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

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
(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, 2000
                                       OR

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

For the transition period from ________________ to ________________

Commission file number 0-23173

                         OAO TECHNOLOGY SOLUTIONS, INC.
             (Exact name of registrant as specified in its charter)

            Delaware                                          52-1973990
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                            Identification No.)

     7500 Greenway Center Drive
             16th Floor
        Greenbelt, Maryland                                     20770
 (Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code (301) 486-0400

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

Title of each class                                     Name of each exchange on
                                                        which registered
None.                                                   Not applicable.

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

                     Common Stock, par value $0.01 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 Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

     The aggregate  market value of voting and non-voting  common equity held by
non-affiliates  of the  registrant  as of  March  23,  2001,  was  approximately
$13,276,652  based on the  closing  sale price of the Common  Stock on March 23,
2001, of $1.33 as reported by the NASDAQ National Market System.

     As of March 23, 2001, the registrant had outstanding  18,653,215  shares of
its Common Stock, par value $0.01 per share.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Proxy  Statement for the Annual Meeting of  Stockholders to
be held on May 16, 2000 are incorporated by reference in Part III, Items 10, 11,
12 and 13.

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

<PAGE>


                         OAO TECHNOLOGY SOLUTIONS, INC.

                               INDEX TO FORM 10-K

                      FOR THE YEAR ENDED DECEMBER 31, 2000

Item                                                                        Page
---                                                                         ----
Part I

  1    Business..........................................................     3

  2    Properties........................................................     9

  3    Legal Proceedings.................................................    10

  4    Submission of Matters to a Vote of Security Holders...............    10

                                     Part II

  5    Market for Registrant's Common Equity and
           Related Stockholder Matters...................................    10

  6    Selected Consolidated Financial Data..............................    11

  7    Management's Discussion and Analysis of Financial Condition
           and Results of Operations.....................................    12

  7a   Quantitative and Qualitative Disclosures about Market Risk........    19

  8    Financial Statements and Supplementary Data.......................    20

  9    Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure......................................    43

                                    Part III

 10    Directors and Executive Officers of the Registrant................    43

 11    Executive Compensation............................................    43

 12    Security Ownership of Certain Beneficial Owners and Management....    43

 13    Certain Relationships and Related Transactions....................    43

                                     Part IV

 14    Exhibits, Financial Statement Schedules and Reports on Form 8-K...    44



<PAGE>


                                     PART I

Item I. BUSINESS.

OAO Technology  Solutions,  Inc. (OAOT - the Company) is a global  integrator of
information  technology  and eBusiness  solutions.  OAOT is committed to provide
reliable IT solutions  and  implementation  methods that allow our  customers to
focus on their core  businesses  and keep their  competitive  edge.  The Company
operates four  business  segments  within two broad  business  sectors.  The New
Business  Sector includes  services in what Management  expects to be relatively
higher margin,  faster growth business segments that are newer to OAOT and where
management  also believes  there is  significant  future growth  potential.  The
Traditional Business Sector includes services in relatively lower profit margin,
slower  growth  business  segments  that are  profitable  and  have a  recurring
positive cash-flow. The Company is committed to leveraging the advantages of its
Traditional Business Sector by investing these resources to rapidly grow its New
Business  Sector.  As a result of the  evolution  in the  services  the  Company
provides,  two of the  Company's  reportable  segment names have been changed in
2000 from 1999;  however,  the  composition  of the  reported  segments  has not
changed.  The name changes have been conformed  throughout  this  discussion and
analysis for consistency purposes.

The Company's Business Sectors and segments are as follows:

New Business Sector
     Healthcare IT Solutions
     Enterprise Applications and eBusiness Solutions
           (formerly, E-Business Consulting Solutions)

Traditional Business Sector
     Managed IT Services (formerly, Network and
          Systems Business Solutions)
     Professional Services


The Company has grown since its  inception,  with revenues  increasing to $152.6
million  in 2000,  from  $57.9  million  in 1996.  Revenues  from two  strategic
customers  were $135.5  million and $137.6  million for the years ended December
31, 2000 and 1999,  respectively.  The largest strategic  customer accounted for
76.0% and 75.7%, and the second largest strategic  customer  accounted for 12.8%
and  15.9%  of  revenues  for the  years  ended  December  31,  2000  and  1999,
respectively.  The Company has diversified  the type of service  provided to its
strategic customers and expanded the number of strategic customer business units
to whom it provides services.  For the year ended December 31, 1996, OAOT earned
60.2% of its revenues from data center management services provided to strategic
customers. For the year ended December 31, 2000, the Company earned 23.1% of its
revenues  from data center  management.  A decrease in the revenues or loss of a
strategic  customer  could  have a  material  adverse  effect  on the  Company's
business,  operating results, and financial condition.  The early termination or
non-renewal  of a strategic  customer's  contract by an end-user  customer could
also  have a  material  adverse  effect  on the  Company's  business,  operating
results, and financial condition.

For the years ended  December 31, 2000 and 1999,  approximately  23%, and 30% of
the Company's revenues,  respectively,  were derived from fixed-price contracts.
Certain of the  Company's  fixed-price  contracts  require  the  Company to meet
pre-established  levels of service,  while  achieving  operating  or  managerial
efficiencies  during the course of the  engagements.  Profitability is generally
lower  during  the early  term of the  engagements  as the  Company  invests  in
assuring a smooth start-up and in attaining  certain service levels prior to the
implementation  of  productivity  improvements.  Upon  completion of the initial
performance  phase,  the  Company  initiates  activities  to attempt to increase
profitability through improved management practices and the establishment of new
technical  and  operational   methodologies.   The  inability  to  increase  the
profitability  of a  contract  could  have  a  material  adverse  effect  on the
Company's business, operating results and financial condition.


                                       3
<PAGE>


Engagements which involve new services to existing  customers or services to new
customers  may also  result  in  lower  margins  during  the  early  term of the
engagement.  The Company has historically  experienced margin improvements after
the start-up  phase of its  engagements,  however,  there can be no assurance of
future  margin  improvements.  Further,  the Company  must  realize and maintain
margins  on its  long-term  contracts  to offset  the  effect  of any  un-priced
increases  in labor cost  associated  with  delivery  of  services  under  these
long-term contracts. In addition, operating results can be affected by the level
of the Company's  investments in  international  and other business  development
activities. The Company believes that its business is not seasonal.


New Business Sector

The New Business Sector,  consists of Enterprise  Applications and eBusiness and
Healthcare IT Solutions.  These are newer  businesses  that the Company  entered
into over the previous four years. The AMS, (formerly ADM), business is the most
significant within the Enterprise Applications and eBusiness Solutions division.
OAOT  management  is  focusing  significant  Company  resources  to grow the New
Business  Sector and  believes  that it offers the best  opportunity  for future
growth.  Revenues from the New Business Sector grew 94% in 2000, and this sector
now represents almost 25% of total Company revenues.

Healthcare IT Solutions

OAOT's MC400 software provides a comprehensive  solution for healthcare  benefit
organizations  (health  maintenance  organizations,  indemnity  insurance plans,
physician  hospital  organizations,   independent  physician  organizations  and
self-insured  employer plans, among others). The MC400 system is web-enabled and
provides  over thirty  modules  that  include  claims  processing,  patient care
management,  eligibility,  enrollment, and utilization review. The Healthcare IT
Solutions division has over fifty installed sites. Our solution is ready for the
federal requirements of the Health Insurance  Portability and Accountability Act
(HIPAA).

In 2000,  OAOT  acquired and began  marketing and  installing a care  management
system (CMS) that enhances the MC400 product's capabilities.  We also introduced
two additional major  enhancements.  The first is a  communications  server that
allows  our  customers  to fax and  email  correspondence  to both  members  and
providers.  The second is our data  warehouse/data-mining  product for executive
information system reporting.

During 2000 OAOT,  won a number of new customer  accounts in our  Healthcare  IT
Solutions  business that management  believes will position the Company well for
the future.  One was the sale of a software  solution that  established  us as a
provider of solutions to the self-funded and self administrated market.  Another
system sale demonstrated that our healthcare software solution could accommodate
a  million-plus-member  healthcare  plan.  The  Company  also  signed  its first
international  distribution  license  agreement  that  is  expected  to  provide
international sales of MC400. The Company intends to target these new markets in
2001,  although there can be no assurance that the Company will be successful in
these markets.

OAOT  recognizes  that  application   software  integration  and  management  is
technically  complex  and  generally  very  expensive.  Therefore,  we offer our
healthcare  clients the application with the  implementation  solution that best
meets their size, complexity and financial resources. The Company offers clients
flexible purchasing  options.  MC400 can be purchased on a per member, per month
(PMPM)  subscription  basis or for a one time perpetual license fee. During 2000
OAOT emphasized  selling MC400 on the PMPM basis.  Under a PMPM sales model, the
Company recognizes revenue monthly over the contract term based on the number of
member  users of the system.  The Company  believes  that selling the MC400 on a
PMPM basis is mutually advantageous to customers and the Company. The PMPM sales
model may allow a  customer  to  implement  the MC400 with a lesser up front fee
thereby better matching the cashflows of their business with their investment in
MC400.  Management  believes  OAOT will benefit  because it receives a recurring
revenue stream over the period of the agreement, and since the revenue stream is
user based, it could grow as the customer's  membership  base grows.  Management
believes that OAOT will receive greater revenues under the PMPM sales model over
the life of the contract than under a one time perpetual  license sale, and that
the lesser up front cash  payment  could  expand the market of  potential  MC400
users.


                                       4
<PAGE>


Enterprise Applications and eBusiness Solutions

OAOT's  Enterprise   Applications  and  eBusiness  Solutions  division  provides
customer-centric  integration  services and software solutions that are designed
to work  cohesively  within the framework of our  customers'  existing  business
models.    The   division's    three   practices   are   eBusiness    Solutions,
Application/Managed Service Provider (A/MSP) and Application Management Services
(AMS).

Management   believes  that  these  practice   areas,   combined  with  industry
partnerships,  provide  OAOT with  co-branding,  market  access  and  competency
development.  Partnerships  include:  Siebel,  SAP, Microsoft,  Plumtree,  Great
Plains and Mi8,  among others.  Through these  partnerships,  OAOT can offer our
customers a wide range of application choices with the flexibility to design and
construct the best  possible  solutions.  For example,  through the Great Plains
Global  Accounts  Partnership,  OAOT can now offer  customers the complete Great
Plains'  front  and back  office  solutions  for  such  functions  as  financial
reporting,  distribution,  eCommerce, human resource management,  manufacturing,
sales and marketing management, and customer service.

The AMS practice  comprised 55% and 82% of this business  segment's  revenues in
1999 and 2000, respectively.  Internet-centric  business solutions are among our
new  services  and include  eBusiness  solutions  that are designed to integrate
front  office  (customer   relationship   management   "CRM")  and  back  office
(enterprise  resource  planning "ERP").  Additional new related services include
web portal  development and deployment,  and customer contact center design. Our
CRM  solutions  are  designed  to  provide  customers  with a  single  point  of
accountability on a 7-day,  24-hour basis for application,  desktop,  server and
network related issues via the phone or an Internet portal. While these services
comprise a relatively small portion of current revenues,  the Company is focused
on growing the future  revenues from these  services.  However,  there can be no
assurance  that the Company will be successful in growing these revenues or that
if successful, it will be profitable.

OAOT believes  results are achieved through  understanding  our customers' needs
and  businesses and blending them with proven  business  methods to leverage our
customers'  return on their IT  investment.  We combine  motivated  and  skilled
employees, mature processes, and strategic partnerships with industry leaders to
provide  integrated  solutions.  OAOT offers both  customized  and  pre-packaged
solutions.  eBusiness Solutions are delivered on a consulting and project basis.
A/MSP is both a stand-alone service and a vehicle to deliver our other services.
AMS services are made  available  through an A/MSP model or outsourced  from the
customer.  Additionally,  OAOT can license its enterprise  applications software
outright  or sell it on an A/MSP  basis.  The Company  developed a single  point
eBusiness  framework.  Management  believes the framework  provides an advantage
when selecting core competency  development,  partner  selection and integration
into customer environments.  The single point framework is a model that provides
a one-stop shop, comprehensive license sale and installation. OAOT is the single
point of accountability for all aspects of our clients'  enterprise  application
software solutions -- from  architecture to integration to ongoing  performance.
Selected  offerings in Enterprise  Applications  and eBusiness  Solutions are as
follows:

eBusiness  Solutions -- A  collaborative  effort that  incorporates  the people,
processes  and tools of our  customers'  current  business  into an  accelerated
process  designed to help their  eBusiness  go to market  quickly,  increase the
return on investment from an existing IT infrastructure, and build the framework
for a successful future.  eBusiness Solutions also include portal solutions that
provide  personalized,  secure,  online  access  to the  vital  information  and
applications  specific  to a  business's  needs,  with direct  communication  to
business and financial communities.

Customer  Relationship  Management  (CRM) -- Utilizing  Siebel,  a  leading  CRM
package, OAOT combines  Internet-integrated  technologies and ongoing management
services with  cost-effective  outsourcing  solutions.  OAOT focuses on Advanced
Customer Contact Center Solutions.

Application   Management   Services  (AMS)  --   Development,   enhancement  and
maintenance of software  applications and strategic  systems performed onsite or
in OAOT's own  eBusiness  Solution  Centers  located in the United  States,  and
Canada.


                                       5
<PAGE>


Traditional Business Sector

The  Traditional   Business   Sector,   consists  of  Managed  IT  Services  and
Professional  Services.  In 2000, the Managed IT Services  division  renewed its
data center management  contract with a strategic  customer for a ten-year term.
In addition to the estimated $200 million base contract value, OAOT also has the
opportunity  to increase  the base  contract  through a preferred  relationship,
giving  OAOT first  chance to compete  for  additional  outsourced  data  center
support  operations.  We  also  added  a  Western  region  data  center  to  our
responsibilities  when the customer  consolidated all four of its centers into a
single contract with one national partner.  However,  there is no assurance that
the  contract  will grow or even  continue  at  historic  levels.  Further,  the
Company's long-term contracts generally have early termination provisions, which
if invoked by its  customers,  could have a  significant  adverse  impact on the
Company's profitability, cash flows and backlog.

Managed IT Services

OAOT has expertise and  experience in network and systems  design,  integration,
and  management  of  large-scale  environments  linking  multiple  technologies,
operating  systems,  protocols and  geographic  areas.  OAOT manages  enterprise
systems and provides  desktop  management  services,  which include  on-site and
remote network systems management. These services are provided as either part of
an IT outsourcing  team,  with its strategic  customers,  to a wide range of end
users or directly to middle market customers.  Selected  offerings in Managed IT
Services are as follows:

Enterprise Systems  Management -- OAOT has experience in managing complex system
environments  for large IT clients.  Our  Enterprise  Systems  Management  (ESM)
practice  provides a disciplined  approach to the  operations  and management of
data centers, including mainframe and client server systems. We partner with our
customers  to  provide  them  an  outsourced,   cost-effective,   results-driven
solution.

Desktop  Management  Services -- OAOT  manages  desktop  services  for  our  two
strategic  customers and other customers.  Our Desktop Management Services (DMS)
practice  provides  cost-effective   operation  and  management  of  distributed
desktops and servers including help desk and other desk side support services.

On-Site  and  Remote  Network  Systems  Management  -- OAOT  has  experience  in
designing,  deploying  and managing  local or wide area networks in the Internet
arena. This includes all facets of protocol  internetworking,  as well as vendor
liaison with equipment vendors and telecommunication firms. OAOT manages complex
networked  environments and routinely manages application minutes for clients on
a 24-hour, 7-day annual basis, that have service level agreements.

Professional Services

Professional Services provides information technology personnel,  primarily on a
time-and-materials basis, that are regularly utilized within engagements to meet
short  or  indefinite  term  requirements.  There  are also  instances  where an
engagement  has  started  on  a  time  and  materials  basis  and  evolved  to a
fixed-price basis, as the requirements became sufficiently defined.

