series D
Convertible  Preferred  Stock,  convertible into 475,000 shares of the Company's
common stock for $10.00 per preferred share.

     January 2004, Patient Infosystems  borrowed $200,000 from Mr. Pappajohn,  a
director of the Company, in exchange for an unsecured note that bore no interest
if repaid on or before March 31, 2004. The note was repaid on March 29, 2004 and
bore no interest as of that date.

     On March  30,  2004,  Mr.  Pappajohn  and Mr.  Schaffer  signed a letter to
Patient  Infosystems in which they committed to obtain the operating  funds that
Patient Infosystems  believes would be sufficient to fund its operations through
December 31, 2004.  There can be no assurances  given that Mr.  Pappajohn or Dr.
Schaffer  can raise  either the  required  working  capital  through the sale of
Patient  Infosystems'  securities  or that  Patient  Infosystems  can borrow the
additional amounts needed.

     Patient  Infosystems  has  expended   significant  amounts  to  expand  its
operational  capabilities  including increasing its administrative and technical
costs.  While Patient  Infosystems  has both  curtailed its spending  levels and
increased its revenue,  to the extent that American  Caresourse  Holdings,  Inc.
revenues  do  not  increase  substantially,  Patient  Infosystems'  losses  will
continue and its available capital will diminish further.  Patient  Infosystems'
operations are currently  being funded by the sale of equity  securities.  There
can be no  assurances  given  that  Patient  Infosystems  can raise  either  the
required  working  capital  through the sale of its  securities  or that Patient
Infosystems  can borrow the additional  amounts  needed.  In such  instance,  if
Patient Infosystems is unable to identify additional sources of capital, it will
likely be forced to curtail or cease  operations.  As a result of the above, the
Independent  Auditors'  Report on Patient  Infosystems'  consolidated  financial
statements includes an emphasis paragraph  indicating that Patient  Infosystems'
recurring  losses  from  operations  raise   substantial   doubt  about  Patient
Infosystems'   ability  to  continue  as  a  going  concern.   The  accompanying
consolidated  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.

     Capital  expenditures during 2003 were $34,185, as compared to expenditures
of $8,867  during 2002 and $9,240  during 2001.  The  expenditures  during these
periods  represented  the  purchase of  technology  platform  components  of the
integrated  information  capture  and  delivery  systems,  as well as  purchases
required to maintain Patient Infosystems' technology infrastructure. On December
31, 2003, Patient Infosystems acquired  substantially all the assets and assumed
substantially all the liabilities of American Caresource  Corporation.  Included
among the assets  acquired was $152,480 of capital  assets,  which  consisted of
computer   hardware  and   software,   furnishings,   fixtures   and   leasehold
improvements.

     Inflation

     Inflation  did  not  have a  significant  impact  on  Patient  Infosystems'
operations during 2003, 2002 or 2001. Patient  Infosystems  continues to monitor
the  impact of  inflation  in order to  minimize  its  effects  through  pricing
strategies, productivity improvements and cost reductions.

     Recent Accounting Pronouncements

     In January 2003, the Financial  Accounting  Standards Board ("FASB") issued
Interpretation  No. 46,  Consolidation of Variable Interest Entities ("FIN 46").
FIN 46 requires  disclosure  about  variable  interest  entities for which it is
reasonably possible that the Company will be required to consolidate or disclose
information  when  the  Interpretation   becomes  effective.   The  Company  has
determined  that it does not have any  variable  interest  entities  which would
require consolidation in accordance with FIN 46.

     In May 2003, the FASB issued  Statement of Financial  Accounting  Standards
No. 150,  Accounting for Certain Financial  Instruments with  Characteristics of
Both  Liabilities  and  Equity,  ("SFAS  No.  150").  SFAS No.  150  establishes
standards  for  how  an  issuer   classifies  and  measures  certain   financial
instruments with  characteristics  of both  liabilities and equity.  It requires
that an issuer  classify a  financial  instrument  that is within its scope as a
liability (or an asset in some  circumstances).  The adoption of SFAS No. 150 in
2003 did not have an effect on the Company's consolidated financial statements.

     Critical Accounting Policies

     The  SEC  recently  issued  disclosure  guidance  for  critical  accounting
policies.  The SEC defines  critical  accounting  policies as those that require
application of  management's  most difficult,  subjective or complex  judgments,
often as a result of the need to make estimates about the effect of matters that
are inherently uncertain and may change in subsequent periods.

     Patient Infosystems significant accounting policies are described in Note 1
to  the  Consolidated  Financial  Statements.   Not  all  of  these  significant
accounting policies require management to make difficult,  subjective or complex
judgments or estimates.  However,  the following  accounting  policies  could be
deemed to be critical by the Securities and Exchange Commission.

     Use of  Estimates.  In  preparing  the  consolidated  financial  statements
Patient  Infosystems  uses estimates in determining the economic useful lives of
its assets,  provisions  for doubtful  accounts,  tax valuation  allowances  and
various other recorded or disclosed amounts. Estimates require management to use
its judgment.  While Patient  Infosystems  believes that its estimates for these
matters are reasonable, if the actual amount is significantly different than the
estimated  amount,  its  assets,  liabilities  or results of  operations  may be
overstated or understated.

     Impairment of Long-Lived  Assets.  Patient  Infosystems  records impairment
losses on  long-lived  assets used in operations  when events and  circumstances
indicate  that the assets  might be impaired  and the  undiscounted  future cash
flows  estimated  to be  generated  by those  assets are less than the  carrying
amount of those assets. Recoverability of assets to be held and used is measured
by a  comparison  of the  carrying  amount of the asset to future net cash flows
expected  to be  generated  by the  asset.  If the  asset  is  considered  to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying  amount of the asset exceeds the fair value of the asset. If the actual
value is significantly less than the estimated value, Patient Infosystems assets
may be overstated.

Item 7. Financial Statements and Supplemental Data.

     The financial  statements and supplementary  data, together with the report
thereon by Patient Infosystems independent auditor, are listed below in Item 13.

<PAGE>

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

     None.

Item 8A. Controls and Procedures.

(a)  Evaluation of Disclosure Controls and Procedures.

     Our management,  with the  participation of our Chief Executive Officer and
Vice  President,  Financial  Planning,  has evaluated the  effectiveness  of our
disclosure  controls and  procedure  as of December  31,  2003.  Based upon this
evaluation,  our Chief Executive Officer and Vice President,  Financial Planning
concluded  that our  disclosure  controls and  procedures  are effective for the
recording,  processing,  summarizing  and  reporting  the  information  that the
Company is required  to  disclose  in the reports it files under the  Securities
Exchange Act of 1934,  within the time periods  specified in the SEC's rules and
forms.  Such evaluation did not identify any change in our internal control over
financial  reporting that occurred  during the quarter ended  September 30, 2003
that has materially  affected,  or is reasonably likely to affect,  our internal
control over financial reporting.

(b)  Changes in Internal Controls.

     There were no significant changes in Patient Infosystems' internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their  evaluation,  including any corrective  actions with regard to
significant deficiencies and material weaknesses

                                    PART III


Item 9. Directors and Executive Officers of the Registrant.

     Incorporated  by reference to the Company's  Proxy Statement for its Annual
Meeting of Stockholders to be filed with the Securities and Exchange  Commission
within 120 days after the close of the year ended December 31, 2003.

Item 10. Executive Compensation.

     Incorporated  by reference to the Company's  Proxy Statement for its Annual
Meeting of Stockholders to be filed with the Securities and Exchange  Commission
within 120 days after the close of the year ended December 31, 2003.

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

     Incorporated  by reference to the Company's  Proxy Statement for its Annual
Meeting of Stockholders to be filed with the Securities and Exchange  Commission
within 120 days after the close of the year ended December 31, 2003.

Item 12. Certain Relationships and Related Transactions.

     Incorporated  by reference to the Company's  Proxy Statement for its Annual
Meeting of Stockholders to be filed with the Securities and Exchange  Commission
within 120 days after the close of the year ended December 31, 2003.

<PAGE>

                                     PART IV

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

(a)  The following  financial  statements  and schedules are filed at the end of
     this annual  report,  beginning on page F-1.  Other  schedules  are omitted
     because  they  are not  required  or are  not  applicable  or the  required
     information  is shown in the  consolidated  financial  statements  or notes
     thereto.

     Index to Financial Statements                            Page

     Independent Auditors' Report                              F-1
     Consolidated Balance Sheets                               F-2
     Consolidated Statements of Operations                     F-3
     Consolidated Statements of Stockholders' Equity (Deficit) F-4
     Consolidated Statements of Cash Flows                     F-5
     Notes to Consolidated Financial Statements                F-6
     Schedule II - Valuation and Qualifying Accounts           S-1


(b)  Reports on Form 8-K.

