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                                    FORM 10-K
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(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, 1999

                                       OR

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

For the transition period from ________________ to ________________

Commission file number 0-23173

                         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
        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,  2000,  was  approximately
$58,713,003  based on the  closing  sale price of the Common  Stock on March 23,
2000, of $6.969 as reported by the NASDAQ National Market System.

     As of March 23, 2000, the registrant had outstanding  18,040,910  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 12, 2000 are incorporated by reference in Part III, Items 10, 11,
12 and 13.

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<PAGE>


                         OAO TECHNOLOGY SOLUTIONS, INC.

                               INDEX TO FORM 10-K

                      FOR THE YEAR ENDED DECEMBER 31, 1999

Item                                                                        Page
----                                                                        ----
                                     Part I

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

  2    Properties........................................................... 13

  3    Legal Proceedings.................................................... 13

  4    Submission of Matters to a Vote of Security Holders.................. 13

                                     Part II

  5    Market for Registrant's Common Equity and
           Related Stockholder Matters...................................... 13

  6    Selected Consolidated Financial Data................................. 14

  7    Management's Discussion and Analysis of Financial Condition
           and Results of Operations........................................ 15

  7a   Quantitative and Qualitative Disclosures about Market Risk........... 22

  8    Financial Statements and Supplementary Data.......................... 23

  9    Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure......................................... 45

                                    Part III

 10    Directors and Executive Officers of the Registrant................... 45

 11    Executive Compensation............................................... 45

 12    Security Ownership of Certain Beneficial Owners and Management....... 46

 13    Certain Relationships and Related Transactions....................... 46

                                     Part IV

 14    Exhibits, Financial Statement Schedules and Reports on Form 8-K...... 46


<PAGE>


                                     PART I

Item I.  BUSINESS.

Overview

     OAO  Technology  Solutions,  Inc.  (the  "Company",  or "OAOT") is a global
enterprise-wide integrator of information technology (IT) solutions. The Company
provides  a wide  range  of  outsourced  information  technology  solutions  and
professional  services,  including the operation of large-scale service delivery
centers  and  networks,  distributed  systems  management,  custom  applications
software  development  and  maintenance,  professional  IT services,  enterprise
application  solutions,  integration,  implementation and training services, web
enablement and e-business solutions,  and proprietary software solutions for the
managed care  marketplace.  These  services are provided  through four  business
lines: Network and Systems Business Solutions; Professional Services; E-Business
Consulting Solutions; and Healthcare IT Solutions.

     Network and Systems Business Solutions, formerly Managed Services, includes
network  and  systems  design,   integration,   and  management  of  large-scale
environments  linking multiple  technologies,  operating systems,  protocols and
geographic areas. The Company has clients within enterprise systems, distributed
systems and networked  systems,  providing  these  services  directly to its own
end-user customers and to its strategic  customers as part of the IT outsourcing
team.

     Professional Services,  formerly Staff Augmentation,  recruits professional
and  technical  staff  locally,  nationally  and  internationally.  The  skilled
workforce consists of programmers,  system managers,  operators,  system support
personnel,  network  engineers and  technical  consultants.  These  technical IT
skills  are  provided  to the  Company's  strategic  and  third-party  customers
nationwide  on a time and  material  basis.  Highly  skilled  professionals  are
provided to augment the  customers  internal  ITs  staffing  requirements  or to
respond to  short-term  staffing  needs that cannot be  sufficiently  defined to
permit fixed prices.

     E-Business  Consulting  Solutions,  formerly  Enterprise  Resource Planning
(ERP),  provides  entire life cycle services for  organizations.  These services
range from initial business  process  modeling and  development,  through system
installation and implementation, and custom software application development and
maintenance  (ADM).  The Company's  service line implements and supports systems
from Siebel  Systems,  NCR, SAP and Microsoft.  This business unit also provides
third  party  vendor  packaged  software  including  Siebel  Systems,   SAP  and
Microsoft,  IBM and  Rational  on both a  licensed  and an  application  service
provider (ASP) basis.

     Healthcare IT Solutions provides proprietary software products and business
solutions  for  health  care  organizations.  The  Company's  proprietary  MC400
software provides a comprehensive  solution for the healthcare  industry's payor
segment  (HMO's,  indemnity  insurance plan and PHO's among  others).  The MC400
system is being web-enabled and provides over thirty modules that include claims
processing,  disease  and  patient  management,   eligibility,   enrollment  and
utilization  review.  The  Company has over fifty  installed  sites and offers a
viable solution to the healthcare  industry that  management  believes meets the
Federal requirements of the Health Insurance  Portability and Accountability Act
(HIPAA).  The company offers clients flexible purchase options whereby MC400 can
be  purchased on a one-time  license and  per-member  per-month  (PMPM) ASP type
basis. This includes product  development,  customer services,  and installation
service, training and ongoing customer support.