Skills  include but are not  limited to,  computer  operators,  application  and
systems  programmers,  network  architects,  designers,  testers and installers,
software/hardware   testers,  help  desk  consultants,   project  managers,  and
technical  writers.   Professional   Services  provides   personnel   possessing
programming  skills ranging from Oracle,  SAP, C++, and COBOL/DB2,  to the every
day needs of customers staffing requirements in the IT industry.

Professional  Services  has  offices  strategically  located  in the  Northeast,
Southeast, Midwest and the West, In October 2000, OAOT expanded its Professional
Services  business  to  new  markets  in  Atlanta  and  Boston.   The  Company's
Professional  Services  division  has the  ability to recruit  professional  and
technical  staff  locally  and  nationally.   The  Company   believes  that  its
Professional  Services division is positioned to provide  nationwide  support to
customers and it has continuously demonstrated this ability since its inception.
The  Professional   Services  business  is  concentrated  within  one  strategic
customer;  however,  the  Company has  expanded  its  customer  base in 2000 and
continues to focus on expanding its customer base in the future.


                                       6
<PAGE>


Industry and competition

The Company sells technology services and solutions  predominantly to technology
companies.  A  significant  portion of annual  revenues,  87% in 2000 and 90% in
1999, is  "recurring  revenue"  under  long-term  contracts  and other  annually
renewable  contracts  that  have  historically  been  renewed  year  to  year at
relatively  constant  levels of revenue.  The Company  begins 2001 with  backlog
under long-term contracts of approximately $720 million.  Backlog is expected to
be realized over the next ten years.  However, the Company's long-term contracts
generally have early termination provisions,  which if invoked by its customers,
could have a significant adverse impact the Company's  profitability,  cash flow
and backlog.  Further,  the  Company's  business is subject to general  economic
conditions  and  economic  conditions  within the  technology  industry.  As the
Company expands its New Business  Sector,  it may become more susceptible to the
overall economic conditions within the technology industry.

The IT services  market is highly  competitive  and is served by numerous firms,
including  systems  consulting  and  integration  firms,  professional  services
companies,   application   software  firms,   staff   augmentation   firms,  the
professional  service  groups  of  computer  equipment   companies,   facilities
management and management  information  systems outsourcing  companies,  certain
"Big Five"  accounting  firms, and general  management  consulting  firms.  Many
participants  in the commercial IT services  market have  significantly  greater
financial,  technical and marketing resources and generate greater revenues than
the Company. The Company believes that the principal  competitive factors in the
commercial IT services  industry  include  responsiveness  to client needs,  the
ability to cause the transition of the outsourced  services to occur on a prompt
and seamless basis, quality of service,  employee relations,  price,  management
capability and technical  expertise.  The Company believes it has the ability to
successfully  compete  in  these  markets  because  of  its  core  competencies,
strategic  customer  relationships,  strategic  alliances  and  product  service
agreements  that  allows  it  to  provide  customers   global,   enterprise-wide
integration of information technology.

While the IT services  industry has generally  experienced  labor  shortages and
wage  inflation in excess of many other  industries,  the Company's  engagements
have not been materially  affected.  The Company prices its services under these
engagements  on the basis of the  historical  cost of the  outsourced  function,
managerial  experience,  and its assessment of evolving technical  factors.  The
Company also enters into professional services engagements requiring high-demand
IT   specialists   for  terms   ranging   up  to  18   months,   usually   on  a
time-and-materials  basis.  The  Company is subject  to the same  general  labor
pressures inherent in the IT services industry when performing these engagements
and as it expands its  services  into the New  Business  Sector.  The Company is
dependent upon its ability to attract, hire and retain personnel who possess the
technical  skills and experience  necessary to meet the service  requirements of
its clients. In pricing its services under shorter-term engagements, the Company
evaluates the existing labor market for IT specialists and the expected duration
of the engagement.

Managed IT Services -- Outsourcing  engagements are typically  characterized  as
being  long-term  in nature and often  involve the  transfer by the  customer of
certain of its facilities,  technologies  and employees to the  outsourcer.  The
outsourcer's   responsibilities  under  IT  engagements  may  vary  widely  from
engagement  to  engagement,  ranging from the  provision of certain  specific IT
functions to the  management  of a client's  entire IT  operation.  Within these
engagements,  the  relationships  often  involve the  provision  of employees or
consultants  by  a  subcontracting   vendor  to  the  outsourcing   vendor.  The
subcontractor is normally paid on a time and materials basis and the outsourcing
vendor retains the  managerial  responsibility  for the IT services  provided by
such persons.

The IT outsourcing industry is defined by several market segments, as predicated
by the strength and nature of customer demand.  These market segments  typically
include data center operations,  network operations,  client-server  operations,
applications management and desktop management. The use of outsourcing has grown
rapidly as corporations have increasingly  determined that it is advantageous to
focus on their core  competencies  and outsource  those  functions  that are not
central to their primary  mission.  Another  reason for rapid growth is the cost
reduction  opportunities offered by outsourcers who leverage more cost efficient
IT  infrastructures.  There are  significant  drivers  that  support  the growth
expectations for IT solutions integrators. These drivers include


                                       7
<PAGE>


the  increasing  complexity  of IT  solutions  and  the  many  rapidly  evolving
technologies required to fulfill those solutions.  Additionally,  many companies
lack  sufficient  internal IT resources to meet this demand and are  outsourcing
internal IT departments. Finally, there is increasing industry consolidation and
the formation of strategic partnerships.

Professional Services -- Many of the same factors fueling the rapid expansion of
the outsourcing  industry are similarly  impacting the  professional IT staffing
industry.   As  the  demand  for  technical   resources   continues  to  expand,
corporations  are  increasingly   relying  on   professional-specific   staffing
providers as a source for skilled IT professionals. Whether to meet temporary or
long-term   demands,   companies  faced  with  the  difficulty  of  identifying,
attracting,  and  retaining  competent,  highly  skilled  IT  professionals  are
supplementing   their   internal  IT  staff  with   consultants   obtained  from
professional-specific staffing companies.

Enterprise  Applications  and eBusiness  Solutions -- AMS services are currently
delivered through our strategic customer to strategic end user customers.  A/MSP
is both a stand alone service and a vehicle to deliver our other  services.  AMS
services  are made  available  through  an A/MSP  model or  outsourced  from the
customer.  eBusiness  Solutions and A/MSP focuses their efforts on middle market
commercial  customers,  as well as public sector customers.  In support of these
efforts,  the Company has established  strategic  relationships with third-party
software vendors such as Plumtree,  Siebel Systems,  Great Plains, Mi8, SAP, and
Microsoft. As part of these strategic relationships the Company signed a special
Value Added Industry Remarketer (VAIR) agreement with Siebel Systems,  Inc. This
agreement permits OAOT to design,  install,  resell and host, on an A/MSP basis,
Siebel solutions for commercial and public sector customers in North America and
Europe.  Management recognizes the need to aggressively diversify and expand the
Company's services and customer base.

The  HealthCare  IT  Solutions  -- The  health  care  industry  has  experienced
significant recent transition,  incurred by both the health care  provider/payor
(the  Company's  customer) and by the evolution of products,  services,  and fee
arrangements made available by IT solution providers.  Health care providers and
payors of health benefits include: (health maintenance organizations,  indemnity
insurance  plans,  physician  hospital   organizations,   independent  physician
organizations and self-insured  employer plans,  among others health maintenance
organizations  (HMO's),  preferred provider  organizations  (PPO's), third party
administrators  (TPA's) and governments).  Health care providers and payors have
experienced consolidation,  forming large health organizations and networks, and
have  incurred  greater  operating  risks  as  the  traditional  fee-for-service
reimbursement  model is being replaced by alternative payment models. To enhance
operating  efficiencies  and controls,  the health care providers have increased
demand for  comprehensive  end-to-end  IT systems  and  services.  These  system
solutions  operate  on  hardware  platforms  including  client/server  networks,
mainframes  and personal  computer  stations.  The Federal  Government is in the
process of defining and  implementing  the  requirements of the Health Insurance
Portability and  Accountability Act (HIPAA).  These proposed  regulations appear
extensive  and concern  privacy and health  record  reporting  standards,  among
others.  The Company  believes  that these  regulations  could cause health care
payors  to  purchase  new IT  systems  which  could be  beneficial  to  software
solutions  providers  like OAOT.  However,  there can be no  assurance  that the
proposed regulations will be implemented as expected or that they will cause any
increase in sales of the MC400 system.


                                       8
<PAGE>


Looking to the Future

The Company's  overall strategy is to continue building its New Business Sector.
OAOT has  invested,  and expects to continue to invest the profits and cashflows
generated from its Traditional  Business Sector to develop businesses within its
New Business Sector and enhance the Company's  marketing and sales  capabilities
to gain new  customers.  The  Company is  attempting  to leverage  our  existing
customer  base,  as we more  aggressively  sell  services  from  our  Enterprise
Applications  and  eBusiness   Solutions  division  to  our  Traditional  Sector
customers.  OAOT  also  expects  to grow its  business  by  expanding  strategic
partnerships  that build  distribution  channels  and open  additional  markets,
pursuing strategic  acquisitions,  and enhancing the potential of our Healthcare
IT Solutions business.  However, there can be no assurance that profitability in
the Company's  Traditional  Business Sectors will continue at historical levels,
or if  investments  are made in the New  Business  Sectors,  they will result in
revenue growth and profitability.

The strategic  alliances we have developed are an integral  element of our plans
to  diversify  and expand our customer  base.  We believe our  partnerships  are
"best-in-class  " and  provide a broad  spectrum  of IT  consulting  and  system
integration  services and give us a strong platform for future growth.  As we go
forward,  we will continue to evaluate potential partner companies that may open
up additional  opportunities for OAOT. Through our alliance  partners,  we added
multiple new  customers to our client  roster  during 2000. In 2000 our customer
base  increased  from 42 at the  beginning  of the  year to 94 by the end of the
year.  The new customer  accounts are relatively  small and the Company  remains
dependent on its two strategic customers.  The Company's strategy is to continue
to grow the number of new  accounts.  However,  there is no  assurance  that the
Company will be successful  in doing so, or if successful  the new accounts will
grow to a significant size or be profitable.

To  supplement  our plans for internal  growth,  OAOT is  aggressively  pursuing
acquisition  candidates that will complement and enhance our New Business Sector
and  expand  our  customer  base.  However,  there can be no  assurance  that if
suitable  acquisition  targets are found, that the Company's lending  facilities
will  be  sufficient  to  afford  such  targets,  or  the  sellers  will  accept
management's valuation of their company.


Employees

As of December 31, 2000, the Company employed approximately 2,236 employees,  of
which 1,917 were full time persons.  Approximately  9% of these  employees  have
managerial responsibilities,  and over 71% have technical responsibilities.  The
Company  typically  utilizes the  services of  independent  contractors  only in
short-term  engagements  and  certain  international  engagements.  The  Company
believes that its relationships with its employees are good.

The Southern California Professional Engineering Association represents 2 of the
Company's employees under a collective  bargaining  agreement,  which expires on
January 10, 2002.  The  International  Association  of Machinists  and Aerospace
Workers  represents 6 of the Company's  employees under a collective  bargaining
agreement,  which  expires  on January  15,  2002.  The Office and  Professional
Employees  International  Union (the  "OPEIU")  represents  24 of the  Company's
employees under a collective  bargaining  agreement that expires on February 29,
2003. The Company believes that it has a good relationship with each union.

Item 2. PROPERTIES.

The Company's  headquarters  and principal  administrative,  sales and marketing
functions  are located in  approximately  25,150  square feet of leased space in
Greenbelt,  Maryland.  This lease expires in December  2003.  The Company leases
office space in twenty locations in twelve U.S. cities, as well as in Vancouver,
British  Columbia;   Toronto,   Ontario;  Calgary,  Alberta,  and  Moncton,  New
Brunswick, and Warwickshire,  United Kingdom.  Additionally,  the Company shares
offices  with  joint  venture  partner  in  Mexico  City,  Mexico.  The  Company
anticipates  that  additional  space will be required  as  business  expands and
believes that it will be able to obtain suitable space as needed.


                                       9
<PAGE>


Item 3. LEGAL PROCEEDINGS.

The Company believes that there are no claims or actions against the Company the
ultimate  disposition  of which  will  have a  material  adverse  effect  on the
Company's results of operations or financial position.


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

     None.

                                     PART II

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

     Stock  Data:  The  Company's  Common  Stock,  par value  $0.01  per  share,
commenced  trading on the NASDAQ National Market tier of the NASDAQ Stock Market
on October 22, 1997,  under the symbol  "OAOT." As of December  31, 2000,  there
were 626 record  holders of the  Company's  Common  Stock  based on  information
provided by the Company's  transfer agent.  The following table sets forth,  for
the periods  indicated,  the high and low closing sale prices for the  Company's
Common Stock.

                                                                  2000
                                                       -------------------------
Quarter                                                 High                Low
-------------                                          -------------------------
First                                                  $9.94               $6.31
Second                                                  8.44                2.62
Third                                                   6.31                3.50
Fourth                                                  3.94                1.13

                                                                  1999
                                                       -------------------------
Quarter                                                 High                Low
-------------                                          -------------------------
First                                                  $7.50               $3.25
Second                                                  5.13                3.13
Third                                                   4.00                2.63
Fourth                                                  8.50                3.13


     The Company has not paid cash  dividends on its Common Stock to date. It is
the  present  policy of the  Company to retain  future  earnings  to finance the
growth and  development  of its  business,  and  therefore  the Company does not
anticipate paying cash dividends on its Common Stock in the foreseeable  future.
Furthermore,  certain financial covenants in the Company's bank credit agreement
restrict the Company's ability to pay cash dividends.


                                       10
<PAGE>


Item 6. SELECTED CONSOLIDATED FINANCIAL DATA.

The  selected  consolidated  financial  data set forth  below  should be read in
conjunction with  "Management's  Discussion and Analysis of Financial  Condition
and Results of  Operations"  and the  Consolidated  Financial  Statements of the
Company  and the  Notes  thereto  included  elsewhere  in this  Form  10-K.  The
following  Statement of Operations Data and Balance Sheet Data have been derived
from the  consolidated  financial  statements  of the  Company  which  have been
audited by Deloitte & Touche LLP, independent auditors.

<TABLE>
<CAPTION>
     (In thousands, except per share amounts)                                       For the years ended December 31,
                                                                       2000          1999          1998         1997         1996
                                                                    ---------------------------------------------------------------
<S>                                                                 <C>           <C>           <C>           <C>          <C>
Statement of Operations Data:
Revenues                                                            $ 152,585     $ 150,162     $ 113,342     $ 84,666     $ 57,891
Direct costs                                                          127,905       131,664        97,105       65,882       43,896
Selling, general and administrative expenses                           22,675        16,014        19,100       13,551       10,824
Restructuring and other charges                                          --            --           3,135         --           --
                                                                    ---------------------------------------------------------------
Income (loss) from operations                                           2,005         2,484        (5,998)       5,233        3,171
Interest and other income (expense), net                                1,122           921           619         (453)         (46)
                                                                    ---------------------------------------------------------------
Income (loss) before income taxes                                       3,127         3,405        (5,379)       4,780        3,125
(Provision) benefit for income taxes                                   (1,329)       (1,554)        1,881       (1,912)      (1,315)
                                                                    ---------------------------------------------------------------
Net income (loss)                                                   $   1,798     $   1,851     $  (3,498)    $  2,868     $  1,810
                                                                    ---------------------------------------------------------------
Net income (loss) per common share:
    Basic                                                           $    0.10     $    0.11     $   (0.21)    $   0.27)    $   0.18)
                                                                    =========     =========     =========     ========     ========
    Diluted                                                         $    0.10     $    0.11     $   (0.21)    $   0.26)    $   0.17)
                                                                    =========     =========     =========     ========     ========

<CAPTION>
                                                                                             As of December 31,
                                                                       2000          1999          1998         1997         1996
                                                                    ---------------------------------------------------------------
<S>                                                                 <C>           <C>           <C>           <C>          <C>
Balance Sheet Data:
Working capital                                                     $  29,457     $  28,353     $  26,394     $ 33,249     $  4,718
Total assets                                                           69,577        61,355        51,118       50,342       12,828
Capital lease obligations, including current portion                    1,565           143           883        1,435          476
Stockholders' equity                                                   43,242        39,622        35,448       38,066        5,840
</TABLE>


                                       11
<PAGE>


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

The following  discussion and analysis is provided to increase the understanding
of,  and  should  be  read  in  conjunction  with,  the  Consolidated  Financial
Statements  and  Notes  thereto  found in Item 8 of this Form  10-K.  Historical
results  and  percentage  relationships  among any  amounts  in these  Financial
Statements are not necessarily indicative of trends in operating results for any
future period.