     Patient  Infosystems filed a current report on Form 8-K on December 9, 2003
announcing the adjournment of its special meeting until December 23, 2003.

     Patient Infosystems filed a current report on Form 8-K on December 23, 2003
announcing the adjournment of its special meeting until December 31, 2003.

     Patient Infosystems filed a current report on Form 8-K on December 31, 2003
filing a copy of a press  release  dated  December 31, 2003 that  announced  the
closing of the  acquisition  of  American  CareSource,  reverse  stock split and
results of special meeting of stockholders.

     Patient  Infosystems  filed a current report on Form 8-K on January 9, 2004
with a copy of a press  release  announcing  the reverse stock split and the new
ticker symbol PATY.

     Patient  Infosystems filed a current report on Form 8-K on January 15, 2004
reporting the acquisition and disposition of assets.

     Patient Infosystems filed a current report on Form 8-K on February 13, 2004
filing a copy of a press release announcing that Patient Infosystems, Inc. would
present at Roth Capital Partners 16th Annual Growth Stock Conference.

     Patient  Infosystems filed a current report on Form 8-K/A on March 15, 2004
updating the  information  provided in the report on Form 8-K dated  January 15,
2004, reporting the financial information required in Item 7 thereof.

(c)  Exhibits.


Exhibit #   Description of Exhibits

3.1         Certificate of Amendment to the Certificate of Incorporation

3.2 *       By-Laws

4.1         Patient Infosystems, Inc. Amended and Restated Stock Option Plan

4.2 ***     Certificate of Designations, Powers, Preferences and Relative,
            Participating, Optional or Other Special Rights, and the
            Qualifications, Limitations Thereof of the Series C Preferred Stock
            of Patient InfoSystems, Inc.

10.20 +     Lease Agreement dated as of February 22, 1995 between Patient
            Infosystems and Conifer Prince Street Associates.

10.21 +     First Addendum to Lease Agreement dated as of August 22, 1995
            between Patient Infosystems and Conifer Prince Street Associates.

10.22 +     Second Addendum to Lease Agreement dated as of November 17, 1995
            between Patient Infosystems and Conifer Prince Street Associates.

10.23 +     Third Addendum to Lease Agreement dated as of March 28, 1996
            between Patient Infosystems and Conifer Prince Street Associates.

10.24 +     Fourth Addendum to Lease Agreement dated as of October 29, 1996
            between Patient Infosystems and Conifer Prince Street Associates.

10.25 +     Fifth Addendum to Lease Agreement dated as of November 30, 1996
            between Patient Infosystems and Conifer Prince Street Associates.

10.26 +     Sixth Addendum to Lease Agreement dated as of November 24, 1997
            between Patient Infosystems and Conifer Prince Street Associates.

10.30 ++    Seventh Addendum to Lease Agreement dated as of June 16, 1999
            between Patient Infosystems and Conifer Prince Street Associates.

10.33 ++    Revolving Note dated as of December 23, 1999 between Patient
            Infosystems and Norwest Bank Iowa, National Association.

10.34 ++    Credit Agreement dated as of December 23, 1999 between Patient
            Infosystems and Norwest Bank Iowa, National Association.

10.35 ++    Security Agreement dated as of December 23, 1999 between Patient
            Infosystems and Norwest Bank Iowa, National Association.

10.36 ++    Arbitration Agreement dated as of December 23, 1999 between Patient
            Infosystems and Norwest Bank Iowa, National Association.

10.37 ++    Financing Statement executed by Patient Infosystems and Norwest Bank
            Iowa, National Association.

10.38 ++    First Amendment to Credit Agreement dated as of March 21, 2000
            between Patient Infosystems and Norwest Bank Iowa, National
            Association.

10.39 ++    Note Modification Agreement dated as of March 21, 2000 between
            Patient Infosystems and Norwest Bank Iowa, National Association.

10.41 ***   Form of Subscription Agreement dated on or about March 31,
            2000 between Patient Infosystems and John Pappajohn, Derace
            Schaffer, Gerald Kirke and Michael Richards for Series C 9%
            Cumulative Convertible Preferred Stock.

10.42 ***   Form of Registration Rights Agreement dated on or about
            March 31, 2000 between Patient Infosystems and John Pappajohn,
            Derace Schaffer, Gerald Kirke and Michael Richards for Series
            C 9% Cumulative Convertible Preferred Stock.

10.43 ***   Eighth Addendum to Lease Agreement dated as of December 8, 2000
            between Patient Infosystems and Conifer Prince Street Associates.

10.45 ***   Amended and Restated Credit Agreement dated as of March 28, 2001
            between Patient Infosystems and Wells Fargo Bank Iowa, National
            Association.

10.46 ***   Revolving Note  dated as of March 28, 2001 between Patient
            Infosystems and Wells Fargo Bank Iowa, National Association.

10.47 ***   Form of Promissory Notes payable to Dr. Schaffer and Mr. Pappajohn.

10.48 ***   Form of Security Agreements with Dr. Schaffer and Mr. Pappajohn.

10.49 ***   Ninth Addendum to Lease Agreement dated as of January 7, 2002
            between Patient Infosystems and Conifer Prince Street Associates.

10.50 #     Letter of Agreement dated as of March 25, 2002 between Patient
            Infosystems, John Pappajohn and Derace Schaffer.

10.51 #     Second Amended and Restated Credit Agreement dated as of March 28,
            2002 between Patient Infosystems and Wells Fargo Bank Iowa, National
            Association.

10.52 #     Revolving Note dated as of March 28, 2002 between Patient
            Infosystems and Wells Fargo Bank Iowa, National Association.

10.53 #     Security Agreement dated as of March 28, 2002 between Patient
            Infosystems and Wells Fargo Bank Iowa, National Association.

10.54 ##    Addendum to Amended and Restated Credit Agreement dated as of June
            28, 2002 between Patient Infosystems and Wells Fargo Bank Iowa,
            National Association.

10.55 ##    Agreement for Purchase and Sale of Assets dated as of September 23,
            2002 between Patient Infosystems and American CareSource
            Corporation.

10.56 ###   Tenth Addendum to Lease Agreement dated as of June 24, 2002 between
            Patient Infosystems and Conifer Prince Street Associates.

10.57 ###   Eleventh Addendum to Lease Agreement dated as of December 30, 2002
            between Patient Infosystems and Conifer Prince Street Associates.

10.58 ###   Letter of Agreement dated as of March 28, 2003 between Patient
            Infosystems, John Pappajohn and Derace Schaffer.

10.59 ###   Second Addendum to Second Amended and Restated Credit Agreement
            dated as of March 28, 2003 between Patient Infosystems and Wells
            Fargo Bank, National Association.

10.60 ###   Modification Agreement dated as of March 28, 2003 between Patient
            Infosystems and Wells Fargo Bank, National Association.

10.61 ^     Amended and Restated Agreement for the Purchase and Sale of Assets
            among Patient Infosystems, Inc., American Caresource Corporation,
            formerly known as Health Data Solutions, and the Stockholders
            Signatory hereto, dated April 10, 2003.

10.62 ^     Note and Stock Purchase Agreement between Patient Infosystems, Inc.
            and a group of investors, dated April 10, 2003.

10.63 ^     Patient Infosystems, Inc. Series D Convertible Preferred Stock
            Registration Right Agreement dated April 10, 2003.

10.64 ^     Credit Agreement between American Caresource Corporation and Patient
            Infosystems, Inc. dated April 10, 2003.

10.65 ^^    Twelfth Addendum to Lease Agreement dated as of April 28, 2003
            between Patient Infosystems and Conifer Prince Street Associates.

10.66 ^^    Thirteenth Addendum to Lease Agreement dated as of June 27, 2003
            between Patient Infosystems and Conifer Prince Street Associates.

10.67 ^^^   Amendment No. 1 to the Amended and Restated Agreement for the
            Purchase and Sale of Assets dated as of July 30, 2003 between
            Patient Infosystems and American Caresource Corporation.

10.68 ^^^   Amendment No. 1 to the Note and Stock Purchase Agreement dated as of
            September 11, 2003 between Patient Infosystems and a group of
            investors.

10.69 ^^^   Amendment No. 1 to the Credit Agreement dated as of July 30, 2003
            between Patient Infosystems and American Caresource Corporation.

10.70 ^^^   Amendment No. 2 to the Amended and Restated Agreement for the
            Purchase and Sale of Assets dated as of October 8, 2003 between
            Patient Infosystems and American Caresource Corporation.