     Management  has been and intends to continue to reinvest  profits  from its
Network and Systems  Business  Solutions and Professional  Services  segments to
continue to develop new IT businesses in the E-Business Consulting Solutions and
HealthCare IT Solutions business segments. These businesses include new specific
vertical markets, e-business application solutions, application service provider
services (ASP), custom software  application  development and maintenance (ADM),
and customer  relationship  management  services (CRM) including  license sales,
application hosting, and consulting.


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<PAGE>


     The  Company  began  operations  in January  1993,  as a separate  business
division  of OAO  Corporation  ("OAO"),  and was  incorporated  in the  State of
Delaware in March 1996.  In April 1996,  the Company was spun-off from OAO as an
independent  corporation.  Finally,  during  December  1997 the  Company  raised
proceeds of approximately  $34 million by issuing 6.235 million shares of common
stock for $5.00 per share and is traded as "OAOT" on the Nasdaq National Market.

Industry

     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.  According to leading
market  research  firms,  spending for  worldwide IT services was expected to be
$2.2  trillion  in 1999 and reach $3.3  trillion by 2002.  Market  demand for IT
outsourcing  services  within the United  States is  expected  to grow from $161
billion during 1998 to $310 billion during 2003.

     There are significant  drivers that support the growth  expectations for IT
solutions  integrators.  These drivers  include 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.

     Factors driving  consolidation  within the industry are customers demanding
complete end-to-end  solutions and the increasing  complexity and convergence of
technology  required in  outsourcing  engagements,  lack of available  technical
resources, shortened delivery times, and investment costs of internally building
technical capabilities. As a result, providers of outsourcing services recognize
that it is not practical to  internally  develop and manage all of the technical
skills  and  critical  resources  necessary  to  perform   increasingly  complex
outsourcing  engagements.  This  impracticality  is due to the speed required to
meet and capture market demands.

     The Network and System Business Solutions Markets.  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  Professional  Services  Markets.  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. According to
a leading market research firm, the human resource  outsourcing  industry within
the United  States is  forecasted  to grow from  $13.9  billion in 1999 to $37.7
billion during 2003.

     The E-Business  Consulting  Solutions  Markets.  The e-business markets are
served by customer solutions that organize and process  information on intranets
and extranets as the primary  application  platform.  These customer markets are
served by a host of vendors marketing proprietary software license


                                       4
<PAGE>


and maintenance  solutions,  integration of front office  customer  relationship
management (CRM) and back office enterprise  resource management (ERP) solutions
via  application  service  provider  (ASP)  services.  Examples  of leading  ERP
solutions are SAP, Baan and PeopleSoft, and examples of CRM solutions are Siebel
and Oracle.

     Currently,  the  market  for CRM  solutions  and ASP  delivery  models  are
converging.   Traditionally,   ERP  application   engagements  experienced  long
implementation  cycles,  and high  consulting  and license  fees that  prevented
middle market  companies from  experiencing  the same operating  efficiencies as
larger competitors.  The ASP implementations provide minimal customizations with
monthly access and service  licensing fees,  thereby  offering various ranges of
customization  services.  More  recently,  the markets are  offering  server and
platform  hosting  services  external to  customer  facilities.  According  to a
leading  market  research  firm,  over 75% of the companies  with revenues of at
least $50 million will venture into  e-business by 2004.  The research firm also
forecasts the worldwide  business-to-business  e-commerce  market will grow from
projections  of $145 billion  during 1999,  to $403  billion  during 2000,  $953
billion during 2001, $2.18 trillion during 2002, $3.95 trillion during 2003, and
reach $7.3 trillion during 2004.

     The ASP market  within the United  States is  forecasted  to grow from $398
million during 1998 to $9.8 billion during 2003 for a compounded  average growth
rate of 89.7%.  The market for CRM licensing will grow from less than $1 billion
in 1997 to $4 billion by 2002.  Although these markets are  expanding,  there is
heightened  awareness  that the leading firms  providing  solutions to customers
will  experience  consolidation.  For example,  the research firm also indicated
that by 2004 the number of CRM firms will only be half of those operating during
1999.

     The  HealthCare  IT  Solutions  Markets.   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  (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.