The  statements  which are not  historical  facts  contained  in this Form 10-K,
including  Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of Operations and Notes to Consolidated Financial Statements, constitute
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation Reform Act of 1995. Such statements are based on currently  available
operating,  financial and  competitive  information,  and are subject to various
risks and  uncertainties.  Future  events and the Company's  actual  results may
differ   materially  from  the  results   reflected  in  these   forward-looking
statements.  Factors  that might cause such a  difference  include,  but are not
limited to: dependence on key strategic and end-user  customers,  the ability to
establish  new  strategic   customer   relationships,   risks   associated  with
fixed-price  contracts,  future  financial  results,  the ability to sustain and
manage growth,  lower than expected growth of non-strategic  customer  revenues,
success in achieving  marketing and sales goals and other  business  development
initiatives,  difficulties  of  investments  in  infrastructure,   uncertainties
relating to the difficulties of transacting on the Internet,  transitioning  the
Company to New Business Sector  businesses,  potential changes in the prevailing
technology away from outsourcing IT applications,  the failure of the Company to
make necessary  enhancements or developments to its existing software  products,
opportunities in the market place, competition in the industry, general economic
conditions,  the possibility  that strategic or end-user  customers could invoke
early  termination  clauses  contained  in the  Company's  long-term  contracts,
dependence on key personnel,  the ability to attract,  hire and retain personnel
who possess the technical  skills and  experience  necessary to meet the service
requirements  of its clients,  the potential  liability  with respect to actions
taken by its employees,  risks  associated  with  international  sales including
exposure to fluctuations  between the U.S. dollar and other foreign  currencies,
and other risks  described  herein and in the  Company's  other  Securities  and
Exchange Commission filings.

Overview

OAO Technology Solutions,  Inc. ("the Company" or "OAOT") is a global integrator
of information  technology and eBusiness  solutions.  The Company  operates four
business  segments  within two broad business  sectors.  The New Business Sector
includes services in relatively  higher margin,  faster growth business segments
that are newer to OAOT and where management believes there is significant future
growth  potential.   The  Traditional   Business  Sector  includes  services  in
relatively  lower  profit  margin,  slower  growth  business  segments  that are
profitable and have a recurring  positive  cash-flow.  The Company is leveraging
the advantages of its  Traditional  Business Sector by investing these resources
to rapidly grow its New  Business  Sector.  As a result of the  evolution in the
services the Company  provides,  two of the Company's  reportable  segment names
have been changed in 2000 from 1999;  however,  the  composition of the reported
segments has not changed.  The name changes have been conformed  throughout this
discussion and analysis for consistency purposes. The Company's business sectors
and segments are as follows:

New Business Sector
     Healthcare IT Solutions
     Enterprise Applications and eBusiness Solutions
          (formerly, E-Business Consulting Solutions)

Traditional Business Sector
     Managed IT Services (formerly, Network and
          Systems Business Solutions)
     Professional Services


                                       12
<PAGE>


The Healthcare IT Solutions  segment provides managed care software  application
solutions under software license agreements via its MC400 software which is sold
on a per member, per month (PMPM) subscription basis or for a one-time perpetual
license  fee.  OAOT's  MC400  software  provides a  comprehensive  solution  for
healthcare benefit  organizations (health maintenance  organizations,  indemnity
insurance  plans,  physician  hospital   organizations,   independent  physician
organizations and self-insured employer plans among others). The MC400 system is
web-enabled  and provides over thirty  modules that include  claims  processing,
patient  care  management,   eligibility,   enrollment,   utilization,  internet
connectivity,   data  warehousing,  care  management  and  web  portals  in  one
integrated  system.  The  Company  has over fifty  installed  sites and offers a
viable  solution  that is  ready  for the  federal  requirements  of the  Health
Insurance Portability and Accountability Act (HIPAA).

The  Enterprise   Applications   and  eBusiness   Solutions   segment   provides
customer-centric   integration   services  and  software   solutions  that  work
cohesively within the framework of our customers'  existing business models. The
division's three practices are eBusiness Solutions,  Application/Managed Service
Provider (A/MSP) and Application  Management Services (AMS), formerly ADM. These
practice    areas   focus   on   the   following    partnerships:    CRM/Siebel,
Portals/Plumtree, eCommerce/IBM and ERP with SAP and Great Plains. To complement
this, we also provide custom application management. OAOT offers both customized
and pre-packaged  solutions.  Integration services are delivered on a consulting
and project basis under both time and  materials  and fixed price  arrangements,
while our  application  management  and software  solutions  are made  available
through an A/MSP model or  outsourced  from the  customer.  OAOT can license its
enterprise applications software outright or sell on an A/MSP basis.

The  Managed  IT  Services   segment   provides   network  and  systems  design,
integration,   and  management  of  large-scale  environments  linking  multiple
technologies,  operating  systems,  protocols and geographic areas. OAOT manages
enterprise  systems and provides  desktop  management  services,  which  include
on-site and remote  network  systems  management.  These  services are provided,
generally  under  long-term  fixed  price  contracts,  as  either  part of an IT
outsourcing  team with its  strategic  customers to a wide range of end users or
directly to middle  market  customers.  The  Company's  strategic  partners  and
customers  include IBM and Compaq.  In 2000 the Company's data center management
contract was renewed for ten years.  Management believes that revenues from this
contract  may  increase  over the  term of the  contract;  however,  there is no
assurance that revenues from this contract will increase or continue at historic
revenue and profitability levels.

The Professional  Services segment provides  information  technology  personnel,
primarily on a  time-and-materials  basis,  that are regularly  utilized  within
engagements  to meet  short or  indefinite  term  requirements.  There  are also
instances  where an  engagement  has started on a time and  materials  basis and
evolved to a fixed-price basis, as the requirements became sufficiently defined.
The  Professional   Services  business  is  concentrated  within  one  strategic
customer;  however,  the  Company has  expanded  its  customer  base in 2000 and
continues to focus on expanding its customer base in the future.

The  Company  has  experienced  substantial  growth  since its  inception,  with
revenues  increasing  to $152.6  million in 2000,  from  $57.9  million in 1996.
Revenues from two strategic customers were $135.5 million and $137.6 million for
the years ended December 31, 2000 and 1999, respectively.  The largest strategic
customer  accounted  for 76.0%  and  75.7%,  and the  second  largest  strategic
customer  accounted for 12.8% and 15.9% of revenues for the years ended December
31, 2000 and 1999, respectively. The Company has diversified the type of service
provided  to its  strategic  customers  and  expanded  the  number of  strategic
customer  business  units  to whom it  provides  services.  For the  year  ended
December 31, 1996, OAOT earned 60.2% of its revenues from data center management
services provided to strategic customers.  For the year ended December 31, 2000,
the Company earned 23.1% of its revenues from data center management. A decrease
in the revenues or loss of a strategic  customer  could have a material  adverse
effect on the Company's business,  operating results,  and financial  condition.
The early  termination or non-renewal of a strategic  customer's  contract by an
end-user  customer  could also have a material  adverse  effect on the Company's
business, operating results, and financial conditions.


                                       13
<PAGE>


The Company focuses its efforts on middle market commercial  customers,  as well
as public  sector  customers.  In  support of these  efforts,  the  Company  has
established  strategic  relationships with third-party  software vendors such as
Plumtree,  Siebel  Systems,  Great Plains,  Mi8, SAP, and Microsoft.  As part of
these strategic  relationships the Company signed a special Value Added Industry
Remarketer  (VAIR)  agreement with Siebel Systems,  Inc. This agreement  permits
OAOT to design,  install,  resell and host, on an A/MSP basis,  Siebel solutions
for  commercial  and public sector  customers in North  America and Europe.  The
Company has also hired teams of experienced sales professionals dedicated solely
to selling  comprehensive CRM solutions.  Although revenues resulting from these
relationships  were relatively small in 2000,  management  expects revenues from
these relationships to be significant in the future.  Management  recognizes the
need to  aggressively  diversify and expand the Company's  services and customer
base.

For the years ended  December 31, 2000 and 1999,  approximately  23%, and 30% of
the Company's revenues,  respectively,  were derived from fixed-price contracts.
Certain of the  Company's  fixed-price  contracts  require  the  Company to meet
pre-established  levels of service,  while  achieving  operating  or  managerial
efficiencies  during the course of the  engagements.  Profitability is generally
lower  during  the early  term of the  engagements  as the  Company  invests  in
assuring a smooth start-up and in attaining  certain service levels prior to the
implementation  of  productivity  improvements.  Upon  completion of the initial
performance  phase, the Company initiates  activities to increase  profitability
through improved management practices and the establishment of new technical and
operational methodologies.

Engagements which involve new services to existing  customers or services to new
customers  may also  result  in  lower  margins  during  the  early  term of the
engagement.  The Company has historically  experienced margin improvements after
the start-up phase of its  engagements.  In addition,  operating  results can be
affected by the level of the Company's  investments in  international  and other
business development  activities.  The Company believes that its business is not
seasonal.

The Company sells technology services and solutions  predominantly to technology
companies.  A  significant  portion of annual  revenues,  87% in 2000 and 90% in
1999, is  "recurring  revenue"  under  long-term  contracts  and other  annually
renewable  contracts  that  have  historically  been  renewed  year  to  year at
relatively  constant  levels of revenue.  The Company  begins 2001 with  backlog
under long-term contracts of approximately $720 million.  Backlog is expected to
be realized over the next ten years.  However, the Company's long-term contracts
generally have early termination provisions,  which if invoked by its customers,
could  significantly  impact  the  Company's  backlog.  Further,  the  Company's
business  is subject to general  economic  conditions  and  economic  conditions
within the technology industry, which appear to have been softening,  especially
with the  decline  of  "dot.com"  businesses.  As the  Company  expands  its New
Business  Sector,  it  may  become  more  susceptible  to the  overall  economic
conditions within the technology industry.

While the IT services  industry has generally  experienced  labor  shortages and
wage  inflation in excess of many other  industries,  the Company's  engagements
have not been materially  affected.  The Company prices its services under these
engagements  on the basis of the  historical  cost of the  outsourced  function,
managerial  experience,  and its assessment of evolving technical  factors.  The
Company also enters into professional services engagements requiring high-demand
IT   specialists   for  terms   ranging   up  to  18   months,   usually   on  a
time-and-materials  basis.  The  Company is subject  to the same  general  labor
pressures inherent in the IT services industry when performing these engagements
and as it expands its  services  into the New  Business  Sector.  The Company is
dependent upon its ability to attract, hire and retain personnel who possess the
technical  skills and experience  necessary to meet the service  requirements of
its clients. In pricing its services under shorter-term engagements, the Company
evaluates the existing labor market for IT specialists and the expected duration
of the engagement.


                                       14
<PAGE>


Results of Operations

The following table sets forth, for the periods indicated,  selected  statements
of operations data as a percentage of revenues:

<TABLE>
<CAPTION>
                                                                                       For the years ended
                                                                                           December 31,
                                                          --------------------------------------------------------------------------
     (in millions)                                                  2000                      1999                      1998
                                                          --------------------------------------------------------------------------
<S>                                                         <C>           <C>         <C>           <C>         <C>           <C>
Revenues .............................................      $152.6        100.0%      $150.2        100.0%      $113.3        100.0%
Direct costs .........................................       127.9         83.8        131.7         87.7         97.1         85.7
Selling, general and administrative expenses .........        22.7         14.9         16.0         10.7         19.1         16.9
Restructuring and other charges ......................        --           --           --           --            3.1          2.7
                                                          --------------------------------------------------------------------------
Income (loss) from operations ........................         2.0          1.3          2.5          1.6         (6.0)        (5.3)
Interest and other income, net .......................         1.1          0.7          0.9          0.6          0.6          0.5
                                                          --------------------------------------------------------------------------
     Income (loss) before income taxes ...............         3.1          2.0          3.4          2.2         (5.4)        (4.8)
(Provision) benefit for income taxes .................        (1.3)        (0.9)        (1.5)        (1.0)         1.9          1.7
                                                          --------------------------------------------------------------------------
     Net income (loss) ...............................      $  1.8          1.1%      $  1.9          1.2%      $ (3.5)       -3.1%
                                                          --------------------------------------------------------------------------
</TABLE>

Comparison  of the Year Ended  December 31, 2000 to the Year Ended  December 31,
1999

Revenues
The Company's  revenues increased $2.4 million or 1.6% to $152.6 million for the
year ended  December  31,  2000,  compared to $150.2  million for the year ended
December 31, 1999.  Revenue  increases for the year ended December 31, 2000 were
driven  by  both  the  Enterprise   Applications  and  eBusiness  Solutions  and
Healthcare  IT  Solutions  segments.  Revenue  increases  were  offset  by lower
revenues in Managed IT Services and Professional  Services  segments compared to
the year ended December 31, 1999.

Enterprise Applications and eBusiness Solutions revenues increased $14.7 million
or 175.0% to $23.1  million,  for the year ended  December 31, 2000  compared to
$8.4 million for the year ended  December 31,  1999.  This was due  primarily to
increased  activity in the AMS and consulting  practices compared with 1999. The
number of billable  personnel  continued  to increase  on new and  existing  AMS
contracts  throughout 2000, compared to 1999 when the contracts had lower levels
of activity.  Similarly,  the  consulting  practices  were in the start-up phase
during most of 1999 and had lower revenues in that period.

Healthcare IT Solutions  revenues  increased  $3.1 million,  or 29.2%,  to $13.7
million for the year ended  December 31, 2000  compared to $10.6 million for the
year ended  December 31, 1999.  The increase in revenues was due primarily to an
increase in recurring  revenues from annual software  maintenance  fees and PMPM
subscription  type  license  sales,  which  reflects the  Company's  decision to
transition  the Healthcare IT Solutions  segment to a subscription  sales model.
Revenue  from  existing  PMPM  customers  increased  in 2000  from  1999  due to
increases in the number of member users year-to-year,  and as a result of having
a full year of sales in 2000 related to PMPM contracts  signed  throughout 1999.
Further, the aggregate number of PMPM customers increased from 1999 to 2000.

Managed IT Services revenues  decreased by $6.6 million or 9.8% to $60.5 million
for the year ended  December  31, 2000  compared  to $67.1  million for the year
ended  December  31, 1999.  The  decrease was due  primarily to the renewal of a
contract,  between a strategic customer and an end-user customer, at lower rates
and reduced  personnel to perform  services.  Further,  the Company  experienced
continued  pricing  and  volume  decreases  from  another  strategic   customer.
Additionally,  a  low-margin  contract  was  not  renewed  in  2000,  which  had
contributed revenues of approximately $8 million throughout 1999. The volume and
pricing  decreases were partially  offset by projects from new customers and the
effect of the UK acquisition, which occurred in the second quarter of 1999.

Professional  Services revenues decreased $8.8 million or 13.7% to $55.3 million
for the year ended  December  31, 2000  compared  to $64.1  million for the year
ended  December  31,  1999.  The  decrease  in  revenues  was due to softness in
staffing requisitions from a strategic customer, which began with the carry over
effects of Y2K constraints and continued throughout most of 2000.