10.71       Third Addendum to Second Amended and Restated Credit Agreement dated
            as of December 31, 2003 between Patient Infosystems and Wells Fargo
            Bank, National Association.

10.72       Form of Securities Purchase Agreement.

11          Statements re: computation of Per Share Loss the year ended
            December 31, 2003 can be found in the Patient Infosystems,
            Inc. Consolidated Financial Statements for the years ended
            December 31, 2003, 2002and 2001 in Note 1, "Net loss pre
            share" on page F-9 of Form 10-KSB, and is incorporated herein
            by reference.

21.1        Subsidiaries.

23.1        Consent of Deloitte & Touche LLP.

31.1        Certification of the Chief Executive Officer pursuant to Section 302
            of the Sarbanes-Oxley Act of 2002.

31.2        Certification of the Principal Accounting Officer pursuant to
            Section 302 of the Sarbanes-Oxley Act of 2002.

32.1        Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
            2002.

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

*           Previously filed with the Securities and Exchange Commission
            as an Exhibit to the Registration Statement on Form S-1 filed
            on July 3, 1996 and incorporated herein by reference.

**          Previously filed with the Securities and Exchange Commission
            as an Exhibit to the Registration Statement on Form S-8 filed
            on May 3, 2000 and incorporated herein by reference.

***         Previously filed with the Securities and Exchange Commission
            as an Exhibit to the Annual Report on Form 10-K filed on April
            2, 2001 and incorporated herein by reference.

+           Previously filed with the Securities and Exchange Commission
            as an Exhibit to the Annual Report on Form 10-K filed on April
            13, 1999 and incorporated herein by reference.

++          Previously filed with the Securities and Exchange Commission
            as an Exhibit to the Annual Report on Form 10-K filed on March
            30, 2000 and incorporated herein by reference.

#           Previously filed with the Securities and Exchange Commission
            as an Exhibit to the Annual Report on Form 10-K filed on April
            10, 2002 and incorporated herein by reference.

##          Previously filed with the Securities and Exchange Commission
            as an Exhibit to the Quarterly Report on Form 10-Q filed on
            November 14, 2002 and incorporated herein by reference.

###         Previously filed with the Securities and Exchange Commission
            as an Exhibit to the Annual Report on Form 10-K filed on March
            31, 2003 and incorporated herein by reference.

^           Previously filed with the Securities and Exchange Commission
            as an Exhibit to the Quarterly Report on Form 10-QSB filed on
            May 15, 2003 and incorporated herein by reference.

^^          Previously filed with the Securities and Exchange Commission
            as an Exhibit to the Quarterly Report on Form 10-QSB filed on
            August 15, 2003 and incorporated herein by reference.

^^^         Previously filed with the Securities and Exchange Commission
            as an Exhibit to the Quarterly Report on Form 10-QSB filed on
            November 14, 2003 and incorporated herein by reference.

Item 14 Principal Accountant Fees and Services.

     Incorporated  by  reference  from the Item 9(e) of Schedule 14A to be filed
with the Securities and Exchange  Commission  within 120 days after the close of
the year ended December 31, 2003.

<PAGE>

                                 SIGNATURE PAGE

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

PATIENT INFOSYSTEMS, INC.

By:      /s/Roger L. Chaufournier                            March 30, 2004
         --------------------------------------------        --------------
         Roger L. Chaufournier                               Date
         Director, President, and Chief Executive Officer

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

By:      /s/Roger L. Chaufournier                            March 30, 2004
         --------------------------------------------        --------------
         Roger L. Chaufournier                               Date
         Director, President and Chief Executive Officer
         (Principal Executive Officer)

By:      /s/Kent A. Tapper                                   March 30, 2004
         --------------------------------------------        --------------
         Kent A. Tapper                                      Date
         Vice President Financial Planning
         (Principal Financial and Accounting Officer)

By:      /s/Derace L. Schaffer, M.D.                         March 30, 2004
         --------------------------------------------        --------------
         Derace L. Schaffer, M.D.                            Date
         Chairman of the Board

By:      /s/John Pappajohn                                   March 30, 2004
         --------------------------------------------        --------------
         John Pappajohn                                      Date
         Director

<PAGE>


INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders
  of Patient InfoSystems, Inc.
Rochester, New York


We  have  audited  the  accompanying  consolidated  balance  sheets  of  Patient
Infosystems,  Inc. and  subsidiaries  as of December 31, 2003 and 2002,  and the
related consolidated  statements of operations,  stockholders' equity (deficit),
and cash flows for each of the three  years in the  period  ended  December  31,
2003. Our audits also included the financial  statement  schedule  listed in the
Index at Item 13. These financial  statements and financial  statement  schedule
are the  responsibility of the Company's  management.  Our  responsibility is to
express  an  opinion  on these  financial  statements  and  financial  statement
schedule based on 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,  such consolidated  financial  statements present fairly, in all
material  respects,  the  financial  position of Patient  Infosystems,  Inc. and
subsidiaries at December 31, 2003 and 2002, and the results of their  operations
and their cash flows for each of the three  years in the period  ended  December
31, 2003, in conformity with  accounting  principles  generally  accepted in the
United  States of  America.  Also,  in our  opinion,  such  financial  statement
schedule,  when  considered  in  relation  to the basic  consolidated  financial
statements  taken as a whole,  presents  fairly  in all  material  respects  the
information set forth therein.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated   financial   statements,   the  Company's  recurring  losses  from
operations  and  negative  working  capital  raise  substantial  doubt about its
ability to continue  as a going  concern.  Management's  plans  concerning  this
matter are also described in Note 1. The  consolidated  financial  statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.

/s/Deloitte & Touche LLP

Deloitte & Touche LLP
Rochester, New York
March 30, 2004

                                      F-1
<PAGE>

PATIENT INFOSYSTEMS, INC.

<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
-------------------------------------------------------------------------------------------------- ------------------


ASSETS                                                                                 2003              2002

CURRENT ASSETS:
<S>                                                                                  <C>             <C>
  Cash and cash equivalents                                                          $    397,851    $         5,011
  Accounts receivable (net of doubtful accounts allowance of $52,141 and $55,000)         771,258            441,216
  Prepaid expenses and other current assets                                               156,729            105,827
  Notes receivable                                                                           -               200,000
                                                                                 ----------------- ------------------
        Total current assets                                                            1,325,838            752,054

PROPERTY AND EQUIPMENT, net                                                               305,551            285,747

OTHER ASSETS:
  Intangible assets (net of accumulated amortization of $586,830 and $443,258)            497,893            179,465
  Goodwill                                                                              6,981,876
                                                                                 ----------------- ------------------

TOTAL ASSETS                                                                          $ 9,111,158        $ 1,217,266
                                                                                 ----------------- ------------------

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
  Bank overdraft                                                                      $   189,608         $     -
  Accounts payable                                                                      1,337,862            379,004
  Accrued salaries and wages                                                              442,299            208,752
  Accrued expenses                                                                      1,472,445            351,621
  Accrued interest                                                                         61,558            713,554
  Current maturities of long-term debt                                                    294,117               -
  Borrowings from directors                                                                  -             5,077,500
  Deferred revenue                                                                        336,598            157,074
                                                                                 ----------------- ------------------
        Total current liabilities                                                       4,134,487          6,887,505

LINE OF CREDIT                                                                          3,000,000          3,000,000
LONG-TERM DEBT                                                                             40,295               -

COMMITMENTS  (Note 7)

STOCKHOLDERS' EQUITY (DEFICIT):
  Preferred stock - $.01 par value:  shares authorized: 20,000,000
    Series C, 9% cumulative, convertible
      issued and outstanding: 2003 & 2002 - 100,000                                         1,000              1,000
    Series D, 9% cumulative, convertible
      issued and outstanding: 2003 - 830,100                                                8,301               -
  Common stock - $.01 par value:
      authorized: 80,000,000; issued and outstanding:  2003 - 4,960,354
      authorized: 20,000,000; issued and outstanding:  2002 - 10,956,024                   49,604            109,560
  Additional paid-in capital                                                           45,596,684         24,132,153
  Accumulated deficit                                                                 (43,719,213)       (32,912,952)
                                                                                 ----------------- ------------------
        Total stockholders' equity (deficit)                                            1,936,376         (8,670,239)
                                                                                 ----------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                  $ 9,111,158        $ 1,217,266
                                                                                 ----------------- ------------------
</TABLE>

See notes to consolidated financial statements.


                                      F-2
<PAGE>

PATIENT INFOSYSTEMS, INC.