     According to a leading market  research  firm,  less than 40% of all health
care claim payments use Electronic  Data  Interchange  (EDI),  electronic  funds
transfers and other technologies. The research firm also forecasts the IT market
size for health care  products and services  within the United  States will grow
from  projections  of $27.2 billion  during 1999, to $38.8 billion  during 2002.
More  specifically the forecast reported that demand for IT health care software
products  will grow from $4.9 billion  during 1999 to $7.9 billion  during 2002,
and demand for  health  care  networking  services  will grow from $1.1  billion
during 1999 to $1.7 billion during 2002.


The Company's Business Segments

Network and Systems Business Solutions

     Network and Systems Business Solutions,  formerly Managed Services,  offers
customer solutions as Enterprise Systems Management (ESM),  Distributed  Systems
Management (DSM), and Networked Systems.  Network and Business Systems Solutions
represents  44.7%,  64.8% and 90.6% of the Company's  total 1999,  1998 and 1997
revenues,   respectively.   In  prior  years  the  Application  Development  and
Maintenance (ADM) solutions offering was also accounted for within this business
sector, but has been realigned with the E-Business Consulting Solutions business
sector within this report.

     Enterprise  Systems  Management  (ESM).  The Company  provides  data center
operations management


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services, including management and operation of distributed networks of systems,
computer room equipment scheduling and operations,  network center operation and
management,  tape library management,  off-site data storage,  disaster planning
and recovery, tape and print equipment operations, print distribution, help desk
and call  center  operations,  move/add/change  operations  for user  equipment,
computer  and  network  systems   programming,   computer  and  network  systems
performance  measurement  and tuning,  production job scheduling and control for
applications  systems,  maintenance  and  development  of software  applications
systems, and quality assurance for technical operations.

     A data center  engagement  involves  supporting  a customer by  selectively
accepting functions within the total outsourcing engagement.  The Company's role
is to assume full  responsibility for managing,  staffing and delivering service
level requirements for those functions.  For example, in regard to the Company's
support  of the IBM Global  Services'  megacenters,  the  Company  performs  the
functions  of  console  operations,   network   operations,   output  processing
operations,  data  storage  operations,  and  user  services  functions  such as
move/add/change  operations.  The  megacenters  utilize a very large  network of
mainframe  computer  configurations  that support both the strategic  customer's
internal  requirements  and those of its  end-user  customers.  The Company also
provides services such as policy  formulation,  planning,  process and procedure
creation,  service  level  development,  staffing and  directing the work force,
budgeting  and  controlling,  relocation  and  consolidation,  and  upgrading of
equipment,  services and systems.  In performing these services,  the Company is
normally  responsible for the attainment of service level  requirements  and has
the flexibility of directing the personnel, as it deems appropriate.

     The Company is engaged to perform  pre-defined  contractual  functions on a
fixed-price  basis  and  also  supports  a wide  range of  additional  functions
pursuant to certain  staffing  service  provisions  under each  contract.  These
additional  functions  are  performed  on  either  a short or  long-term  basis,
depending on the  requirements of the strategic  customer.  The Company performs
these functions in the facilities of both its strategic and end-user  customers,
including regional, national and international locations.

     The Company provides ESM services primarily to strategic customers that are
global  providers of IT  outsourcing  services.  IBM Global  Services  currently
engages the Company to provide  management and  operations  services at three of
its four  megacenters  in the United  States and its  megacenters  in the United
Kingdom.  Each megacenter represents the networking of IBM's data centers across
a geographic region.  Datacenter  operations  management provided  approximately
25.2%, 30.2%, and 43.0% of total revenues for the years ended December 31, 1999,
1998 and 1997, respectively. The Company's data center contracts with IBM Global
Services are up for renewal during 2000.  (See Growth  Strategy - 1.  Leveraging
existing relationships with strategic customers.)

     Distributed  Systems  Management  (DSM). The Company's primary focus in DSM
services is on the evolving market for outsourced support of the desktop-network
requirements  of the end-user  customers.  The Company  believes  that the trend
toward outsourcing the operation and management of desktop-network  requirements
presents a major  opportunity  for growth.  The services being  delivered by the
Company vary by engagement and include:  network  operating system  architecture
and   implementation;   evaluation   and   redesign   of  server   architecture;
communications  network  evaluation and restructuring for improved  connectivity
and efficiency;  design and  implementation of e-mail solutions;  rollout of the
new desktop system into the user environment;  transition  services to support a
smooth  migration to a new  centrally  managed  desktop  environment;  help desk
services;  deskside  training  services;  asset management  support and control;
design and implementation of automated  centralized asset control; and operation
support,  including  activities  associated  with  changes  in  technology,  the
client's  organizational  structure or physical plant changes.  DSM  engagements
accounted for approximately  18.4%,  24.7% and 28.3% of revenues,  respectively,
for the years ended December 31, 1999, 1998 and 1997.