                                       15
<PAGE>

Direct Costs

The Company's  direct costs decreased $3.8 million or 2.9% to $127.9 million for
the year ended December 31, 2000,  compared to $131.7 million for the year ended
December 31, 1999.  Direct costs also  decreased as a percentage  of revenues to
83.8% for the year ended  December  31, 2000 versus 87.7% for the same period in
1999.  The  decrease in direct  costs as a  percentage  of revenues for the year
ended  December  31, 2000  compared to the year ended  December  31, 1999 is due
primarily to the New Business  Sector  segments of Enterprise  Applications  and
eBusiness  Solutions  and  the  Healthcare  IT  Solutions  segments.  The  other
Traditional   Business   Sector  segments   maintained  a  relatively   constant
relationship of direct costs to their respective revenues.

In the Enterprise  Applications and eBusiness  Solutions  segment,  direct costs
increased by $8.7 million to $21.3 million for the year ended  December 31, 2000
from $12.6 million for the year ended December 31, 1999.  However,  as a percent
of the segment  revenues,  direct  costs  decreased to 92.2% of revenues for the
year ended  December 31, 2000 from 150.0% of revenues in the year ended December
31, 1999. The  improvement in the  relationship  of direct cost to revenues is a
result of the increased levels of business in 2000 compared to most of 1999 when
the segment was ramping up its activity.

In the  Healthcare  IT Solutions  segment,  direct costs as a percent of segment
revenues  decreased to 65.7% of revenues in 2000,  from 76.4% of revenues in the
same period in 1999.  Direct costs as a percent of revenues continue to decrease
as a result of an increase in  recurring  revenues  and  perpetual  use software
license sales.

Selling, General and Administrative Expenses

Selling,  general  and  administrative  expenses  were $22.7  million  and $16.0
million for the years ended  December  31, 2000 and 1999,  respectively.  OAOT's
selling,  general and  administrative  expenses  increased  as a  percentage  of
revenues  for the year ended  December  31, 2000 to 14.9%  compared to 10.7% for
year ended December 31, 1999. The increases were a result of increased sales and
marketing efforts and the continuation of the Company's infrastructure build-out
to accommodate its expected New Business Sector growth. During the third quarter
of 2000,  the Company  began to  eliminate  unproductive  sales,  marketing  and
delivery staff, in addition to reducing corporate overhead costs. The results of
the  reductions  began to be recognized  in the fourth  quarter of 2000 and will
continue to be realized in future  periods.  The reductions in costs realized by
the  workforce  reductions  and other cost  saving  measures  were  offset by an
increase to reserves associated with amounts due from several customers affected
by the economic downturn in the later part of 2000.

Interest and other income (expense) and Provision for Income Taxes

Interest  income  decreased to $1.0 million for the year ended December 31, 2000
from  $1.1  million  for the year  ended  December  31,  1999.  Interest  income
decreased  primarily due to a slightly  lower amount of average  invested  cash.
Other income was positively  affected by a positive mark to market adjustment in
the amount of $0.1  million to the  obligation  incurred as a part of the Siebel
VAIR agreement.

The effective tax rate was  approximately  42.5% for the year ended December 31,
2000. The effective tax rate was 45.6% in 1999. The Company's effective tax rate
includes  income taxes in foreign  countries where the income tax rate is higher
than in the United States. Differences between the effective tax rates from 1999
to  2000  were a  result  of  minor  fluctuations  in the  amount  of  permanent
differences  between book reporting and income tax reporting items, and measures
the Company has taken to minimize the effect of foreign taxes.


                                       16
<PAGE>

Comparison  of the Year Ended  December 31, 1999 to the Year Ended  December 31,
1998

Revenues

The Company's  revenues increased $36.9 million or 33% to $150.2 million for the
year ended December 31, 1999, compared to $113.3 million for the same prior year
period.  The  increase was  primarily  due to  increased  Professional  Services
revenues from the acquisition of OAO Services, Inc. in July 1998. Revenue growth
was also  achieved  within  the New  Business  Sector  from both the  Enterprise
Applications and eBusiness Solutions and Healthcare IT Solutions segments. These
improved  revenues  were  offset by lower  revenues  in the  Managed IT Services
segment.

Professional  Services  revenues  increased to $64.1  million for the year ended
December 31, 1999 from $30.5 million for 1998.  The increase in revenues was due
to  owning  OAO  Services,  Inc.  for the  entire  year in 1999 as  compared  to
approximately six months in 1998.

The New  Business  Sector  segments of  Enterprise  Applications  and  eBusiness
Solutions and Healthcare IT Solutions  revenues  increased $9.5 million to $19.0
million,  or 100% for the year ended  December  31, 1999 versus $9.5 million for
the year ended  December  31,  1998.  The  revenues  increase in the  Enterprise
Applications  and eBusiness  Solutions  segment was due primarily to the AMS and
CRM  practices.  AMS  revenues  increased  $3.1  million  to $4.6  million.  The
improvement was due to increased work performed in our Moncton, Canada eBusiness
software  solutions center.  Revenues also increased due to expansion of the CRM
consulting practice, which was a new service offered in 1999.

Healthcare  IT  Solutions  revenues  increased  $4.5  million,  or 74%, to $10.6
million for the year ended  December  31, 1999 versus $6.1  million for the year
ended  December 31, 1998.  This segment is comprised  primarily of the Company's
healthcare  software  applications  solutions  business.   Healthcare  solutions
revenues increased due to a greater number of MC400 installation  projects which
increased consulting and implementation revenues.  License revenues declined due
to a shift to a subscription type service priced on a PMPM basis to its clients,
versus a one-time license fee.

Managed IT Services revenues declined $6.4 million to $67.1 million for the year
ended December 31, 1999 from $73.5 million for the year ended December 31, 1998.
Revenues  increased  $2.9 million due to the  acquisition of OAO/ICOR UK Ltd. in
the United  Kingdom in April  1999.  However,  this  revenue  gain was offset by
revenue  decreases  resulting from  reductions in the amount of work,  including
work order  projects,  head  count  downsizing  on  continuing  projects  due to
automation,  consolidation of sites,  insourcing  (where Company  functions were
transferred back to internal customer  personnel) and elimination of revenues on
smaller,   non-recurring   projects  with  strategic   customers.   The  Company
discontinued services on work order projects in the fourth quarter of 1999. Work
order projects are low margin, short-term fixed-fee engagements, which comprised
a declining  portion of total Company  revenues.  Total work order revenues were
$1.5  million and $2.4  million for the years ended  December 31, 1999 and 1998,
respectively.

Direct Costs

The Company's  direct costs increased 35.6% to $131.7 million for the year ended
December 31, 1999, from $97.1 million. As a percentage of revenues, direct costs
increased to 87.7% for the year ended 1999 versus 85.7% for the year ended 1998.
The increase in direct  costs and  increase in direct  costs as a percentage  of
revenues was primarily due to OAOT  increasing  its  investment by $2 million to
$4.8 million to develop its  Enterprise  Applications  and  eBusiness  Solutions
segment in 1999.

Direct costs  increased in the Healthcare IT Solutions  segment due to increased
marketing and training costs incurred to support subscription based sales and to
build the infrastructure to support increased sales.

Direct costs within the AMS business  increased $4.4 million to $7.2 million for
the year ended  December 31, 1999.  The increase was due to start-up  costs on a
contract with a strategic  end-user  customer that included  employee  training,
travel,  relocation,  recruitment  fees  and  commissions  incurred  to  place a
programmer on the project. Enterprise Applications and eBusiness Solutions costs
increased  due to  training  and  recruiting  of  professional  consultants  and
management,  and marketing and product  development  costs incurred to establish
and grow the newer businesses.


                                       17
<PAGE>


Direct costs increased  proportionally  to revenues in the Company's  Managed IT
Services and Professional Services segments for the year ended December 31, 1999
from the year ended December 31, 1998.

Selling, General and Administrative Expenses

Selling,  general  and  administrative  expenses  were $16.0  million  and $19.1
million for the years ended December 31, 1999 and 1998,  respectively.  The 1998
amount included a $4.2 million provision for uncollectible  accounts  receivable
compared  with  $474,000 in 1999.  OAOT's  selling,  general and  administrative
expenses  declined as a percentage  of revenues for the year ended  December 31,
1999 to 10.7%  compared to 16.9% for 1998.  The decline in selling,  general and
administrative  expenses as a percentage of revenues was due to OAOT  leveraging
its  overhead  structure  as revenues  increased by reducing the cost of outside
consultants, administrative programs, and administrative infrastructure.

Interest and other income (expense) and Provision for Income Taxes

Interest income increased  primarily due to a higher amount of invested cash and
interest  earned on a note receivable  from OAO  Corporation.  The effective tax
rate increased to 45.6% in 1999 versus a 35% income tax benefit in 1998 due to a
loss for that year. In 1999,  the  effective  tax rate included  income taxes in
foreign countries where the income tax rate is higher than in the United States.
In 1998, the Company had the benefit of losses in the United States only.

Liquidity and Capital Resources

Cash and cash  equivalents  were $11.8  million as of December 31, 2000,  versus
$13.1 million as of December 31, 1999.  Cash used in operations was $4.5 million
for the year ended December 31, 2000 compared with $6.9 million of cash provided
by operations in 1999.  Cash used in operations was primarily due to the payment
of  accounts  payable  and accrued  expenses  and an  increase  in net  accounts
receivable.  Net accounts  receivable was impacted by slight  differences in the
timing of payments by a strategic  customer from 1999 to 2000.  Approximately $4
million of accounts  receivable was received in January 2001,  whereas a similar
amount  was  received  in  December   1999.   OAOT's  Managed  IT  Services  and
Professional  Services business segments provided net cash flows which were used
to fund the Company's newer Healthcare IT Solutions and Enterprise  Applications
and eBusiness Solutions business segments.

The Company  expects to continue to invest in the operations of its New Business
Sectors of Enterprise  Applications  and eBusiness  Solutions and  Healthcare IT
Solutions,  for  projects  including  eBusiness  Solutions,  Application/Managed
Service Provider (A/MSP) and Application  Management Services (AMS). The Company
will  continue  to invest in its sales and  marketing  capabilities,  as well as
building a delivery team to support  anticipated sales. Such costs will continue
to be expensed as incurred and represent significant use of future cash which is
expected to be funded from Company  operations and available  cash. Cash used in
investing  activities was $5.8 million,  which was primarily for the purchase of
computers and office equipment used primarily in the Company's AMS business, and
certain  software  associated  with the  Healthcare  IT segment.  The  Company's
business operations will require additional capital  expenditures as the Company
continues to expand its AMS business and its other New Business Sector segments.
Uses of cash from  operating  and investing  activities  were offset by proceeds
from net borrowings  under the revolving  credit agreement in the amount of $6.0
million,  the sale of the Company's  common stock through stock option exercises
and  purchases  under the  employee  stock  purchase  plan in the amount of $1.6
million  and  by  proceeds  of  another  $1.6  million  from  a   sale-leaseback
transaction with a bank involving furniture and equipment purchased during 2000.


                                       18
<PAGE>


The Company has a $35 million combined  revolving credit and term loan agreement
("the Agreement") with a Bank. The Agreement provides a revolving line of credit
("Revolver")  in the amount of $15 million  that  matures on May 31,  2002.  The
Revolver  provides for a commitment fee based on the unused balance,  and at the
Company's option,  interest at the prime rate, or the LIBOR plus a 1.75% to 2.5%
risk adjusted  premium.  The Agreement's term loan facility  provides for a draw
fee of 0.50% payable when drawn upon and interest at LIBOR plus a risk- adjusted
premium.  The term loan facility,  in the amount of $20 million,  matures on May
31,  2001.  However,  in the event that there are no  borrowings  under the term
facility by May 31, 2001,  the maturity is extended to May 31, 2002.  Borrowings
under the  Agreement  are  limited to a multiple of  earnings  before  interest,
taxes,  depreciation,  and  amortization  (EBITDA).  However,  the  Company  may
convert,  at  its  option,  the  Revolver  portion  of  the  Agreement  into  an
asset-based loan whose borrowing  availability would be a percentage of eligible
billed and unbilled  receivables.  The Agreement  also requires  maintenance  of
certain financial covenants,  prohibits the payment of dividends and pledges all
Company assets as collateral, among other restrictions. However, there can be no
assurance that, based on the Company's operations, its covenants will permit the
full amounts  under the  Agreement  to be utilized in the future.  There were no
borrowings  outstanding  under this  Agreement  as of December 31, 1999 and $6.0
million  outstanding  as of December 31, 2000 with an interest rate of 9.5%. The
amount outstanding was repaid in January 2001.

The Company currently  anticipates that its existing cash balances,  bank credit
facilities,  or any cash generated from operations will be sufficient to satisfy
its operating cash needs for the foreseeable  future.  The Company has announced
an  acquisition  program as part of its  strategy  to  accelerate  revenues  and
earnings  growth.  The  Company  expects  to use bank  credit  to  leverage  the
Company's  financial position.  In addition,  the Company could consider seeking
additional  public or private  debt or equity  financing  to fund future  growth
opportunities.  No assurance can be given, however, that such additional debt or
equity  financing  will be  available  to the  Company  on terms and  conditions
acceptable to the Company, if at all.


Recent Accounting Pronouncements

In June 1998, the Financial  Accounting  Standards  Board (FASB) issued SFAS No.
133,  "Accounting  for  Derivative  Instruments  and  Hedging  Activities."  The
statement  requires  companies to recognize all  derivatives as either assets or
liabilities,  with the  instruments  measured at fair value.  The accounting for
changes in fair value and gains or losses  depends  on the  intended  use of the
derivative and its resulting designation. The Company will adopt SFAS No. 133 on
January 1, 2001 and believes that the adoption of this standard will not have an
impact on its results of operations and financial position.


Item 7a.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company  conducts  business in foreign  countries,  primarily Canada and the
United Kingdom.  Foreign currency transaction gains and losses were not material
to the Company's results of operations for the years ended December 31, 2000 and
1999. The Company believes its foreign currency risk is related primarily to the
difference  between amounts the Company receives and disburses in Canada in U.S.
dollars from U.S.  dollar  denominated  contracts.  To date, the Company has not
entered into any significant  foreign  currency  forward  exchange  contracts or
other  derivative  financial   instruments  to  hedge  the  effects  of  adverse
fluctuations  in  foreign  currency   exchange  rates;   however,   the  Company
periodically  reviews its exposure to foreign  currency risk and may take action
to limit its foreign currency exchange exposure if deemed appropriate.


                                       19
<PAGE>


Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The Consolidated Financial Statements of OAO Technology Solutions, Inc. and
Subsidiaries are filed as part of this form 10-K.

Index to Financial Statements and Schedule                                Page
------------------------------------------                                ----
Financial Statements:
      Independent Auditors' Report .....................................   21
      Consolidated Statements of Operations and Comprehensive Income
          for the years ended December 31, 2000, 1999, and 1998 ........   22
      Consolidated Balance Sheets as of December 31, 2000 and 1999 .....   23
      Consolidated Statements of Cash Flows for the years ended
            December 31, 2000, 1999 and 1998 ...........................   24
      Consolidated Statements of Stockholders' Equity for the years
            ended December 31, 2000, 1999 and 1998 .....................   25
      Notes to Consolidated Financial Statements .......................   26
Schedule:
            Schedule II - Valuation and Qualifying Accounts ............   42


     Schedules  not  listed  above  have  been  omitted  because  they  are  not
applicable  or the  information  required to be set forth therein is included in
the financial statements or the notes thereto.


                                       20
<PAGE>


                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders
of OAO Technology Solutions, Inc.:

We have audited the accompanying  consolidated  balance sheets of OAO Technology
Solutions,  Inc.  and  subsidiaries  as of December  31, 2000 and 1999,  and the
related  consolidated   statements  of  operations  and  comprehensive   income,
stockholders'  equity,  and cash flows for each of the three years in the period
ended  December  31, 2000.  Our audits also  included  the  financial  statement
schedule on page 42. These  financial  statements  and the  financial  statement
schedule are the responsibility of the Company's management.  Our responsibility
is to express an opinion on the 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  financial  statements  present  fairly,  in all material
respects, the consolidated financial position of OAO Technology Solutions,  Inc.
and  subsidiaries  as of December  31,  2000 and 1999,  and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 2000, 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.