<TABLE>
<CAPTION>
CONSOLIDATED  STATEMENTS OF OPERATIONS  YEARS ENDED DECEMBER 31, 2003,  2002 AND 2001
-----------------------------------------------------------------------------------------------

                                              2003                2002                2001


<S>                                      <C>                 <C>                 <C>
REVENUES                                 $    5,687,293      $   2,355,677       $   1,586,443
                                     ------------------- ------------------ -------------------
COSTS AND EXPENSES:
  Cost of revenue                             4,162,759          1,914,464           2,420,151
  Sales and marketing                           893,833            746,353             813,975
  General and administrative                  1,125,926          1,282,683           2,028,804
  Research and development                      131,782            105,614             190,731
                                     ------------------- ------------------ -------------------
        Total costs and expenses              6,314,300          4,049,114           5,453,661
                                     ------------------- ------------------ -------------------

OPERATING LOSS                                (627,007)        (1,693,437)         (3,867,218)

Amortization of debt discount               (2,143,120)                  -                   -
Other expense, net                            (607,834)          (530,924)           (598,087)
                                     ------------------- ------------------ -------------------

NET LOSS                                    (3,377,961)        (2,224,361)         (4,465,305)

CONVERTIBLE PREFERRED STOCK DIVIDENDS       (7,671,557)           (90,000)            (90,000)
                                     ------------------- ------------------ -------------------

NET LOSS ATTRIBUTABLE TO
 COMMON STOCKHOLDERS                     $ (11,049,518)      $ (2,314,361)       $ (4,555,305)
                                     =================== ================== ===================
NET LOSS PER SHARE - BASIC
   AND DILUTED                                 $ (3.25)           $ (2.36)            $ (5.17)
                                     =================== ================== ===================
WEIGHTED AVERAGE COMMON
   SHARES OUTSTANDING                         3,399,616            979,668             880,875
</TABLE>

See notes to consolidated financial statements.


                                      F-3
<PAGE>

PATIENT INFOSYSTEMS, INC.

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
-------------------------------------------------------------------------------------------------------------------------------
                                                                                      Additional                      Total
                                                Common Stock        Preferred Stock     Paid-in     Accumulated   Stockholders'
                                              Shares      Amount    Shares   Amount     Capital       Deficit     Equity(Deficit)
                                           ------------ ---------- --------- -------- ------------ -------------- -------------
<S>                                          <C>         <C>        <C>      <C>      <C>          <C>            <C>
Balance at December 31, 2000                 8,220,202   $ 82,202   100,000  $ 1,000  $23,951,103  $(26,223,286)  $ (2,188,981)

Compensation expense related to
  issuance of  stock                         2,319,156     23,191      -        -         329,482          -           352,673

Debt issuance costs in the form
  stock warrants                                  -          -         -        -          35,735          -            35,735

Immaculate exercise of stock warrants          416,666      4,167      -        -          (4,167)         -              -

Dividends on
  Series C Convertible Preferred Stock            -          -         -        -         (90,000)         -           (90,000)

Net loss for the year ended
      December 31, 2001                           -          -         -        -            -       (4,465,305)    (4,465,305)
                                           ------------ ---------- --------- -------- ------------ -------------- -------------
Balance at December 31, 2001                10,956,024    109,560   100,000    1,000   24,222,153   (30,688,591)    (6,355,878)

Dividends on
  Series C Convertible Preferred Stock            -          -         -        -         (90,000)         -           (90,000)

Net loss for the year ended
      December 31, 2002                           -          -         -        -            -       (2,224,361)    (2,224,361)
                                           ------------ ---------- --------- -------- ------------ -------------- -------------
Balance at December 31, 2002                10,956,024    109,560   100,000    1,000   24,132,153   (32,912,952)    (8,670,239)

Exercise of stock options                          400          4      -        -              32          -                36

Give effect to 1 for 12 reverse split of
common stock                               (10,043,389)  (100,434)     -        -         100,434          -              -

Issuance of common stock                     4,047,319     40,474      -        -       6,759,023          -         6,799,497

Issuance of Series D Preferred                    -          -      830,100    8,301    7,419,999          -         7,428,300

Beneficial Conversion on Series D issuance        -          -         -        -       7,428,300    (7,428,300)          -

Dividends on
  Series C Convertible Preferred Stock            -          -         -        -         (90,000)         -           (90,000)

  Series D Convertible Preferred Stock            -          -         -        -        (153,257)         -          (153,257)

Net loss for the year ended
      December 31, 2003                           -          -         -        -             -      (3,377,961)    (3,377,961)
                                           ------------ ---------- --------- -------- ------------ -------------- -------------

Balance at December 31, 2003                 4,960,354   $ 49,604   930,100  $ 9,301  $45,596,684  $(43,719,213)   $ 1,936,376
                                           ============ ========== ========= ======== ============ ============== =============
</TABLE>

See notes to consolidated financial statements.


                                      F-4
<PAGE>

PATIENT INFOSYSTEMS, INC.

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
----------------------------------------------------------------------------------------------------------------------------

                                                                                 2003             2002             2001
                                                                                 ----             ----             ----

OPERATING :
<S>                                                                         <C>             <C>               <C>
  Net loss                                                                  $ (3,377,961)   $ (2,224,361)     $ (4,465,305)
  Adjustments to reconcile net loss to net cash provided by (used in)
    operating activities:
      Depreciation and amortization                                               310,433         374,099           695,369
      Amortization of debt discount                                             2,143,120            -                 -
      Gain on sale of property                                                       -               (400)            4,772
      Noncash interest income                                                    (129,499)           -                 -
      Loss on investments                                                            -               -              200,000
      Compensation expense related to issuance of stock warrants and options         -               -              352,673
      Decrease (increase) in accounts receivable                                  156,393        (167,425)          137,645
      (Increase) decrease in prepaid expenses and other current assets            (34,960)        (17,378)           77,718
      Increase (decrease) in accounts payable                                     172,084         267,986          (122,527)
      Increase in accrued salaries and wages                                       40,025          32,134               460
      Increase (decrease) in accrued expenses                                      19,007        (215,584)          198,745
      Increase in accrued interest                                                645,832         431,024           232,429
      Increase (decrease) in deferred revenue                                     179,524          33,934           (38,821)
                                                                            -------------- --------------- -----------------
            Net cash provided by (used in) operating activities                   123,998      (1,485,971)       (2,726,842)
                                                                            -------------- --------------- -----------------
INVESTING:
  Property and equipment additions                                                (34,185)         (8,867)           (9,240)
  Proceeds from sale of property and equipment                                       -                400               800
  Increase in notes receivable                                                       -           (200,000)             -
  Acquisition of American Caresource, net of cash acquired of $1,710           (3,348,290)           -                 -
  Acquisition expenses                                                           (173,719)           -                 -
                                                                            -------------- --------------- -----------------
          Net cash used in investing activities                                (3,556,194)       (208,467)           (8,440)
                                                                            -------------- --------------- -----------------

FINANCING:
  Exercise of stock options                                                            36            -                 -
  Borrowings from directors                                                       150,000       1,170,000         2,736,500
  Borrowings from shareholders                                                  3,675,000            -                 -
  Proceeds from line of credit                                                       -            500,000              -
                                                                            -------------- --------------- -----------------
            Net cash provided by financing activities                           3,825,036       1,670,000         2,736,500
                                                                            -------------- --------------- -----------------
NET INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS                             392,840         (24,438)            1,218

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                      5,011          29,449            28,231
                                                                            -------------- --------------- -----------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                        $ 397,851         $ 5,011          $ 29,449
                                                                            -------------- --------------- -----------------
Supplemental disclosures of cash flow information
   Cash paid for interest expense                                                $ 97,559       $ 102,856         $ 169,490
                                                                            ============== =============== =================
</TABLE>

See notes to consolidated financial statements.


                                      F-5
<PAGE>

PATIENT INFOSYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

1.   DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Organization  - Patient  Infosystems,  Inc.  (the  "Company")  designs  and
     develops health care  information  systems and services to manage,  collect
     and analyze patient-related  information to improve patient compliance with
     prescribed  treatment  protocols.  Through its various  patient  compliance
     programs  for disease  state  management,  the Company  provides  important
     benefits for the patient, the health care provider and the payor.

     The consolidated  financial  statements include the accounts of the Company
     and its wholly owned subsidiaries,  Patient Infosystems Canada, Inc., which
     ceased operations in January 2001 and American  Caresource  Holdings,  Inc.
     which was created in December 2003. Significant  intercompany  transactions
     and balances have been eliminated in consolidation.