     As an example of the Company's  DSM  services,  the Company has teamed with
its  strategic  customer,  Compaq  Computer  Corporation  to provide  support of
desktop  computers  and local area networks for a major  financial  institution.
Compaq  requested OAOT to provide support in three major areas;  interim support
services, change management and help desk staffing for workstations and servers


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<PAGE>


throughout North America.

     Under  the  interim  support  services   agreement,   the  Company  assumed
responsibility  for onsite  services being  performed by the end-user  customers
while their offices were migrated to the new configurations.  Subsequently,  the
end-user  customer has asked that OAOT continue this onsite  service after sites
are migrated.  Services include onsite support of desktops,  laptops,  and local
area networks including design and installation of desktop,  server, and network
configurations,  modification to equipment and/or software, and desktop, network
and server  upgrades,  changes and moves of  equipment  and  software,  and some
hardware and software  maintenance.  The Company has full responsibility for all
management and technical aspects including  negotiating with  subcontractors and
working with client  management  and  employees.  OAOT's  onsite  support  staff
currently  includes site managers,  desktop analysts and technicians,  and local
area network analysts and technicians.

     The  Company's  help desk support for this project is performed at Compaq's
Remote Management  Center (RMC) in Calgary,  Alberta,  Canada.  The RMC provides
hot-line and telephonic  support to end-user  customer offices  throughout North
America.   The  Company's  support  services  include  first  and  second  level
assistance for desktop,  laptop, and local area network users and, if necessary,
dispatch of local  technicians  for additional  support.  The Company  currently
provides  help  desk  technicians,  desktop  analysts,  and local  area  network
analysts at the RMC. Service  contracts with Compaq require periodic renewal and
a portion  of these  contracts  are up for  renewal  in 2000.  (See  Growth  and
Strategy - 1. Leveraging existing relationships with strategic customers.)

     Networked  Systems.  OAOT  has  experience  in  designing,  deploying,  and
managing  local or wide area  networks.  This  includes  all facets of  protocol
inter-networking,   as  well  as  vendor  liaison  with  equipment  vendors  and
telecommunication  firms.  OAOT  manages  complex  networked  environments.  The
Company routinely manages hundreds of millions of application  minutes per month
for clients on a 24-hour, 7-day week, annual basis.

     The Company believes its relationships  with its strategic  customers,  and
its posture as a value-added  partner of choice working within end-user customer
engagements and facilities,  provide  opportunities  to be highly  responsive to
evolving  customer  needs.  As a result,  the Company  believes  that it is well
positioned to gain insight into market trends and make  investments  required to
pursue  opportunities that result from these trends.  This may allow the Company
to selectively broaden its service offerings.

Professional Services

     Professional  Services,  formerly Staff Augmentation Services, are provided
by OAO Services,  Inc., ("OAO Services") a wholly owned subsidiary of OAOT which
was  formed in 1995 and  acquired  by the  Company  in July  1998.  Professional
Services  represent 42.7%,  26.9% and 4.9% of the Company's total 1999, 1998 and
1997 revenues, respectively. OAO Services provides technical IT skills to a wide
range of end users and strategic customers nationwide.  These services, provided
on a time and material basis, are regularly  utilized within engagements to meet
short, long and indefinite term requirements.  Highly skilled  professionals are
provided to augment the customers internal IT staffing  requirements that cannot
be sufficiently defined to permit fixed prices.

     As of December 31, 1999,  OAO Services  provided  over 700  consultants  to
customers,  primarily IBM, with skills,  including but 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.  OAO  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.

     With offices strategically located in the Northeast, Southeast, Midwest and
the West,  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


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<PAGE>


nationwide  support  to  customers  and it has  continuously  demonstrated  this
ability since its inception.