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP
McLean, VA
February 9, 2001


                                       21
<PAGE>


                         OAO TECHNOLOGY SOLUTIONS, INC.
         Consolidated Statements of Operations and Comprehensive Income
           (Dollars and shares in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                          For the years ended December 31,
                                                                                ---------------------------------------------------
                                                                                   2000                 1999                 1998
                                                                                ---------------------------------------------------
<S>                                                                             <C>                  <C>                  <C>
Revenues                                                                        $ 152,585            $ 150,162            $ 113,342
Direct costs                                                                      127,905              131,664               97,105
                                                                                ---------------------------------------------------
                                                                                   24,680               18,498               16,237
Selling, general and administrative expenses                                       22,675               16,014               19,100
Restructuring and other charges                                                        --                   --                3,135
                                                                                ---------------------------------------------------
Income (loss) from operations                                                       2,005                2,484               (5,998)
Interest and other income (expense):
    Interest income                                                                 1,027                1,137                  858
    Interest expense                                                                  (35)                (269)                (200)
    Other                                                                             130                   53                  (39)
                                                                                ---------------------------------------------------
Income (loss) before income taxes                                                   3,127                3,405               (5,379)
(Provision) benefit for income taxes                                               (1,329)              (1,554)               1,881
                                                                                ---------------------------------------------------
Net income (loss)                                                                   1,798                1,851               (3,498)
Other comprehensive (loss) income :
    Foreign currency translation adjustment                                          (271)                 186                 (435)
                                                                                ---------------------------------------------------
Comprehensive income (loss)                                                     $   1,527            $   2,037            $  (3,933)
                                                                                ---------------------------------------------------

Net income (loss) per common share:
    Basic                                                                       $    0.10            $    0.11            $   (0.21)
                                                                                ---------------------------------------------------
    Diluted                                                                     $    0.10            $    0.11            $   (0.21)
                                                                                ---------------------------------------------------

Weighted average number of shares outstanding:
      Basic                                                                        17,883               16,856               16,434
                                                                                ---------------------------------------------------
      Diluted                                                                      18,484               17,362               16,434
                                                                                ---------------------------------------------------
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.



                                       22
<PAGE>

                          OAO TECHNOLOGY SOLUTIONS, INC
                           Consolidated Balance Sheets
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                                            As of December 31,
                                                                                                    -------------------------------
                                                                                                            2000               1999
                                                                                                    -------------------------------
<S>                                                                                                     <C>                <C>
ASSETS
Current assets:
    Cash and cash equivalents                                                                           $ 11,779           $ 13,142
    Accounts receivable
      Billed, net of allowance of $1,280 and $1,014, respectively                                         25,129             21,066
      Unbilled, net of allowance of $449 and $493, respectively                                            6,684              5,059
                                                                                                    -------------------------------
                                                                                                          31,813             26,125
    Note receivable, OAO Corporation                                                                       2,160              2,520
    Deferred income taxes                                                                                  1,093                829
    Income tax receivable                                                                                    754                934
    Other current assets                                                                                   6,959              6,447
                                                                                                    -------------------------------
      Total current assets                                                                                54,558             49,997
Property and equipment, net                                                                                5,778              4,387
Purchased and developed software for sale, net                                                             2,279              1,596
Deposits and other assets                                                                                  1,943                192
Deferred income taxes                                                                                        261                202
Goodwill                                                                                                   4,758              4,981
                                                                                                    -------------------------------
      Total assets                                                                                      $ 69,577           $ 61,355
                                                                                                    ===============================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Borrowings under revolving credit agreement                                                         $  6,000           $     --
    Accounts payable                                                                                       6,464              8,470
    Accrued expenses                                                                                      10,545             11,718
    Income tax payable                                                                                       523                605
    Unearned revenue                                                                                         959                797
    Current portion of capital lease obligations                                                             610                 54
                                                                                                    -------------------------------
      Total current liabilities                                                                           25,101             21,644

Capital lease obligations, net of current portion                                                            955                 89
Other                                                                                                        279                 --

Commitments and contingencies

Stockholders' equity :
    Preferred stock, par $.01 per share, 10,000,000 shares authorized
      none issued and outstanding                                                                             --                 --
    Common stock, par $.01 per share, 50,000,000 shares authorized;
      18,648,765 and 18,101,124 shares issued and outstanding, respectively                                  186                181
    Additional paid-in capital                                                                            42,725             40,743
    Deferred compensation                                                                                    (25)              (131)
    Accumulated other comprehensive loss                                                                    (520)              (249)
    Stockholder's receivable                                                                              (2,933)            (2,933)
    Retained earnings                                                                                      3,809              2,011
                                                                                                    -------------------------------
      Total stockholders' equity                                                                          43,242             39,622
                                                                                                    -------------------------------
      Total liabilities and stockholders' equity                                                        $ 69,577           $ 61,355
                                                                                                    ===============================
</TABLE>

The  accompanying  notes are in integral  part of these  consolidated  financial
statements.


                                       23
<PAGE>

                          OAO TECHNOLOGY SOLUTIONS, INC
                      Consolidated Statements of Cash Flows
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                              For the years ended December 31,
                                                                                       --------------------------------------------
                                                                                         2000              1999              1998
                                                                                       --------------------------------------------
<S>                                                                                    <C>               <C>               <C>
Cash Flows from Operating Activities:
    Net income (loss)                                                                  $  1,798          $  1,851          $ (3,498)
    Adjustment to reconcile net income (loss) to net
      cash (used in) provided by  operating activities:
        Depreciation and amortization                                                     3,326             2,164             1,248
        Asset abandonment costs                                                              --                --             2,100
        Bad debt expense                                                                    755               474             4,200
        Deferred income taxes                                                                23               105            (1,136)
        Change in assets and liabilities:
          Accounts receivable                                                            (6,468)              115             1,271
          Income tax receivable                                                             180               403            (1,337)
          Other current assets                                                             (714)           (3,243)              189
          Deposits and other assets                                                        (696)              (76)              328
          Accounts payable                                                               (2,355)            2,274            (6,841)
          Accrued expenses                                                                 (820)            2,009               652
          Unearned revenue                                                                  203               252               166
          Other long-term liabilities                                                       279                --                --
          Income tax payable                                                                (52)              605              (591)
                                                                                       --------------------------------------------
             Net cash (used in) provided by operating activities                         (4,541)            6,933            (3,249)
                                                                                       --------------------------------------------

Cash Flows from Investing Activities:
    Purchase of businesses, net of cash acquired                                           (546)             (289)           (6,570)
    Expenditures for property and equipment                                              (3,479)           (1,707)           (2,233)
    Repayments of notes receivable                                                          360                --                --
    Capitalized software costs                                                           (1,097)           (1,682)               --
    Other assets                                                                         (1,000)               --                --
                                                                                       --------------------------------------------
             Net cash used in investing activities                                       (5,762)           (3,678)           (8,803)
                                                                                       --------------------------------------------

Cash Flows from Financing Activities:
    Borrowings under revolving credit agreement, net                                      6,000                --                --
    Proceeds from the sale of common stock, net                                           1,641             1,277               298
    Receipt of stockholders' receivable                                                      --                --               133
    Repayments of capital lease obligations                                                (148)             (740)             (552)
    Proceeds from sale-leaseback                                                          1,584                --                --
    Repayments of notes payable                                                              --                --              (378)
                                                                                       --------------------------------------------
             Net cash provided by (used in) financing activities                          9,077               537              (499)
                                                                                       --------------------------------------------
Effect of exchange rate changes on cash                                                    (137)             (265)              (55)
                                                                                       --------------------------------------------
Net (decrease) increase in cash and cash equivalents                                     (1,363)            3,527           (12,606)
Cash and cash equivalents, beginning of year                                             13,142             9,615            22,221
                                                                                       --------------------------------------------
Cash and cash equivalents, end of year                                                 $ 11,779          $ 13,142          $  9,615
                                                                                       ============================================
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                       24
<PAGE>


                          OAO TECHNOLOGY SOLUTIONS, INC
                 Consolidated Statement of Stockholders' Equity
                        (Dollars and Shares in thousands)

                For the years ended December 31, 2000, 1999, 1998

<TABLE>
<CAPTION>
                                                                               Accumulated
                                       Common Stock   Additional                   Other                                  Total
                                     ---------------   Paid-in      Deferred   Compensation  Stockholders'  Retained   Stockholders'
                                     Shares   Amount   Capital    Compensation     Loss       Receivable    Earnings      Equity
                                     -----------------------------------------------------------------------------------------------
<S>                                  <C>       <C>    <C>           <C>         <C>          <C>            <C>         <C>
Balance, January 1, 1998             16,285    $163   $ 34,454      $ (76)      $  --        $  (133)       $ 3,658     $ 38,066
                                     -----------------------------------------------------------------------------------------------
Net loss                                 --      --         --         --          --             --         (3,498)      (3,498)
Exercise of stock options               187       2        489         --          --             --             --          491
Amortization of
    deferred compensation                --      --         --         30          --             --             --           30
Shares issued for the
    acquisition of ETG                  222       2        852         --          --             --             --          854
Option grants to non-employees           --      --        127       (127)         --             --             --           --
Payment of stockholders receivable       --      --         --         --          --            133             --          133
Foreign currency
    translation adjustment               --      --         --         --        (435)            --             --         (435)
Costs associated with sale
    of common stock                      --      --       (193)        --          --             --             --         (193)
                                     -----------------------------------------------------------------------------------------------
Balance, December 31, 1998           16,694     167     35,729       (173)       (435)            --            160       35,448
                                     -----------------------------------------------------------------------------------------------
Net income                               --      --         --         --          --             --          1,851        1,851
Exercise of stock options               219       2        547         --          --             --             --          549
Tax benefit related to
    exercise of stock options            --      --        101         --          --             --             --          101
Amortization of
    deferred compensation                --      --         --         42          --             --             --           42
Shares issued for
    employee stock purchase plan        210       2        575         --          --             --             --          577
Shares issued for note receivable       750       8      2,925         --          --         (2,933)            --           --
Shares issued to vendor                 228       2        816         --          --             --             --          818
Foreign currency
    translation adjustment               --      --         --         --         186             --             --          186
Refund of costs associated
    with sale of common stock            --      --         50         --          --             --             --           50
                                     -----------------------------------------------------------------------------------------------
Balance, December 31, 1999           18,101     181     40,743       (131)       (249)        (2,933)         2,011       39,622
                                     -----------------------------------------------------------------------------------------------
Net income                               --      --         --         --          --             --          1,798        1,798
Exercise of stock options               217       2        815         --          --             --             --          817
Tax benefit related to
    exercise of stock options            --      --        346         --          --             --             --          346
Amortization of
    deferred compensation                --      --         --        106          --             --             --          106
Shares issued for
    employee stock purchase plan        331       3        821         --          --             --             --          824
Foreign currency
    translation adjustment               --      --         --         --        (271)            --             --         (271)
                                     -----------------------------------------------------------------------------------------------
Balance, December 31, 2000           18,649    $186   $ 42,725      $ (25)      $(520)       $(2,933)       $ 3,809     $ 43,242
                                     -----------------------------------------------------------------------------------------------
</TABLE>

The  accompanying  notes are in integral  part of these  consolidated  financial
statements.


                                       25
<PAGE>


                         OAO TECHNOLOGY SOLUTIONS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

1.   Summary of Significant Accounting Policies

Description of the Company

OAO Technology Solutions,  Inc. ("the Company" or "OAOT") is a global integrator
of  information  technology  and  eBusiness  solutions.  The  Company  began its
operations in 1993 as a division of OAO  Corporation,  was incorporated in March
1996 and was spun off from OAO  Corporation in April 1996. The Company  operates
four business  segments:  Healthcare IT Solutions,  Enterprise  Applications and
eBusiness Solutions, Managed IT Services, and Professional Services.

Principles of Consolidation

The consolidated financial statements include the accounts of all majority owned
domestic and foreign  subsidiaries.  All other  investments  in  affiliates  are
carried at cost. All significant  inter-company  accounts and transactions  have
been eliminated.

Revenue Recognition

The Company  provides  services under  contracts,  primarily to large commercial
customers.  Service revenues are generally recognized ratably over the period of
the related contract. Revenue for fixed-price contracts is recorded on the basis
of the estimated  percentage of completion,  based on costs incurred as compared
to estimated  costs at  completion  of the  services  rendered.  Revenues  under
time-and-materials  contracts  are recorded at the  contracted  rates plus other
direct costs as they are incurred.  Losses,  if any, on contracts are recognized
as soon as they become known.

The Company  recognizes  software  revenue under the  provisions of Statement of
Position (SOP) No. 97-2,  "Software Revenue  Recognition" (as amended by SOP No.
98-4  and SOP No.  98-9).  Except  as noted  below,  software  license  fees are
recognized as revenue upon the customer's  execution of a noncancelable  license
agreement and the Company's  delivery of the software,  provided that the fee is
fixed and determinable,  collectibility is probable, and no customization of the
software is required.  Revenues are recognized from per member, per month (PMPM)
software license  arrangements as payments from customers  become due.  Revenues
from software maintenance  contracts are recognized ratably over the maintenance
period  based upon their  vendor  specific  objective  evidence  of fair  value.
Revenues   from   consulting   and  training   services  are   recognized  on  a
time-and-materials basis as services are performed.  Amounts received in advance
of the delivery of software or the  performance  of services are  classified  as
unearned revenue on the consolidated balance sheets.

Stock-Based Compensation

The  Company  follows  the  provisions  of  Statement  of  Financial  Accounting
Standards  (SFAS)  No.  123,  "Accounting  for  Stock-Based   Compensation."  As
permitted under this statement,  the Company  continues to follow the accounting
provisions of Accounting  Principles Board (APB) Opinion No. 25, "Accounting for
Stock Issued to  Employees"  for the  recognition  and  measurement  of employee
stock-based compensation and, therefore,  provides only the disclosures required
under SFAS No. 123. Using the intrinsic method prescribed in APB Opinion No. 25,
compensation  costs are  measured  as the excess,  if any, of the quoted  market
price of the  Company's  stock at the date of grant over the amount an  employee
must pay to acquire the stock.

Income Taxes

The provision for income taxes includes federal,  state and foreign income taxes
currently  payable  plus the net  change  during  the year in the  deferred  tax
liability or asset.  The current or deferred tax consequences of all events that
have  been  recognized  in  the  financial  statements  are  measured  based  on
provisions  of  enacted  tax law to  determine  the  amount of taxes  payable or
refundable in future periods.


                                       26
<PAGE>


Restructuring and Other Charges

During 1998, the Company recorded pre-tax restructuring charges of approximately
$1 million.  The  restructuring  costs relate primarily to involuntary  employee
termination  benefits.  Terminated  employees were notified,  in writing, of the
terms and conditions of their severance.

During the third quarter of 1998, the Company  discontinued  an  enterprise-wide
financial  management  system  project.  As a result,  the  Company  recorded  a
write-off of approximately $2.1 million related to this abandonment.

Foreign Currency Translation

The  assets  and  liabilities  of  the  Company's  foreign  subsidiaries,  whose
functional  currency  is other  than  the U.S.  dollar,  are  translated  at the
exchange  rates in effect on the balance sheet date, and income and expenses are
translated at the weighted average exchange rate during the period.  Translation
gains or losses are included as a component of accumulated  other  comprehensive
loss and represent the sole source of comprehensive income (loss) other than net
income (loss).

Cash and Cash Equivalents

The Company  considers all securities with a remaining  maturity of three months
or less at the date of purchase to be cash equivalents. At December 31, 2000 and
1999, the Company's cash equivalents  consisted of overnight reverse  repurchase
agreements and demand deposits.