     Acquisition - On December 31, 2003, the Company acquired  substantially all
     the assets and liabilities of American  Caresource  Corporation for a total
     purchase  price of  $5,732,116.  The  purchase  consideration  included (a)
     1,100,000  shares of common stock valued at  $1,848,000;  (b) $3,679,499 of
     notes  and  accrued  interest  owed  the  Company  by  American  Caresource
     Corporation  that was  extinguished  by the  business  combination  and (c)
     $204,617 of direct  expenses  associated with the  acquisition.  The common
     stock  issued in the  transaction  was valued at $1.68 per share based upon
     the measurement  date for this  transaction of April 14, 2003, which is the
     date the terms of the proposed  transaction  were agreed upon and announced
     to the public.

     Information related to the acquisition is as follows:

     Purchase price                           $      5,732,116
                                              ================
     Purchase allocation:
     Current assets                           $        504,087
     Property and equipment                            152,480
     Identifiable intangible assets                    462,000
     Current liabilities, excluding current
        portion of long-term debt                   (2,033,915)
     Long-term debt                                   (334,412)
     Goodwill                                        6,981,876
                                               ---------------
                                              $      5,732,116

     This  acquisition  has been  accounted  for  using the  purchase  method of
     accounting  and  accordingly,   the  results  of  the  operations  of  this
     acquisition  have been included in the  consolidated  financial  statements
     from the date of the  acquisition.  Since the  acquisition  occurred at the
     close of business on December  31,  2003,  there are no  operating  results
     reflected in the accompanying 2003 consolidated statement of operations.

     The allocation of the purchase price to identifiable  intangible assets and
     goodwill  has not been  finalized,  and any  required  adjustments  will be
     recorded as necessary in 2004.


                                      F-6
<PAGE>

     The  following   unaudited   pro  forma  summary   presents  the  Company's
     consolidated  results of operations for 2003 and 2002 as if the acquisition
     had been consummated at January 1, 2002. The pro forma consolidated results
     of  operations  include  certain  pro  forma  adjustments,   including  the
     amortization  of  identifiable  intangible  assets and  interest on certain
     debt.

<TABLE>
<CAPTION>
                                                                        December 31,
                                                                    2003                  2002
                                                           --------------------- ---------------------
<S>                                                          <C>                     <C>
     Revenue                                                 $    14,851,682         $  11,996,817

     Operational costs                                          (18,882,522)          (17,936,490)

     Other costs                                                 (2,490,533)             (166,707)
                                                           --------------------- ---------------------
     Net loss                                                    (6,521,373)           (6,106,380)

     Dividends and beneficial conversions                          (837,090)           (8,265,390)
                                                           --------------------- ---------------------
     Net loss attributable to common shareholders            $   (7,358,463)         $(14,371,770)
                                                           ===================== =====================
     Net loss per share (using 3,399,616 weighted average
     shares outstanding at December 31, 2003.                $        (2.16)         $      (4.23)
                                                           ===================== =====================
</TABLE>

     The pro forma  results are not  necessarily  indicative of those that would
     have  occurred  had the  acquisition  taken place at the  beginning  of the
     periods presented.

     Going Concern - The  accompanying  consolidated  financial  statements have
     been prepared on a going concern basis,  which contemplates the realization
     of assets and the  satisfaction  of  liabilities  in the  normal  course of
     business. As shown in the accompanying  consolidated  financial statements,
     the Company  incurred a net loss for 2003 of  $3,377,961  and had  negative
     working  capital of $2,808,649 at December 31, 2003.  These factors,  among
     others, may indicate that the Company will be unable to continue as a going
     concern for a reasonable period of time.

     The  consolidated  financial  statements  do not  include  any  adjustments
     relating to the  recoverability of assets and classification of liabilities
     that might be necessary should the Company be unable to continue as a going
     concern.  The Company's  continuation  as a going concern is dependant upon
     its ability to generate  sufficient cash flow to meet its  obligations,  to
     obtain  additional   financing  and,   ultimately,   to  attain  successful
     operations.

     Management is currently assessing the Company's operating structure for the
     purpose of reducing ongoing expenses,  increasing sources of revenue and is
     negotiating the terms of additional debt or equity financing.  The recently
     completed   acquisition  of  American   Caresource   Corporation  is  being
     integrated into the operation of the Company.  Opportunities  to expand the
     existing  customer  relationships  of both  organizations  to  include  the
     services of both organizations are being assessed by management. Management
     believes that the access to capital will provide the newly acquired  entity
     the stability needed to begin a period of growth. In addition, successes in
     outcomes from disease management programs are being leveraged in an attempt
     to increase revenues from sales.

     Use  of  Estimates  in  the  Preparation  of  Financial  Statements  -  The
     preparation  of  financial   statements  in  conformity   with   accounting
     principles  generally  accepted  in the United  States of America  requires
     management  to make  estimates  and  assumptions  that affect the  reported
     amounts of assets and liabilities  and disclosure of contingent  assets and
     liabilities  at the  date of the  financial  statements  and  the  reported
     amounts of  revenues  and  expenses  during the  reporting  period.  Actual
     amounts could differ from those estimates.

     Fair Value of Financial  Instruments - The Company's financial  instruments
     consist  primarily  of cash  and  cash  equivalents,  accounts  receivable,
     accounts payable,  accrued expenses,  borrowings from directors,  a line of
     credit and long-term  debt.  The fair value of instruments is determined by
     reference  to  various  market  data and  other  valuation  techniques,  as
     appropriate.  Unless  otherwise  disclosed,  the fair  value of  short-term
     financial  instruments  approximates  their  recorded  values  due  to  the
     short-term  nature  of  the  instruments.  Based  on  the  borrowing  rates
     currently  available to the Company for bank loans with  similar  terms and
     average  maturities,  the fair value of  long-term  debt  approximates  its
     carrying value.


                                      F-7
<PAGE>

     Revenue  Recognition and Deferred Revenue - The Company's  principal source
     of  revenue to date has been from  contracts  with  various  pharmaceutical
     companies and managed care  organizations for the development and operation
     of disease  management  programs for chronic diseases,  disease  management
     programs and other health care information  system  applications.  Deferred
     revenue  represents  amounts  billed in advance  of  delivery  under  these
     contracts.

     Development  Contracts  - The  Company's  program  enhancements  consist of
     specific  changes  or  modifications  to  existing  products  requested  by
     customers and are  short-term in nature.  Therefore,  revenue is recognized
     upon delivery of the enhancement.

     Program  Operations - The Company's program operation  contracts call for a
     per-enrolled patient fee to be paid by the customer for a series of program
     services as defined in the contract. The timing of customer payments varies
     by contract,  but typically  occurs in advance of the  associated  services
     being provided.  Revenues from program operations are recognized ratably as
     the program services are delivered.

     Licenses - Revenue  derived from software  license fees is recognized  when
     the criteria  established by Statement of Position 97-2,  Software  Revenue
     Recognition,   is   satisfied.   License  fees   associated   with  hosting
     arrangements (e.g.,  arrangements that include the right of the customer to
     use the software stored on the Company's hardware),  are recognized ratably
     over the hosting period when such fees are fixed and determinable.  Hosting
     fees with payment terms  extending past one year are recognized as payments
     become due.

     Cash and Cash  Equivalents - Cash and cash  equivalents  include all highly
     liquid debt instruments with original maturities of three months or less.

     Concentrations  of Credit Risk - Financial  instruments,  which potentially
     subject the Company to concentration of credit risk, consist principally of
     cash and cash equivalents and accounts  receivable.  The Company places its
     cash and cash equivalents with high credit quality institutions.

     The  Company's  current  contracts  are  concentrated  in a small number of
     customers,  consequently, the loss of any one of its customers could have a
     material adverse effect on the Company and its operations. During the years
     ended December 31, 2003,  2002 and 2001,  approximately  $3,635,661  (64%),
     $1,680,475  (71%),  and $1,027,931  (65%),  respectively,  of the Company's
     revenues arose from contracts  with three  customers.  At December 31, 2003
     and 2002,  accounts  receivable included balances of $151,688 and $317,046,
     respectively, from contracts with these customers.

     Property  and  Equipment  -  Property  and  equipment  are  stated at cost.
     Depreciation is computed using the straight-line  method over the estimated
     useful lives of the assets, which range from 3 to 10 years.

     Asset  Impairment  - The Company  regularly  assesses all of its long lived
     assets for  impairment  and recognizes a loss when the carrying value of an
     asset  exceeds its fair value.  The Company  determined  that no impairment
     loss of long lived assets need be recognized for applicable assets in 2003,
     2002 and 2001.

     Intangible  Assets -  Intangible  assets at December  31, 2002  represent a
     purchased  software asset of the Company's web based services that is being
     amortized over 4 years using the straight-line  method.  This asset balance
     at December 31, 2003  totaled  $35,893.  At December  31, 2003,  intangible
     assets also includes, among other things, a customer list and relationships
     acquired from American Caresource Corporation on December 31, 2003 totaling
     $462,000.

     Research and Development - Research and  development  costs are expensed as
     incurred.

     Income Taxes - Deferred  income 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  net  operating  loss  and  tax  credit
     carryforwards.


                                      F-8
<PAGE>

     Net Loss Per Share - The  calculations  for the basic and diluted  loss per
     share  were  based on net  loss  attributable  to  common  stockholders  of
     $11,049,518,  $2,314,361 and  $4,555,305  and a weighted  average number of
     common shares  outstanding,  including  convertible  preferred  shares,  of
     3,399,616,  979,668 and 880,875 for the years ended December 31, 2003, 2002
     and 2001 after giving effect to the 1 for 12 reverse  stock split  approved
     by the Company's stockholders on December 31, 2003,  respectively.  All per
     share information included in the consolidated financial statements and the
     footnotes  thereto  have been  restated  for effect of the 1 for 12 reverse
     stock split. The computation of fully diluted loss per share for 2003, 2002
     and 2001 did not  include  101,160,  92,928  and  103,128  shares of common
     stock,  respectively,  which consist of outstanding  convertible  preferred
     shares,  options and warrants  because the effect would be antidilutive due
     to the net loss in those years.

     The  calculation  of the  Company's  net loss per share for the years ended
     December 31, 2003, 2002 and 2001 is as follows:

<TABLE>
<CAPTION>
                                                                2003               2002             2001
                                                                ----               ----             ----
     Net loss per share - basic and diluted
<S>                                                         <C>                <C>              <C>
        Net loss attributable to common stockholders        $(11,049,518)      $(2,314,361)     $(4,555,305)
                                                         ----------------- ----------------- ----------------
        Actual weighted average common shares outstanding         924,109           913,002          814,209
        Weighted average preferred shares outstanding
           convertible into common shares                       2,475,507            66,666           66,666
                                                         ----------------- ----------------- ----------------
        Total weighted average common shares outstanding        3,399,616           979,668          880,875
                                                         ----------------- ----------------- ----------------
        Net loss per share - basic and diluted                 $   (3.25)         $  (2.36)        $  (5.17)
                                                         ================= ================= ================
</TABLE>

     Retirement  Plan - The Company has a retirement  plan that qualifies  under
     Section 401(k) of the Internal  Revenue Code.  This  retirement plan allows
     eligible  employees  to  contribute  a portion of their  income on a pretax
     basis to the plan, subject to the limitations  specified under the Internal
     Revenue  Code.  The  Company's  annual  contribution  to the plan is at the
     discretion of the Board of Directors.  The Company made no contributions to
     this plan in 2003, 2002 and 2001.

     New Accounting  Pronouncements - In January 2003, the Financial  Accounting
     Standards Board ("FASB") issued  Interpretation  No. 46,  Consolidation  of
     Variable  Interest  Entities ("FIN 46"). FIN 46 requires  disclosure  about
     variable  interest  entities for which it is  reasonably  possible that the
     Company will be required to  consolidate or disclose  information  when the
     Interpretation  becomes effective.  The Company has determined that it does
     not have any variable interest  entities which would require  consolidation
     in accordance with FIN 46.

     In May 2003, the FASB issued  Statement of Financial  Accounting  Standards
     No. 150, Accounting for Certain Financial  Instruments with Characteristics
     of Both Liabilities and Equity,  ("SFAS No. 150"). SFAS No. 150 establishes
     standards  for how an issuer  classifies  and  measures  certain  financial
     instruments  with  characteristics  of  both  liabilities  and  equity.  It
     requires that an issuer classify a financial  instrument that is within its
     scope as a liability (or an asset in some  circumstances).  The adoption of
     SFAS No. 150 in 2003 did not have an effect on the  Company's  consolidated
     financial statements.


                                      F-9
<PAGE>

     Stock-Based  Compensation  - In 2002,  the  Company  adopted  Statement  of
     Financial   Accounting   Standards   ("SFAS")  No.  148,   "Accounting  for
     Stock-Based  Compensation  -  Transition  and  Disclosure."  This  standard
     provides alternative methods of transition for voluntary change to the fair
     value based method of accounting  for  stock-based  employee  compensation.
     Additionally,  the standard  also  requires  prominent  disclosures  in the
     Company's  financial  statements  about the method of  accounting  used for
     stock-based employee  compensation,  and the effect of the method used when
     reporting financial statements.

     The Company  accounts for stock-based  compensation in accordance with SFAS
     No. 123,  "Accounting for Stock-Based  Compensation".  As permitted by SFAS
     No. 123, the Company continues to measure compensation for such plans using
     the intrinsic  value based method of  accounting,  prescribed by Accounting
     Principles Board ("APB"),  Opinion No. 25,  "Accounting for Stock Issued to
     Employees."   Had   compensation   cost  for  the   Company's   stock-based
     compensation  plans been determined  based on the fair value at the date of
     grant for  awards  consistent  with the  provisions  of SFAS No.  123,  the
     Company's net loss and net loss per share would have been  increased to the
     pro forma amounts indicated below:


<TABLE>
<CAPTION>
                                              2003            2002           2001
                                              ----            ----           ----

     Net loss attributable to common
<S>                                     <C>              <C>             <C>
     shareholders - as reported         $ (11,049,518)   $ (2,314,361)   $ (4,555,305)

     Stock compensation expense              (118,257)       (136,306)       (210,471)
                                      ----------------- --------------- ---------------
     Net loss - pro forma               $ (11,167,775)   $ (2,450,667)   $ (4,765,776)
                                      ================= =============== ===============
     Net loss per share - basic
       and diluted - as reported              $ (3.25)        $ (2.36)        $ (5.17)
                                      ================= =============== ===============
     Net loss per share - basic
       and diluted - pro forma                $ (3.29)        $ (2.50)        $ (5.41)
                                      ================= =============== ===============
</TABLE>


     The fair value of each option grant is estimated on the date of grant using
     the Black-Scholes  option-pricing  model using assumed  risk-free  interest
     rates of 3.79% for the year ended  December  31,  2003,  3.63% for the year
     ended  December 31, 2002 and 4.86% for the year ended December 31, 2001 and
     an expected  life of 7 years.  The  assumed  dividend  yield was zero.  The
     Company has used a volatility factor of .98 for the year ended December 31,
     2003, 1.78 for the year ended December 31, 2002 and 1.24 for the year ended
     December 31, 2001. For purposes of pro forma disclosure, the estimated fair
     value of each option is  amortized to expense  over that  option's  vesting
     period.


                                      F-10
<PAGE>

     Consolidated  Statements of Cash Flows - Supplemental noncash investing and
     financing  activities for the years ended December 31, 2003,  2002 and 2001
     are as follows:

<TABLE>
<CAPTION>
                                                          2003          2002         2001
     Common stock activities:
        Borrowings from directors converted into
<S>                                                    <C>           <C>          <C>
            common stock                               $4,482,500    $     -      $     -
        Accrued interest converted into common stock      438,099          -            -
        Common stock issued in acquisition              1,848,000          -            -
        Common stock issued for acquisition expenses       30,898          -            -
                                                      ------------- ------------ ------------
        Total of noncash common stock activities       $6,799,497    $     -      $     -
                                                      ============= ============ ============
     Preferred stock activities:
        Borrowings from directors converted to
            preferred stock                             $ 745,000    $     -      $     -
        Borrowings from shareholders converted into
            preferred stock                             3,675,000          -            -
        Accrued interest converted into preferred
            stock                                         865,180          -            -
        Issuance of preferred stock in connection
            with issuance of debt                       2,143,120          -            -
                                                      ------------- ------------ ------------
        Total noncash preferred stock activities       $7,428,300    $     -      $     -
                                                      ============= ============ ============
     Dividends declared on Series C & D Convertible
          Preferred Stock                               $ 243,257    $  90,000    $  90,000
                                                      ============= ============ ============
     Value of beneficial conversion feature on Series
          D Convertible Preferred Stock recognized as
          a dividend                                   $7,428,300    $     -      $     -
                                                      ============= ============ ============
</TABLE>

     Segments - Prior to the American Caresource  Corporation  acquisition,  the
     Company  operated  in one  segment.  As a result  of the  acquisition,  the
     Company anticipates that it will operate in two segments.  Accordingly, the
     required segment information will be disclosed commencing in 2004.