Property and Equipment

Property and equipment,  which  includes  capital  leases,  is recorded at cost.
Purchased or developed  internal-use  software is capitalized in accordance with
SOP 98-1,  "Accounting for the Costs of Computer Software  Developed or Obtained
for  Internal  Use."  Property  and  Equipment  and  internal  use  software are
depreciated using the straight-line  method over their estimated useful lives of
three to five years.  Leasehold  improvements  and capital  leases are amortized
over the  shorter of the term of the  related  lease or their  estimated  useful
lives.

Software Development Costs

Development  costs  incurred in the  research  and  development  of new software
products and enhancements to existing software products are expensed as incurred
until  technological  feasibility  has  been  established.  After  technological
feasibility is established, costs are capitalized in accordance with SFAS No. 86
"Accounting for the Costs of Computer Software to be Sold,  Leased, or Otherwise
Marketed." Software product development costs are amortized based on current and
future  revenue for each product with annual minimum  amortization  equal to the
straight-line  amortization  over the remaining  estimated  economic life of the
product.  Amortization of such costs was $414,000,  $86,000 and $0 for the years
ended December 31, 2000, 1999 and 1998, respectively.

Goodwill

Goodwill resulting from business purchases represents the excess of the purchase
price over the fair value of the net assets acquired. Goodwill is amortized on a
straight-line  basis  over  estimated  useful  lives  of  seven  to  ten  years.
Amortization  expense was $769,000,  $751,000,  and $313,000 for the years ended
December 31, 2000, 1999 and 1998,  respectively.  Accumulated  amortization  was
$1,907,000 and $1,138,000 at December 31, 2000 and 1999, respectively.

Evaluation of Long-lived Assets

In accordance  with SFAS No. 121,  "Accounting  for the Impairment of Long-lived
Assets and for Long-Lived  Assets to be Disposed of," the Company  evaluates the
potential  impairment of long-lived  assets,  including  goodwill,  based on the
projection  of   undiscounted   cash  flows   whenever   events  or  changes  in
circumstances  indicate  that the  carrying  amount of an asset may not be fully
recoverable.


                                       27
<PAGE>


Fair Value of Financial Instruments

The Company's  financial  instruments,  principally  cash and cash  equivalents,
accounts receivable, accounts payable, and accrued expenses are carried at cost,
which approximates fair value due to the short term nature of these instruments.
The  Company's  note  receivable  and  revolving  debt are carried at cost which
approximates  fair value as these  instruments  bear interest at variable market
rates.  Considerable judgement is required to estimate fair value.  Accordingly,
the estimates provided are not necessarily indicative of the amounts the Company
could realize in a current market exchange.

Concentration of Risk

The Company has two strategic  customers.  One strategic  customer accounted for
76.0%,  75.7% and 67.0%, and the other accounted for 12.8%,  15.9% and 23.4%, of
total  revenues  for  the  years  ended  December  31,  2000,   1999  and  1998,
respectively.

Financial  instruments that potentially  subject the Company to concentration of
credit risk principally consist of accounts receivable and cash equivalents. The
Company's two largest strategic  customers accounted for approximately 60.9% and
9.5%, respectively, of accounts receivable as of December 31, 2000 and 61.9% and
22.1%, respectively, of accounts receivable as of December 31, 1999. The Company
did not have any other  customers  with  balances in excess of 10.0% of accounts
receivable as of December 31, 2000 and 1999, respectively.  The Company performs
ongoing  credit  evaluations  of its  customers,  but generally does not require
collateral to support customer receivables.

The Company has investments in overnight  reverse  repurchase  agreements with a
commercial  bank.  As of December  31, 2000 and 1999,  the Company had  invested
approximately $10.5 and $8.5 million in overnight reverse repurchase  agreements
with this bank.  The bank  provides  underlying  collateral  consisting  of U.S.
government  securities  which fully  secures the  carrying  value of the reverse
repurchase  agreements.  Because the  transactions  are entered into and settled
daily,  management  believes that the risk of market value impairment on a given
day is nominal.

Recent Accounting Pronouncements

In June 1998, the Financial  Accounting  Standards  Board (FASB) issued SFAS No.
133,  "Accounting  for  Derivative  Instruments  and  Hedging  Activities."  The
statement  requires  companies to recognize all  derivatives as either assets or
liabilities,  with the  instruments  measured at fair value.  The accounting for
changes in fair value and gains or losses  depends  on the  intended  use of the
derivative and its resulting designation. The Company will adopt SFAS No. 133 on
January 1, 2001 and believes that the adoption of this standard will not have an
impact on its results of operations and financial position.

In December 1999,  the SEC issued Staff  Accounting  Bulletin No. 101,  "Revenue
Recognition in Financial  Statements"  (SAB 101). SAB 101 summarizes  certain of
the SEC's views on applying generally accepted accounting  principles to revenue
recognition  in  financial  statements.  The  adoption  of SAB 101 in the fourth
quarter of 2000 did not impact the Company's  results of operations or financial
position.

In March 2000, the FASB issued  Interpretation  No. 44,  "Accounting for Certain
Transactions Involving Stock Compensation--an  interpretation of APB Opinion No.
25" (FIN 44). FIN 44 clarifies the  application of APB Opinion No. 25 and, among
other  issues,  clarifies  the  following:  the  definition  of an employee  for
purposes of applying APB Opinion No. 25, the criteria for determining  whether a
plan qualifies as a non-compensatory plan, the accounting consequence of various
modifications to the terms of previously fixed stock options or awards,  and the
accounting  for  an  exchange  of  stock  compensation   awards  in  a  business
combination.  The adoption of this  interpretation  did not impact the Company's
results of operations or financial position.


                                       28
<PAGE>


Use of Estimates

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 results could differ from those estimates.

Reclassifications

Certain amounts  previously  reported in the consolidated  financial  statements
have been reclassified to conform to the current year presentation.


2.   Supplemental Disclosure of Cash Flow Information

<TABLE>
<CAPTION>
                                                        For the years ended December 31,
                                                             2000     1999     1998
                                                        --------------------------------
<S>                                                        <C>      <C>      <C>
Cash paid during the year for:
    Interest                                               $   68   $   52   $  135
    Income taxes                                            1,309    1,494    1,180

Supplemental noncash investing and financing activities:
    Fair value of stock issued for software licenses           --    2,288       --
    Fair value of stock issued for note receivable             --    2,933       --
</TABLE>

3.   Acquisitions

The Company has made  several  acquisitions  to further its  strategic  business
objectives.  In October 2000,  the Company  acquired the assets of a division of
another  company for  approximately  $400,000 in cash. The division  provides IT
staff  augmentation  services and has offices in Atlanta and Boston. The Company
also made one  acquisition  in 1999, and three in 1998.  All  acquisitions  were
accounted  for under the  purchase  method of  accounting  and the excess of the
purchase  price over the fair  value of net assets  acquired  was  allocated  to
goodwill.  The results of each of the acquired  companies  have been included in
the  operations  of the Company  from the  effective  date of  acquisition.  The
Company's 1999 and 1998 acquisitions are as follows:

OAO/ICOR UK Ltd. Acquisition

Effective  May  27,  1999,  the  Company  acquired  the  remaining  50%  of  the
outstanding  capital stock of OAO/ICOR UK Ltd. not already owned by the Company.
The Company paid $688,000 for the outstanding  capital stock of the seller.  The
purchase  resulted  in  goodwill  of  approximately  $501,000,  which  is  being
amortized on a straight-line basis over seven years. The Company ceased applying
the equity method of accounting on the effective date of the acquisition.

ETG, Inc. Acquisition

Effective  November 1, 1998,  the Company  entered into an agreement and plan of
merger with Enterprise Technology Group, Inc. (ETG), a Delaware corporation, and
ETG's three stockholders.  Pursuant to the agreement and plan of merger, the ETG
stockholders  exchanged  all  of  the  issued  and  outstanding  stock  of  ETG,
consisting  of 1,000  shares of common  stock,  par value  $.10 per  share,  for
222,222  shares of common stock,  par value $.01 per share of the Company valued
at  approximately  $850,000.  The  Company,  prior to the merger,  provided  ETG
interest  free  advances  totaling  approximately  $216,000.   Additionally,  at
closing,  the Company repaid ETG's stockholder loans of approximately  $109,000.
The purchase  resulted in goodwill of approximately  $1,000,000,  which is being
amortized on a straight-line basis over seven years.


                                       29
<PAGE>


OAO Services, Inc. Acquisition

Effective  July 1, 1998,  the Company  completed the  acquisition  of all of the
outstanding  capital stock of OAO Services,  Inc.,  pursuant to a Stock Purchase
Agreement among the Company, OAO Corporation and an individual  stockholder (the
individual  stockholder  together  with OAO  Corporation,  the  "Stockholders").
Pursuant  to the terms of the  Stock  Purchase  Agreement,  the  purchase  price
payable by the Company to the  Stockholders  in connection  with the acquisition
included (i) cash in the amount of $2,305,000, subject to certain purchase price
adjustments,  (ii)  the  payment  by OAOT  to the  bank  of  $4,561,000  for the
retirement of outstanding debt under a financing  agreement,  and (iii) earn-out
payments to the Stockholders.  Under the terms of the Stock Purchase  Agreement,
the Company is required to make earn-out payments in amounts equal to 10% of the
Company's  pre-tax  profit in excess,  if any, of $2 million  subject to certain
increases,  for the three years ended  December  31,  1999,  2000 and 2001.  The
aggregate  earn-out  payments  shall not exceed $5 million.  For the years ended
December  31, 2000 and 1999,  the Company  recognized  $125,000  and $148,000 of
earn-out  payments,  respectively.  The  amounts  earned  under  this  agreement
increase the amount of goodwill  attributable to this transaction.  The purchase
resulted in goodwill of approximately $2,300,000,  which is being amortized on a
straight-line basis over ten years.

DHR Technologies Acquisition

Effective April 2, 1998, the Company  acquired certain assets and liabilities of
DHR Technologies,  Inc. (DHR) for approximately $1.1 million in cash and assumed
liabilities.  DHR, a Maryland-based  information technology services company and
software  developer,  provided  technical  services in a variety of disciplines,
including   object-oriented   software  engineering;   WorldWide  Web/multimedia
applications; training and consulting; and maintenance engineering. The purchase
resulted in goodwill of approximately $1,500,000,  which is being amortized on a
straight-line basis over seven years.

The  unaudited  pro forma  information  set forth below gives  effect to the OAO
Services,  Inc.  acquisition as if it had occurred at the beginning of 1998. The
effect of the other  acquisitions in 2000, 1999, and 1998 are not significant to
the pro forma information and therefore have been excluded from the presentation
below. The pro forma  information is presented for  informational  purposes only
and is not  necessarily  indicative of the results of  operations  that actually
would have been achieved had the  acquisition  been  consummated as of that time
(unaudited, dollars in thousands except per share amounts):

                                                   For the year ended
                                                       December 31,
                                                           1998
                                                   ------------------
Revenue                                              $   142,140
Net loss                                                  (2,986)
Basic loss per share                                       (0.18)
Diluted loss per share                                     (0.18)


                                       30
<PAGE>


4.   Net Income Per Common Share

     (dollars and shares in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                       For the years ended December 31,
                                                           2000      1999      1998
                                                       --------------------------------
<S>                                                      <C>       <C>       <C>
Basic Earnings (Loss) Per Share
    Net income (loss)                                    $ 1,798   $ 1,851   $ (3,498)
    Weighted average number of shares                     17,883    16,856     16,434
                                                       --------------------------------
    Basic earnings (loss) per share                      $  0.10   $  0.11   $  (0.21)
                                                       ================================

Diluted Earnings (Loss) Per Share
    Net income (loss)                                    $ 1,798   $ 1,851   $ (3,498)
    Weighted average number of shares and equivalents:
    Weighted average shares                               17,883    16,856     16,434
    Shares issuable upon exercise of stock options           601       506         --
                                                       --------------------------------
    Total weighted average shares and equivalents         18,484    17,362     16,434
                                                       --------------------------------
Diluted earnings (loss) per share:                       $  0.10   $  0.11   $  (0.21)
                                                       ================================
</TABLE>

Options to purchase  1,975,656,  1,244,071 and 315,000 shares outstanding during
2000,  1999 and 1998,  respectively,  were not  included in the  computation  of
diluted net income per common share  because the options'  exercise  prices were
greater than the average market price of the common shares.

5.   Unbilled Accounts Receivable

Unbilled  accounts  receivable as of December 31, 2000 and 1999 consisted of the
following (in thousands):

                                                               2000       1999
                                                             ------------------
Amounts billable                                             $ 4,488    $ 4,727
Amounts billable subject to extended payment terms             2,561        602
Amounts billable pending receipt of  contractual documents
    authorizing billing                                           84        223
Allowance for doubtful accounts                                 (449)      (493)
                                                             ------------------
      Total                                                  $ 6,684    $ 5,059
                                                             ==================

6.   Other Current Assets

Other current  assets include  software  licenses for resale of $4.8 million and
$5.0 million at December 31, 2000 and 1999,  respectively.  In connection with a
Value Added Industry Remarketer  agreement with Siebel Systems,  Inc., on August
31, 1999, the Company purchased  software licenses in the amount of $5.1 million
for resale to third parties.  The software  licenses were purchased with cash of
$2.8  million  and  228,800  shares of the  Company's  common  stock,  which was
guaranteed  to have a market  value of $10 per share at  August  31,  2000.  The
difference between the closing share price at August 31, 2000, of $4.94, and the
guaranteed market value, which is approximately $1.2 million,  is due August 31,
2001.  The cash  settlement  amount of $1.2  million  and the fair value of this
guarantee of $1.3  million is included in accrued  expenses at December 31, 2000
and 1999, respectively. Changes in the fair value of the guarantee are reflected
in the  Statements  of  Operations as other income in the amount of $0.1 million
for the year ended December 31, 2000.


                                       31
<PAGE>


7. Property and Equipment

Property and equipment at December 31, 2000 and 1999  consisted of the following
(in thousands):

                                                             2000        1999
                                                          ---------------------
Furniture and equipment                                    $  6,929     $ 5,427
Leasehold improvements                                          522         386
Internal-use software                                         2,877       1,689
                                                          ---------------------
                                                             10,328       7,502
    Less accumulated depreciation and amortization           (4,550)     (3,115)
                                                          ---------------------
      Property and equipment, net                          $  5,778     $ 4,387
                                                          ======================


The Company  leases  furniture and equipment  which are accounted for as capital
leases.  Amounts  related to capital  leased  assets  included in  property  and
equipment  at  December  31,  2000 and  1999  are  furniture  and  equipment  of
$2,103,000 and $699,000,  respectively and accumulated  amortization of $447,000
and $337,000, respectively.


8.   Accrued Expenses

Accrued  expenses at December 31, 2000 and 1999  consisted of the  following (in
thousands):

                                                            2000          1999
                                                         -----------------------
Accrued compensation and benefits                          $ 5,993       $ 7,457
Accrued expenses - primarily trade vendors                   4,087         3,882
Other                                                          465           379
                                                         -----------------------
        Total accrued expenses                             $10,545       $11,718
                                                         =======================


                                       32
<PAGE>


9.   Credit Agreements

The Company entered into a $35 million  combined  revolving credit and term loan
agreement (the "Agreement") with a bank on June 30, 1999. The Agreement provides
a $15 million revolving line of credit  ("Revolver") and a $20 million term loan
facility.  The Revolver  provides for a commitment  fee of 0.30% to 0.50% of the
unused  balance and interest at the prime rate or, at the Company's  option,  at
LIBOR plus a 1.75% to 2.5% risk adjusted  premium.  The Revolver  matures on May
31, 2002. The  Agreement's  term loan facility  provides for a draw fee of 0.50%
payable when drawn upon and interest at LIBOR plus a risk- adjusted premium. The
term loan facility matures on May 31, 2001. However, in the event that there are
no borrowings  under the term facility by May 31, 2001, the maturity is extended
to May 31, 2002. Draws under the Agreement are limited to a multiple of earnings
before interest,  taxes, depreciation and amortization (EBITDA). The Company may
convert  the  revolving  line of  credit to an  asset-based  loan  limited  to a
percentage of eligible billed and unbilled trade receivables. The Agreement also
requires  maintenance of certain financial  covenants,  prohibits the payment of
dividends   and  pledges  all  Company   assets  as   collateral,   among  other
restrictions.  There were no borrowings  outstanding  under this Agreement as of
December  1999 and $ 6.0 million  outstanding  as of December  31, 2000  bearing
interest at a rate of 9.5 %.