2.   PROPERTY AND EQUIPMENT

     Property and equipment consists of the following at December 31:

                                        2003        2002

     Computer software               $  686,792  $  665,286
     Computer equipment               1,514,547   1,168,445
     Telephone equipment                365,204     362,887
     Leasehold improvements              64,897      41,504
     Office furniture and equipment     395,720     354,329
                                   ------------- -----------
                                      3,027,160   2,592,451

     Less accumulated depreciation    2,721,609   2,306,705
                                   ------------- -----------

     Property and equipment, net      $ 305,551  $  285,746
                                   ------------- -----------

                                      F-11
<PAGE>

3.   Debt

     Line  of  Credit  - At  December  31,  2003,  the  Company  has  borrowings
     outstanding  totaling  $3,000,000  under a line  of  credit,  which  is the
     maximum amount  available under the line of credit.  The amount borrowed is
     due and payable on July 31,  2005.  Interest is due and payable at maturity
     at a floating  rate based  upon LIBOR plus 1.75%  (effective  LIBOR rate at
     December 23, 2003 was 1.2%).  There is a commitment  fee of 0.25% per annum
     on the  average  daily  unused  amount  of the  line of  credit  to be paid
     quarterly in arrears. The line of credit is secured by substantially all of
     the Company's  assets and is guaranteed by Dr. Schaffer and Mr.  Pappajohn,
     directors  of the  Company.  In  consideration  for  their  guarantees,  in
     February  2004,  the  Company  granted to Dr.  Schaffer  and Mr.  Pappajohn
     warrants to purchase an aggregate of 47,500  shares of Series D Convertible
     Preferred  Stock,  convertible  into 475,000 shares of the Company's common
     stock for $10.00 per preferred share.

     At December 31, 2002, the Company's  borrowings  outstanding under the line
     of credit totaled $3,000,000.  This line of credit was amended during 2003,
     the amended terms of which are described in the preceding paragraph.

     Borrowings  from  directors - Prior to December 31,  2003,  the Company had
     borrowings from Mr. Pappajohn and Dr. Schaffer.  At December 31, 2002, such
     borrowings totaled $5,077,500.  The Company borrowed an additional $150,000
     from these directors during 2003.

     On December 31, 2003, the Company converted $4,482,500 in debt and $438,099
     of accrued  interest  owed to Mr.  Pappajohn  and Dr.  Schaffer into common
     stock by issuing  2,928,986  shares of the  Company's  common stock using a
     value of $1.68 per common  share.  Additionally  on December 31, 2003,  Mr.
     Pappajohn  agreed to convert his  remaining  debt of  $745,000  and accrued
     interest  of  $711,110  into  145,611  shares  of the  Company's  Series  D
     Convertible  Preferred Stock at a price of $10.00 per preferred  share. See
     Note 5.


                                      F-12
<PAGE>

     Long-Term  Debt  -  Long-term  debt,   which  was  acquired  from  American
     Caresource Corporation, consists of the following at December 31, 2003:

<TABLE>
<CAPTION>
     Unsecured non-interest bearing note to a stockholder, payable in monthly
<S>                                                                                 <C>
     installments of $10,127, matured in December 2003                              $    40,507

     Unsecured non-interest bearing obligation to a stockholder, payable in
     monthly installments of $5,000, maturing in April 2004                              15,732

     Unsecured loan at index rate plus 2.5% (6.5%) to a stockholder, due on demand
                                                                                         30,478
     19% obligation assumed and due an individual in connection with the purchase
     of certain assets, payable in monthly installments of $2,000, matured in
     December 2003                                                                       11,577

     5% unsecured note payable to a client, with principal and interest maturing
     in March 2004                                                                      165,000

     Other                                                                                7,610

     Capital lease obligations (see Note 7)                                              63,508
                                                                                    ------------
     Total debt                                                                         334,412

     Less current portion                                                             (294,117)
                                                                                    ------------
     Total long-term debt                                                           $    40,295
                                                                                    ============
</TABLE>

     Scheduled payments in each of the next four years are as follows:

     Year ended December 31,
     ------------------------ --------------
     2004                         $ 294,117
     2005                            21,360
     2006                            12,748
     2007                             6,187
     ------------------------ --------------
     Total                      $   334,412
                              ==============


                                      F-13
<PAGE>

4.   INCOME TAXES

     There was no income tax expense for the years ended December 31, 2003, 2002
     and 2001.

     Income tax expense for the years ended  December 31 differed  from the U.S.
     federal income tax rate of 34% as a result of the following:

<TABLE>
<CAPTION>
                                                           2003            2002          2001

<S>                                                   <C>              <C>          <C>
     Computed "expected" tax benefit                  $ (1,148,507)    $ (756,283)  $ (1,518,203)

     Change in the valuation allowance
         for deferred tax assets                            487,000        885,000      1,795,000

     Amortization of debt discount is not deductible        728,660              -              -

     State and local income taxes at statutory rates,
         net of federal income tax benefit                 (73,350)      (133,462)      (267,918)

     Other, net                                               6,197          4,745        (8,879)
                                                      -------------- -------------- --------------

                                                         $     -        $     -        $    -
                                                      -------------- -------------- --------------
</TABLE>

     The tax  effects of  temporary  differences  that give rise to  significant
     portions  of the  deferred  income  tax  assets  and  deferred  income  tax
     liabilities at December 31, are presented below.

     Deferred income tax assets:                        2003            2002

     Accounts receivable, principally due
       to allowance for doubtful accounts          $     21,000  $      22,000
     Deferred revenue                                   135,000         63,000
     Compensation                                        53,000         40,000
     Net operating loss carryforwards                13,053,000     12,698,000
     Tax credit carryforwards                            75,000         75,000
     Amortization of intangibles                        153,000        112,000
     Other                                               36,000         36,000
                                                   ------------- --------------
          Total gross deferred income tax assets     13,526,000     13,046,000

          Less valuation allowance                 (13,461,000)   (12,974,000)
                                                   ------------- --------------

          Net deferred income tax assets                 65,000         72,000
                                                   ------------- --------------

     Deferred income tax liabilities:

     Property and equipment, principally due to
       differences in depreciation and amortization     (9,000)       (30,000)
     Other                                             (56,000)       (42,000)
                                                   ------------- --------------
          Total gross deferred income tax liability    (65,000)       (72,000)
                                                   ------------- --------------

          Net deferred income taxes                 $     -        $     -
                                                   ------------- --------------

     Management of the Company has evaluated the available evidence about future
     taxable  income and other  possible  sources of realization of deferred tax
     assets. The valuation  allowance reduces deferred tax assets to zero, which
     represents  management's  best  estimate of the amount of such deferred tax
     assets that more likely than not will be realized.


                                      F-14
<PAGE>

     At December 31, 2003 the Company has net operating  loss  carryforwards  of
     approximately  $32,684,000,  which are available to offset  future  taxable
     income,  if any,  which  begin to  expire  in 2010.  The  Company  also has
     investment  tax credit  carryforwards  for federal  income tax  purposes of
     approximately  $75,000, which are available to reduce future federal income
     taxes,  if any,  which  begin to expire in 2010.  These loss and tax credit
     carryforwards  may be subject to  limitation  by  certain  sections  of the
     Internal Revenue Code relating to ownership changes.

5.   PREFERRED STOCK

     On March 31,  2000,  the Company  completed a private  placement of 100,000
     shares of newly issued Series C 9% Cumulative  Convertible  Preferred Stock
     ("Series C Preferred Stock"),  raising $1,000,000 in total proceeds.  These
     shares can be  converted  at any time by the holder into common  stock at a
     rate of 8 shares of common stock to 1 share of Series C Preferred Stock. In
     2003, this rate changed to 10 shares of common stock to 1 share of Series C
     Preferred  Stock.  Each share of Series C Preferred Stock has voting rights
     equivalent  to 10 shares of common  stock.  As of December  31,  2003,  the
     Company  has accrued  $337,500  in  dividends  since  inception,  which was
     payable to the Series C stockholders.

     During  2003 the  Company  issued a total of 301,582  shares of Series D 9%
     Cumulative  Convertible  Preferred  Stock  ("Series D Preferred  Stock") in
     connection  with certain  borrowings  during 2003. In  accordance  with APB
     Opinion  No. 14, a portion of the cash  received  totaling  $2,143,120  was
     allocated to the preferred  stock  resulting in a debt discount in the same
     amount,  which was fully  amortized by December 31, 2003.  Additionally,  a
     beneficial  conversion  feature has arisen since the value recorded for the
     preferred  stock,  which is convertible into common stock, is less than the
     fair  market  value of the  common  stock  totaling  $5,177,458.  While the
     resulting beneficial conversion feature totals $3,034,338,  the Company can
     only record a  beneficial  conversion  equal to the value of the  preferred
     stock  recorded,  $2,143,120.  Such  amount  is  reflected  in the net loss
     attributable  to the common  stockholders  for the year ended  December 31,
     2003  because  the  preferred  stock is  immediately  convertible  into the
     Company's  common stock.  As of December 31, 2003,  the Company has accrued
     $153,257 in dividends  since  inception,  which was payable to the Series D
     stockholders.

     On December 31, 2003, $5,285,180 of debt and accrued interest was converted
     into  528,518  shares of Series D Preferred  Stock at a price of $10.00 per
     share.  Because the effective purchase price per common share was $1.00 per
     share while the fair market value on December 31, 2003 was $2.40 per share,
     there is a  beneficial  conversion  feature of these  Series D  Convertible
     Preferred  shares  totaling  $7,399,252.  While  the  resulting  beneficial
     conversion  feature  totals  $7,399,252,  the  Company  can  only  record a
     beneficial  conversion  equal to the value of the preferred stock recorded,
     $5,285,180.  Such amount is reflected in the net loss  attributable  to the
     common  stockholders  for the year ended  December  31,  2003  because  the
     preferred stock is immediately convertible into the Company's common stock.

6.   STOCK OPTIONS AND WARRANTS

     The Company has an Employee Stock Option Plan (the "Stock Option Plan") for
     the benefit of certain employees, non-employee directors, and key advisors.
     On December 31, 2003, the  stockholders  approved an amendment to the Stock
     Option Plan that increased its authorized shares from 1,680,000 shares on a
     pre-split  basis to 3,500,000  shares  after giving  effect to the 1 for 12
     reverse  stock  split and  increase  in the  Company's  overall  authorized
     capital. On May 2, 2000, the Company filed a Form S-8 registering 1,680,000
     of the Stock Option Plan shares,  the Company plans to file an amended Form
     S-8 which will register the full  3,500,000  shares now  authorized.  Stock
     options  granted  under  the Stock  Option  Plan may be of two  types:  (1)
     incentive  stock options and (2)  nonqualified  stock  options.  The option
     price of such grants  shall be  determined  by a Committee  of the Board of
     Directors (the "Committee"),  but shall not be less than the estimated fair
     market  value of the common  stock at the date the option is  granted.  The
     Committee  shall fix the terms of the grants  with no option  term  lasting
     longer  than ten years.  The  ability to  exercise  such  options  shall be
     determined  by the  Committee  when the  options  are  granted.  Generally,
     outstanding  options vest at the rate of 20% per year.  During  2001,  some
     grants had a portion of the options  vest  immediately  with the balance of
     the options vesting at a rate of 20% per year.


                                      F-15
<PAGE>

     A summary of stock option activity follows:

<TABLE>
<CAPTION>
                                                            Outstanding    Weighted-Average
                                                              Options       Exercise Price

<S>                                                         <C>                 <C>
Options outstanding at December 31, 2000                      701,880           $ 1.28

Options granted during the year ended December 31, 2001
  (weighted average fair value of $0.18)                      536,500           $ 0.19

Options forfeited by holders during the year
  ended December 31, 2001                                    (40,840)           $ 1.83

Options outstanding at December 31, 2001                    1,197,540           $ 0.77

Options forfeited by holders during the year
  ended December 31, 2002                                    (82,400)           $ 0.86
                                                           -----------
Options outstanding at December 31, 2002                    1,115,140           $ 0.76

Options granted during the year ended December 31, 2003
  (weighted average fair value of $0.20)                      100,000           $ 0.20

Options forfeited by holders during the year
  ended December 31, 2003                                       (700)           $ 0.09

Options exercised during the year ended December 31, 2003       (400)           $ 0.09
                                                           -----------
Options outstanding at December 31, 2003
  before giving effect to the 1 for 12 reverse stock split  1,214,040           $ 0.78
                                                           ===========
Options outstanding at December 31, 2003
  after giving effect to the 1 for 12 reverse stock split     101,160           $ 9.36
                                                           ===========
Options exercisable at December 31, 2003                       70,565           $ 8.54
                                                           ===========
Options available for grant at December 31, 2003            3,376,917
                                                           ===========
</TABLE>


                                      F-16
<PAGE>

     The following  table  summarizes  information  concerning  outstanding  and
     exercisable  options at December 31, 2003, after giving effect to the 1 for
     12 reverse stock split:



<TABLE>
<CAPTION>
                               Options Outstanding                Options Exercisable
                     -------------------------------------   ---------------------------
                                    Weighted
                                     Average     Weighted                      Weighted
                                      Remaining   Average                       Average
        Range of       Number        Contractual Exercise        Number        Exercise
     Exercise Price  Outstanding         Life      Price      Exercisable        Price

<S>                        <C>           <C>       <C>            <C>          <C>
     $1.08 - $11.99         65,747       5.73      $ 3.48         51,449       $  3.47

     $12.00 - $23.99        17,250       4.88      $15.20          7,917       $ 17.65

     $22.00 - $33.00        18,163       5.55      $25.24         11,199       $ 25.40
                     --------------                         -------------

                           101,160                                70,565
                     ==============                         =============
</TABLE>

7.   COMMITMENTS

     The Company leases an automobile,  certain equipment and other office space
     under  non-cancelable  lease  agreements,  which  expire at  various  dates
     through April 2008.

     Rent expense for office space for the years ended  December 31, 2003,  2002
     and 2001 was $139,256, $95,508 and $136,045, respectively.

     At December  31, 2003  minimum  annual lease  payments  for  operating  and
     capital leases are as follows:

                                             Leases
     Years ending December 31,          Capital   Operating
     --------------------------------- --------- -----------
                       2004            $ 28,467   $ 386,839
                       2005              24,362     324,993
                       2006              14,036     308,783
                       2007               7,040     304,951
                       2008                -        110,888
     Less amount representing interest (10,397)
     --------------------------------- --------- -----------
     Net present value of
     minimum lease payments            $ 63,508  $1,436,454


                                      F-17
<PAGE>

8.   QUARTERLY RESULTS (UNAUDITED)

     The following is a summary of the unaudited  interim  results of operations
     by quarter:

<TABLE>
<CAPTION>
                                                     First     Second       Third      Fourth
     -------------------------------------------------------------------------------------------
     Year ended December 31, 2003:
<S>                                               <C>       <C>         <C>         <C>
     Revenues                                     $ 947,679 $ 1,580,037 $ 1,429,692 $ 1,729,885
     Gross margin                                   186,077     395,182     321,916     621,359
     Net loss                                     (505,206) (1,006,198) (1,190,639)   (675,918)
     Net loss attributable to common shareholders (527,706) (2,496,016) (1,858,563) (6,167,233)
     Net loss per common share                       (0.54)      (0.70)      (0.45)      (1.26)

     Year ended December 31, 2002:
     Revenues                                     $ 499,328   $ 542,716   $ 586,100   $ 727,533
     Gross margin                                    11,475      80,990     118,938     229,810
     Net loss                                     (661,521)   (556,519)   (474,147)   (532,174)
     Net loss attributable to common shareholders (684,021)   (579,019)   (496,647)   (554,674)
     Net loss per common share                       (0.70)      (0.59)      (0.51)      (0.57)
</TABLE>

                                      F-18
<PAGE>

Schedule II

                            Patient InfoSystems, Inc.
                        Valuation and Qualifying Accounts
              For the Years Ended December 31, 2003, 2002 and 2001

<TABLE>
<CAPTION>
                                           Balance at                                            Balance at
                                            Beginning                                              End of
                                             of Year         Additions         Deductions           Year
Allowance for Doubtful Accounts:
<S>                               <C>    <C>               <C>                   <C>           <C>
                                  2003   $     55,000      $        92           $  2,951      $     52,141
                                  2002   $     37,217      $    59,117           $ 41,334      $     55,000
                                  2001   $     48,122      $    15,447           $ 26,352      $     37,217

Deferred Tax Assets Valuation
  Allowance:
                                  2003   $ 12,974,000      $   487,000               -         $ 13,461,000
                                  2002   $ 12,089,000      $   885,000               -         $ 12,974,000
                                  2001   $ 10,294,000      $ 1,795,000               -         $ 12,089,000
</TABLE>

                                      S-1