10.  Lease Commitments

The Company leases furniture and equipment under capital lease arrangements. The
Company also leases office space and office  equipment under  operating  leases.
The minimum  fixed,  non-cancelable  lease  payments  under the Company's  lease
commitments at December 31, 2000 are as follows:

Future minimum lease payments:                       Capital      Operating
Year ended December 31:                               Leases       Leases
                                                    -----------------------
2001                                                $    751        $ 3,239
2002                                                     738          2,961
2003                                                     145          2,834
2004                                                     144          2,323
2005                                                      10          2,067
      Thereafter                                          --          1,701
                                                    -----------------------
                                                       1,788        $15,125
                                                    --------
Less amount representing interest                       (223)
                                                    --------
Present value of lease payments                        1,565
Current portion of capital lease obligations             610
                                                    --------
                                                    --------
Noncurrent portion of capital lease obligations     $    955
                                                    --------


Capital lease obligations have effective  interest rates that range from 7.8% to
9.5% and have aggregate monthly payments of approximately $60,000 and $9,000, at
December  31, 2000 and 1999,  respectively.  A number of  operating  leases have
escalation  clauses for  increases  in real estate  taxes,  operating  costs and
inflation,  and various renewal  options for up to five years.  Rent expense for
the years ended December 31, 2000, 1999 and 1998 was  approximately  $2,076,000,
$1,707,000 and $1,297,000, respectively.


                                       33
<PAGE>


11.  Income Taxes

The Company's  provision (benefit) for income taxes for the years ended December
31, 2000, 1999 and 1998 consisted of the following (in thousands):

                                                      2000      1999      1998
                                                    ---------------------------
Current:
     Federal                                        $   150   $   615   $  (134)
     Foreign                                          1,115       605      (410)
     State                                               41       128        (6)
                                                    ---------------------------
        Total current provision (benefit)             1,306     1,348      (550)
Deferred:
     Federal                                             19       167    (1,153)
     State                                                4        39      (178)
                                                    ---------------------------
        Total deferred provision (benefit)               23       206    (1,331)
                                                    ---------------------------
Total provision (benefit)                           $ 1,329   $ 1,554   $(1,881)
                                                    ---------------------------

The provision  (benefit)  for income taxes  differs from the amount  computed by
applying the statutory Federal income tax rate as follows:

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

Expected statutory amount                             34.0%     34.0%    (34.0)%
Nondeductible expense                                  3.1       0.8      (1.3)
Foreign income taxes                                   3.9       7.7        --
State income taxes, net of federal benefit             1.4       3.1      (1.5)
Other                                                  0.1        --       1.8
                                                   ---------------------------
Effective rate                                        42.5%     45.6%    (35.0)%
                                                   ---------------------------

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes  and  amounts  used  for  income  tax  purposes.  The  tax  effects  of
significant  temporary  differences  that  comprise  the deferred tax assets and
liabilities at December 31, 2000 and 1999 are as follows (in thousands):

                                                          2000            1999
                                                        -----------------------
Deferred tax assets:
     Bad debt                                           $   674         $   510
     Accrued employee benefits                              212             169
     Goodwill                                               261             202
     Charitable contributions                                85              69
     Other expense items                                    195             195
                                                        -----------------------
        Total deferred tax assets                         1,427           1,145
Deferred tax liabilities                                    (73)           (114)
                                                        -----------------------
        Net deferred tax assets                         $ 1,354         $ 1,031
                                                        -----------------------

Deferred tax assets and liabilities are reflected on the Company's  consolidated
balance sheets at December 31, 2000 and 1999 as follows (in thousands):

                                                            2000           1999
                                                         -----------------------
Net current deferred tax assets                            $1,093         $  829
Net non-current deferred tax assets                           261            202
                                                         -----------------------
       Net deferred tax assets                             $1,354         $1,031
                                                         -----------------------


                                       34
<PAGE>

12. Employee Benefit Plans

Employee Savings Plans

The Company sponsors defined  contribution  plans for its eligible  employees in
the United  States and Canada.  The U.S.  plan covers  substantially  all of the
Company's  U.S.  employees.  Participants  may  contribute to the plan an amount
between  1% and 15% of  their  total  annual  compensation.  The  Company  makes
matching  contributions of 20% of each participant's  contributions up to 10% of
annual compensation. The Canadian plan covers substantially all of the Company's
Canadian employees. Participants may contribute to the plan an amount between 1%
and  18%  of  their  total  annual  compensation.  The  Company  makes  matching
contributions  of 50% of each  participant's  contributions  up to 5% of  annual
compensation.  Company  matching  contributions  under all defined  contribution
savings plans amounted to approximately $839,000, $764,000 and $688,000 in 2000,
1999 and 1998, respectively.

Employee Stock Purchase Plan

The Company has a qualified  Employee  Stock  Purchase Plan (ESPP) under section
423 of the Internal  Revenue Code, with a total of 1,000,000 shares reserved for
issuance thereunder.  The ESPP enables substantially all employees in the United
States and Canada to subscribe to purchase shares of common stock on a quarterly
basis.  The purchase  price is determined as the lower of 85% of the fair market
value of the shares on the first day of the  quarter  or 85% of the fair  market
value of the shares on the last trade day of the quarter.  During 2000 and 1999,
the Company issued 337,125 and 210,021 shares, respectively, at an average price
per share of $3.31 and $2.75. No shares were issued during 1998.

Deferred Compensation Plan

Beginning in 2000, the Company established a non-qualified deferred compensation
plan for certain  Executives and Directors,  which provides the  opportunity for
participants to enter into agreements for the deferral of a specified percentage
of their  cash  compensation.  The  amount of  compensation  to be  deferred  is
determined by participant  elections,  subject to plan limitations.  The Company
may make discretionary  contributions,  which are subject to a vesting schedule.
The amount  distributed will be based on the amounts  deferred,  as increased or
decreased for deemed investment in mutual funds or other investments  designated
by the  participant  from choices offered by the Company.  Contributions  to the
plan are held by a "Rabbi Trust," the net assets of which are consolidated  into
the financial  statements of the Company.  Such investments consist primarily of
marketable equity securities,  classified as trading securities, which have been
included in deposits and other assets on the consolidated balance sheet at their
fair value of $279,000  at December  31,  2000.  Unrealized  gains and losses on
investments held in the "Rabbi Trust" are recognized in net income of the period
in which they  occur.  The  deferred  compensation  obligation  of  $279,000  is
included in other  noncurrent  liabilities  on the  consolidated  balance sheet.
Changes in the fair value of the deferred compensation obligation are recognized
in net income in the period they occur.

Stock-Based Compensation

Under the 1996 Equity Compensation Plan, as amended, (the "Plan") the Company is
authorized  to  grant  stock  options  to  employees,  officers,  directors  and
consultants.  The Plan provides for the issuance of up to 6.6 million  shares of
common  stock for the  grant of  incentive  stock  options,  nonqualified  stock
options,  stock appreciation rights, and restricted stock awards up to a maximum
of 1.6  million  shares  of  common  stock  to an  individual  in any one  year.
Generally,  these grants vest ratably over a four or five year period and expire
six to ten years after the date of grant.  The exercise price of options granted
under  the  Plan is equal to the fair  market  value on the date of  grant.  The
Company  accounts for  employee  stock  options  under APB Opinion No. 25, under
which no compensation  cost has been  recognized.  Pursuant to SFAS No. 123, the
Company recognized  approximately $106,000,  $42,000 and $30,000 of compensation
expense on options  granted to  non-employees  for the years ended  December 31,
2000, 1999 and 1998, respectively.


                                       35
<PAGE>

A summary of the  Company's  stock  option  plan  activity  for the years  ended
December 31, 2000, 1999, and 1998 is presented below:

<TABLE>
<CAPTION>
                                                Number of                             Average
                                                 Option         Exercise Price        Exercise
                                                 Shares           Per Share            Price
                                          ----------------------------------------------------
<S>                                            <C>              <C>                    <C>
Outstanding January 1, 1998                    1,505,476        $2.00 - $5.10          $ 2.93
Granted                                        2,942,865         3.50 -  8.50            5.53
Canceled                                      (1,512,849)        2.00 -  8.50            6.01
Exercised                                       (186,790)        2.00 -  5.10            2.63
----------------------------------------------------------------------------------------------
Outstanding, December 31, 1998                 2,748,702        $2.00 - $8.50          $ 4.04
Granted                                        1,178,115         2.00 -  5.19            4.72
Canceled                                      (1,102,590)        2.00 -  8.50            4.83
Exercised                                       (219,523)        2.00 -  8.50            2.51
----------------------------------------------------------------------------------------------
Outstanding, December 31, 1999                 2,604,704        $2.00 - $8.50          $ 4.09
Granted                                        2,056,150         1.35 -  8.27            6.21
Canceled                                        (765,822)        2.00 -  8.50            5.47
Exercised                                       (216,664)        2.00 -  8.50            3.77
----------------------------------------------------------------------------------------------
Outstanding December 31, 2000                  3,678,368        $1.35 - $8.50          $ 5.01
                                          ----------------------------------------------------
</TABLE>

For the year ended  December  31, 1998,  800,366  incentive  stock  options with
exercise  prices  ranging  from $4.63 to $8.50 were  re-priced  to $3.50.  These
options are included in amounts granted and canceled in 1998.

The  following   summarizes   information  about  the  Company's  stock  options
outstanding at December 31, 2000:

<TABLE>
<CAPTION>
                                  Weighted
                                   Average         Weighted                       Weighted
 Range of                         Remaining         Average                        Average
 Exercise          Number     Contractual Life     Exercise        Number         Exercise
  Prices        Outstanding       (in Years)         Price       Exercisable       Price
------------------------------------------------------------------------------------------
<S>              <C>                 <C>            <C>           <C>             <C>
$1.35-$2.00        737,063           5.25           $ 1.62          309,563       $ 2.00
2.40 - 3.50        787,899           3.95             3.38          319,890         3.44
3.66 - 5.19        939,956           4.28             4.94          353,021         5.04
    5.63            45,000           3.38             5.63           22,500         5.63
8.27 - 8.50      1,168,450           5.47             8.27           32,500         8.32
------------------------------------------------------------------------------------------
$1.35-$8.50      3,678,368           4.77           $ 5.01        1,037,474       $ 3.76
------------------------------------------------------------------------------------------
</TABLE>

As of  December  31,  2000,  1999 and 1998,  options of  1,037,474,  906,953 and
670,322,  respectively,  were exercisable with a weighted average exercise price
of $3.76, $3.74 and $3.53, respectively. As of December 31, 2000, 1999 and 1998,
approximately  1.5 million,  2.8 million and 200,000  options were available for
grant, respectively.


                                       36
<PAGE>

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option   pricing  model  with  the  following   weighted-average
assumptions for grants in 2000, 1999 and 1998: risk-free interest rates of 5.94,
5.50 and 5.17 percent,  respectively;  no expected dividend yields; and expected
lives of 5 years. In 2000,  1999 and 1998, the expected  volatility was 93%, 70%
and 55%,  respectively.  Using  these  assumptions,  the fair value of the stock
options  granted in 2000, 1999 and 1998 on a per share,  weighted  average basis
was  $4.63,  $2.94  and  $2.58,  respectively,   which  would  be  amortized  as
compensation expense over the vesting period of the options.

Had  compensation  cost for these plans been recognized  under SFAS No. 123, the
Company's  net income  (loss)  and  earnings  (loss)  per share  would have been
reduced to the following pro forma amounts:

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

Consolidated net income (loss):
     As reported                              $  1,798    $  1,851   $ (3,498)
     Pro forma                                  (1,009)        807     (4,563)
Basic net income (loss) per common share:
     As reported                                  0.10        0.11      (0.21)
     Pro forma                                   (0.06)       0.05      (0.28)
Diluted net income (loss) per common share:
     As reported                                  0.10        0.11      (0.21)
     Pro forma                                   (0.06)       0.05      (0.28)

13. Segment and Geographic Information

The Company operates four business segments.  The Company's  reportable segments
are Healthcare IT Solutions,  Enterprise  Applications  and eBusiness  Solutions
(formerly,  E-Business  Consulting  Solutions),  Managed IT Services  (formerly,
Network and Systems Business Solutions) and Professional  Services.  As a result
of the  evolution  in the services the Company  provides,  two of the  Company's
reportable  segment  names have been  changed in 2000 from  1999;  however,  the
composition of the reported segments from 2000 to 1999 has not changed.

The Healthcare IT Solutions segment provides  proprietary  software products and
business  solutions for  healthcare  organizations.  The division  provides full
service  solutions via its proprietary  MC400 software on a one-time  license or
PMPM basis. This includes customer service,  installation service,  training and
ongoing support.

The Enterprise Applications and eBusiness Solutions segment provides integration
services and software  solutions.  The division's  three practices are eBusiness
Solutions,   Application/Managed   Service   Provider  (A/MSP)  and  Application
Management  Services  (AMS).  These practice  areas focus on AMS, CRM,  Portals,
eCommerce and ERP.

The  Managed  IT  Services   segment   provides   network  and  systems  design,
integration,  and management of  large-scale  data-center  environments  linking
multiple  technologies,  operating systems,  protocols and geographic areas. The
division manages enterprise  systems and provides desktop  management  services,
which includes on-site and remote network systems management.

The Professional Services segment provides information technology personnel that
are regularly  utilized  within  engagements  to meet short or  indefinite  term
requirements.  These highly  skilled  professionals  are provided to augment the
client's staffing requirements.


                                       37
<PAGE>

The Company  evaluates the performance of each segment based on segment revenues
and gross profit.  Summary  information by segment as of and for the years ended
December 31, 2000, 1999 and 1998 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                               2000                 1999                  1998
                                                           ----------------------------------------------------
<S>                                                        <C>                  <C>                   <C>
Managed IT Services
     Revenues                                              $  60,518            $  67,117             $  73,465
     Gross profit                                             11,271               14,136                14,396
     Segment assets                                           26,312               24,496                24,281
Professional Services
     Revenues                                                 55,299               64,126                30,461
     Gross profit                                              6,911                6,074                 2,920
     Segment assets                                           11,515               14,025                12,981
Enterprise Applications and eBusiness Solutions
     Revenues                                                 23,102                8,353                 3,289
     Gross profit (loss)                                       1,820               (4,226)               (2,671)
     Segment assets                                           14,636                9,786                 3,420
Healthcare IT Solutions
     Revenues                                                 13,666               10,566                 6,127
     Gross profit                                              4,678                2,514                 1,592
     Segment assets                                            9,791                5,958                 2,556
Segment totals
     Revenues                                              $ 152,585            $ 150,162             $ 113,342
     Gross profit                                             24,680               18,498                16,237
     Segment assets                                           62,254               54,265                43,238
</TABLE>

The following table reconciles reportable gross profit and segment assets to the
Company's  consolidated totals.  Selling,  general and administrative  expenses;
restructuring and other charges;  and interest and other income and expenses are
not allocated to segments (in thousands):

<TABLE>
<CAPTION>
                                                                          2000              1999              1998
                                                                       --------------------------------------------
<S>                                                                    <C>               <C>               <C>
Gross profit for reportable segments                                   $ 24,680          $ 18,498          $ 16,237
     Selling, general and administrative expenses unallocated            22,675            16,014            19,100
     Restructuring and other charges unallocated                           --                --               3,135
                                                                       --------------------------------------------
         Total consolidated income (loss) from operations                 2,005             2,484            (5,998)
     Interest and other (income) expense unallocated                      1,122               921               619
                                                                       --------------------------------------------
         Total consolidated income (loss) before income taxes          $  3,127          $  3,405          $ (5,379)
                                                                       --------------------------------------------

Total assets for reportable segments                                   $ 62,254          $ 54,265          $ 43,238
     Note receivable, OAO Corporation                                     2,160             2,520             2,520
     Property and equipment unallocated                                   3,055             2,605             2,887
     Income taxes unallocated                                             2,108             1,965             2,473
                                                                       --------------------------------------------
         Total consolidated assets                                     $ 69,577          $ 61,355          $ 51,118
                                                                       --------------------------------------------
</TABLE>


                                       38
<PAGE>

The Company generated substantially all of its revenues in the United States and
Canada during the three years ended December 31, 2000. The following  represents
a summary of information by geographic area (in thousands):

<TABLE>
<CAPTION>
                                                           For the years ended December 31,
                                                     2000                1999                  1998
                                                  ----------------------------------------------------
<S>                                               <C>                 <C>                    <C>
Revenues:
      United States                               $ 117,711           $ 131,261              $  93,066
      Canada                                         29,019              16,029                 20,193
      Other consolidated entities                     5,855               2,872                     83
                                                  ----------------------------------------------------
                                                  $ 152,585           $ 150,162              $ 113,342
                                                  ----------------------------------------------------
(Loss) income before income taxes:
      United States                               $    (965)          $   4,722              $  (4,435)
      Canada                                          3,395              (1,575)                  (964)
      Other consolidated entities                       697                 258                     20
                                                  ----------------------------------------------------
                                                  $   3,127           $   3,405              $  (5,379)
                                                  ----------------------------------------------------
Identifiable assets:
      United States                               $  59,049           $  51,702              $  46,879
      Canada                                          9,016               9,493                  5,258
      Other consolidated entities                     1,512                 160                 (1,019)
                                                  ----------------------------------------------------
                                                  $  69,577           $  61,355              $  51,118
                                                  ----------------------------------------------------
</TABLE>

14. Related Party Transactions

OAO Corporation

The  Company and OAO  Corporation  (OAO) are  related  parties  because a common
stockholder holds a substantial  ownership interest in both companies and is the
Vice-Chairman of the Board of Directors of the Company.

In May 1999, the Company  loaned OAO  approximately  $2.5 million.  The note, as
amended,  is a demand note with minimum quarterly  principal payments of $90,000
plus  interest  at the prime  rate plus  2.5%.  The note is  further  secured by
approximately  1.3 million shares of Company stock owned by the Vice-Chairman of
the Board of Directors.

During 2000,  1999 and 1998,  the Company served as a  subcontractor  on several
contracts with OAO. Revenues under these contracts  totaled  $871,000,  $949,000
and $785,000, respectively. In connection with the OAO Services acquisition, the
Company paid OAO $364,000  under an  administrative  services  agreement  during
1998.  The Company had  $421,000,  $662,000  and $298,000 in billed and unbilled
receivables due from OAO as of December 31, 2000,  1999 and 1998,  respectively,
and has  advanced  $500,000 to OAO at December  31,  2000 in  connection  with a
teaming agreement.

Other

The Company had an administrative  service agreement with Safeguard Scientifics,
Inc., which was terminated  effective April 1, 2000. The agreement  provided for
payment of an administrative  fee, not to exceed $500,000.  The Company expensed
an administrative  fee to operations of $124,000 for the year ended December 31,
2000 and  $500,000  for each of the  years  ended  December  31,  1999 and 1998,
respectively,   in  connection   with  this   agreement.   In  addition  to  the
administrative fee, the Company paid other professional service fees incurred on
behalf of the Company of $160,000 for the year ended December 31, 1998.


                                       39
<PAGE>

On July 14, 1999, the Chief Executive  Officer of the Company  acquired  750,000
shares of common stock of the Company,  $.01 par value,  at $3.91 per share,  in
exchange for a $2.9 million full recourse  note,  bearing  interest of 5.82% due
July 14, 2004.  The shares were pledged as  collateral  for the note,  which the
Chief Executive Officer has personally guaranteed.

The Company and an unrelated third party each made a strategic  investment in an
entity,  in which the  Company's  Chief  Executive  Officer  is a member of that
entity's  Board of Directors.  In December 2000, the Company paid $500,000 for a
10% ownership interest.  The valuation received by the Company was equal to that
of the unrelated third party's investment. The investment is accounted for under
the cost method of accounting  and is classified as deposits and other assets in
the accompanying consolidated balance sheets.

15. Contingencies

The Company from time to time is involved in various  litigation  arising in the
normal course of business.  In  management's  opinion,  the  Company's  ultimate
liability  or loss,  if any,  resulting  from  such  litigation  will not have a
material  adverse  effect  on  the  Company's  financial  position,  results  of
operations or cash flows.


                                       40
<PAGE>

16. Quarterly Financial Data (Unaudited)

Set forth below is a summary of the  unaudited  quarterly  results of operations
for the years ended December 31, 2000 and 1999 (In  thousands,  except per share
data):

<TABLE>
<CAPTION>
                                                                               2000 Quarters Ended
                                                           March 31         June 30          Sept. 30          Dec. 31
                                                           --------         --------         --------          --------
<S>                                                        <C>              <C>              <C>               <C>
Revenues                                                   $ 38,545         $ 39,695         $ 36,674          $ 37,671
Income (loss) from operations                                   637            1,441             (247)              174
Income before income taxes                                    1,233            1,283              319               292
Net income                                                 $    709         $    738         $    183          $    168
Net income per common share:
      Basic                                                $   0.04         $   0.04         $   0.01          $   0.01
      Diluted                                                  0.04             0.04             0.01              0.01
Weighted average number of shares outstanding:
      Basic                                                  17,635           17,755           17,910            18,130
      Diluted                                                18,976           18,372           18,269            18,206

<CAPTION>
                                                                               1999 Quarters Ended
                                                           March 31         June 30          Sept. 30          Dec. 31
                                                           --------         --------         --------          --------
<S>                                                        <C>              <C>              <C>               <C>
Revenues                                                   $ 35,717         $ 39,219         $ 38,887          $ 36,339
Income from operations                                          404              203              734             1,143
Income before income taxes                                      501              564              957             1,383
Net income                                                 $    301         $    340         $    527          $    683
Net income per common share:
     Basic                                                 $   0.02         $   0.02         $   0.03          $   0.04
     Diluted                                                   0.02             0.02             0.03              0.04
Weighted average number of shares outstanding:
     Basic                                                   16,694           16,737           16,986            17,388
     Diluted                                                 17,334           17,204           17,666            17,971
</TABLE>

Earnings per share  calculations  for each of the quarters are based on weighted
average number of shares outstanding in each period.  Diluted earnings per share
calculations  adjust  net  earnings  for the  dilutive  effect of  common  stock
equivalents.  Therefore,  the sum of the quarters may not necessarily  equal the
year-to-date earnings per share.


                                       41
<PAGE>

                         OAO TECHNOLOGY SOLUTIONS, INC.
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
              For the years ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                          Additions
                                                    --------------------
                                                     Balance     Charges
                                                        at       to costs     Charges to
                                                    beginning      and          other       Deductions     Write-    Balance at
(In thousands)                                       of year     expenses     accounts(B)      (C)         Offs(D)   end of year
--------------                                       -------     --------     -----------   ----------     -------   -----------
<S>                                                   <C>          <C>             <C>          <C>        <C>          <C>
Allowance for uncollectible
accounts (A)
    Year ended December 31, 1998 .............        $  289       4,227           175          (239)      (2,783)      $1,669
    Year ended December 31, 1999 .............        $1,669         474            --            --         (636)      $1,507
    Year ended December 31, 2000 .............        $1,507         755            --            --         (533)      $1,729
</TABLE>

(A)  Reflected  on the  consolidated  balance  sheets as a reduction of accounts
     receivable.

(B)  A reduction  of accounts  receivable  purchased in  acquisition  of certain
     assets of OAO Services, Inc. for the year ended December 31, 1998.

(C)  Provided as a recovery of revenue.

(D)  Reduced accounts receivable and allowance for uncollectible items.


                                       42
<PAGE>

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

     None.

                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The  information  required by this Item is incorporated by reference to the
sections of the  Registrant's  definitive Proxy Statement for the Annual Meeting
of  Stockholders  to be held on May 16, 2001 (the "Proxy  Statement"),  entitled
"Election of Directors --  Nominees,"  "Executive  Officers"  and "Common  Stock
Ownership of Principal  Stockholders  and Management -- Compliance  with Section
16(a)  Beneficial  Ownership  Reporting   Compliance,"  to  be  filed  with  the
Commission.

Item 11. EXECUTIVE COMPENSATION

     The  information  required by this Item is incorporated by reference to the
sections of the Proxy Statement  entitled "Election of Directors -- Compensation
of Directors" and "Executive  Compensation  and Other  Information," to be filed
with the Commission.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANGEMENT.

     The  information  required by this Item is incorporated by reference to the
section of the Proxy  Statement  entitled  "Common Stock  Ownership of Principal
Stockholders and Management," to be filed with the Commission.

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The  information  required by this Item is incorporated by reference to the
sections of the Proxy Statement entitled "Election of Directors -- Nominees" and
"Executive   Compensation  and  Other  Information  --  Compensation   Committee
Interlocks and Insider Participation," to be filed with the Commission.


                                       43
<PAGE>

                                     PART IV

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

 (a) (1)   Financial Statements

The  financial  statements  listed  in the  accompanying  Table of  Contents  to
Consolidated  financial  Statements  are  filed  as  part  of  this  Form  10-K,
commencing on page 20.

(a) (2)    Schedules

The following  consolidated financial statement schedule of the Company is filed
as part of this Form 10-K.

Schedule II - Valuation and Qualifying Accounts

(a) (3)    Exhibits

           The exhibits are listed in the index to Exhibits appearing below.

(b)        No reports were filed on form 8-K during the last quarter of fiscal
           2000.

(c)        Exhibits


                                       44
<PAGE>

Exhibit                                                                   Page
  No.                    Description                                       No.
--------------------------------------------------------------------------------

3.1    Amended and Restated Certificate of Incorporation of the
       Company, as amended. (2)

3.2    Amended and Restated By-Laws of the Company. (2)

10.1   Conformed form of Vendor Agreement between the Company and
       Integrated Systems Solutions Corporation, as amended. (2)

10.2   Basic Order Agreement between Digital Equipment Corporation
       and OAO Canada Limited/OAO Technology Solutions, Inc. (2)
       (4)

10.3   Amended and Restated OAO Technology Solutions, Inc. 1996
       Equity Compensation Plan. (2)

10.4   Employment Agreement between William R. Hill and the
       Company, dated April 1, 1996. (2)

10.5   Employment Agreement between Gregory Pratt and Company dated
       June 1, 1998 (5)

10.6   Employment Agreement between Ron Branch and Company dated
       December 1, 1998 (7)

10.7   Stock Purchase Agreement, dated July 24, 1998, among the
       Company, OAO Services, Inc., OAO Corporation and William
       Hill (3)

10.8   Registration Rights Agreement between Gregory Pratt and
       Company dated November 1, 1998 (7)

10.9   Agreement and Plan of Merger, dated as of November 1, 1998,
       among the Company, ETG Acquisition Corporation, Enterprise
       Technology Group, Inc. and the shareholders of Enterprise
       Technology Group, Inc. (7)

10.10  OAO Technology Solutions, Inc. Employee Stock Purchase Plan
       as of May 21, 1998 (6)

10.11  Credit Agreement dated June 30, 1999 by and among OAO
       Technology Solutions, Inc., and its subsidiaries and Bank of
       America (formerly NationsBank, N.A.) (8)

10.12  Amended and Restated OAO Technology Solutions, Inc.
       Restricted Stock Grant Letter. Date of grant: July 14, 1999
       issued to Gregory A. Pratt. (9)

10.13  Amended and Restated Term Note dated July 14, 1999 between
       the Company and Gregory A. Pratt. (9)

10.14  Amended and Restated Pledge Agreement dated July 14, 1999
       between the Company and Gregory A. Pratt. (9)

10.15  Amended and Restated OAO Technology Solutions, Inc. 1996
       Equity Compensation Plan (10)

10.16  Executive and director deferred compensation plan. (11)

10.17  Consent of Deloitte and Touche LLP (1)

21.1   Subsidiaries of the Registrant.

o OAO HealthCare Solutions,  Inc. o OAO Services, Inc. o OAO Systems, Inc. o OAO
Technology  Solutions (Canada) Inc. o OAO Technology Solutions Europe B.V. o OAO
Technology  Solutions  de Mexico,  S.A. de C.V. o OAO  Technology  Solutions  UK
Limited.


                                       45
<PAGE>


                         INDEPENDENT AUDITORS' CONSENT


We consent to the  incorporation  by reference in  Registration  Statements Nos.
333-36534, 333-75273, 333-75407, and 333-82789 of OAO Technology Solutions, Inc.
on Form S-8 of our report  dated  February  9, 2001,  appearing  in this  Annual
Report  on Form  10-K of OAO  Technology  Solutions,  Inc.  for the  year  ended
December 31, 2000.

/s/ Deloitte & Touche LLP


Deloitte & Touche LLP
McLean, Virginia
March 28, 2001





                                       46


<PAGE>


(1)  Filed herewith.

(2)  Incorporated by reference to the Company's  Registration  Statement on Form
     S-1 (Registration No. 333-00796) declared effective on October 22, 1997.

(3)  Incorporated  by reference  to the  Company's  current  report on Form 8-K,
     filed on August 7, 1998.

(4)  Confidential  Treatment  Requested.  The  entire  agreement  has been filed
     separately with the Securities and Exchange Commission.

(5)  Incorporated  by reference to the Company's  Form 10Q,  filed on August 14,
     1998.

(6)  Incorporated  by reference to the  Company's  Form S-8,  filed on March 30,
     1999.

(7)  Incorporated  by reference to the Company's  Form 10-K,  filed on March 30,
     1999.

(8)  Incorporated  by reference to the Company's Form 10-Q,  filed on August 16,
     1999.

(9)  Incorporated by reference to the Company's Form 10-Q, filed on November 15,
     1999.

(10) Incorporated  by reference  to the  Company's  Form S-8,  filed on July 13,
     1999.

(11) Incorporated by reference to the Company's Form S-8, filed on May 8, 2000.



                                       47
<PAGE>

                                   SIGNATURES

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

                                              OAO Technology Solutions, Inc.

March 28, 2001                                By: /s/ Gregory A. Pratt
                                                 -----------------------------
                                              Gregory A. Pratt
                                              Chief Executive Officer
                                              and President

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

     Signature                         Title                          Date


  /s/ Gregory A. Pratt         Chief Executive Officer,
---------------------------    President and Director
     Gregory A. Pratt          (Principal Executive Officer)      March 30, 2001

   /s/ J. Jeffrey Fox          Senior Vice President of Finance   March 30, 2001
---------------------------    and Chief Financial Officer
     J. Jeffrey Fox


  /s/ Jerry L. Johnson         Chairman of the Board of           March 30, 2001
---------------------------    Directors
    Jerry L. Johnson


  /s/ Cecile D. Barker         Director                           March 30, 2001
---------------------------
    Cecile D. Barker


/s/ Yvonne Brathwaite Burke    Director                           March 30, 2001
---------------------------
  Yvonne Brathwaite Burke


  /s/ Frank B. Foster, III     Director                           March 30, 2001
---------------------------
    Frank B. Foster, III


    /s/ John F. Lehman         Director                           March 30, 2001
---------------------------
      John F. Lehman


    /s/ Richard B. Lieb        Director                           March 30, 2001
---------------------------
      Richard B. Lieb



                                       48