E-Business Consulting Solutions

     The  e-business  service and solutions  market is rapidly  evolving to pair
customer requirements with the constant stream of new technologies  presented to
the market.  These changes include the methods of delivery,  as witnessed by the
convergence  of the  CRM  solutions  with  the  ASP  delivery  models.  OAOT  is
broadening  its  product  lines and  delivery  methods  to  attempt  to  capture
additional   opportunities   and  to  provide  its  customers  higher  operating
efficiencies.  OAOT  believes  that it has also  strengthened  itself  by adding
seasoned personnel and resources,  and also by realigning its delivery teams. To
enhance  its  ERP  offerings,   the  Company  added  call  center  and  customer
relationship   management   personnel,   expanded  its  web-enablement  and  ADM
solutions, entered into a remarketing agreement with Siebel Systems, and entered
into  an ASP  hosting  delivery  agreement  with  Qwest.  E-Business  Consulting
Solutions  represents  5.6%  and  2.9% of the  Company's  total  1999  and  1998
revenues, respectively. There was no revenue for this segment in 1997.

     Enterprise  Resource  Planning.  The  Company  provides  entire  life cycle
services for  organizations  using Enterprise  Resource Planning (ERP) software.
These services range from initial  business  process  modeling and  development,
through system installation and implementation. The Company also provides a full
suite of  continuous  support  services to help  maintain  and upgrade  complex,
mission critical systems. The Company's ERP service line implements and supports
systems  from SAP AG,  one of the  world's  leaders in ERP  solutions  and other
software providers.  The Company focuses its efforts on middle market commercial
customers as well as public sector customers.

     The  Company  has  established  strategic  relationships  with both SAP and
Microsoft.  As a Microsoft  Certified Solutions Provider (MCSP), the Company has
trained and deployed technical consultants who are technically certified by SAP,
as well as being Microsoft  Certified System Engineers (MCSE).  This enables the
Company  to  provide a  combination  of highly  technical  skills.  The  Company
believes that highly trained and skilled  consultants  will allow the Company to
provide  solutions for middle market commercial and public sector customers in a
more timely and cost effective manner.

Customer  Relationship  Management.  The Company  established  this  practice to
expand the front  office  solutions  and  customized  solutions  in  application
design,  implementation  and hosting services.  This practice has the ability to
configure the client's  applications  and provide access to the application from
an entirely  managed  environment.  The Company brings the customers on line and
manages their systems at cost effective pricing.  The CRM segment implements and
supports third party packaged  software  applications  and systems on a licensed
and ASP basis.  The  Company  focuses its  efforts on middle  market  commercial
customers, as well as public sector customers.  The Company signed a Value Added
Industry Remarketer ("VAIR") agreement with Siebel Systems,  Inc. This agreement
permits  OAOT to design,  install,  resell and host on an ASP basis,  Siebel CRM
front office  applications  for  commercial  and public sector  customers in the
North America and Europe. The Company has also hired teams of Siebel consultants
to implement comprehensive CRM solutions.

     Application Development and Maintenance (ADM).  Application development and
maintenance services encompass the development,  integration, and enhancement of
business application software.  These business applications include existing web
enabled applications such as electronic commerce,  enterprise resource planning,
and legacy  applications.  Customers can access software  engineering centers in
the United States,  Canada (Northshore) and Mexico  (Southshore).  These centers
are  collaboratively  networked  to provide ADM  services  and have  programs to
eventually achieve level 3 certification in the Software Engineering  Institutes
Capability  Maturity  Model (SEI CMM).  SEI CMM has been  widely  adopted as the
industry standard for measuring software development and maintenance processes.

     An example of these  efforts is the expansion  with IBM Global  Services to
provide ADM services in support of IBM's AT&T application  outsourcing contract.
To support this contract,  the Company  committed to hire  application  software
personnel at its Montcon Software Engineering Centre. In


                                       8
<PAGE>


December  1999,  the  Company  entered  into  another  contract  with IBM Global
Services to provide custom  software  application  development for a significant
global technology  manufacturing company. This agreement is expected to generate
$70 million in revenue over a 10-year term.

     The Company  formally  announced  its entry into the ASP market in February
2000. ASP services usually provide  customers a pre-packaged  suite of hardware,
network and software  products and  services  that provide  customers a software
application  solution for a monthly fee. The Company's  ASP business  model will
attempt to customize  the services to meet customer  requirements  by leveraging
its existing IT  infrastructure  and offering a  comprehensive,  single point of
responsibility service solution.

Healthcare IT Solutions

     Healthcare  IT Solutions  represents  7.0%,  5.4% and 4.4% of the Company's
total 1999, 1998 and 1997 revenues,  respectively. The Company has found that it
can provide significant added value to industry-specific  markets by melding its
proven  capabilities in IT with in-depth  expertise in the targeted market.  The
Company  targeted  the  healthcare  industry  based  upon  the  dynamics  of the
industry. An evaluation of the information aspects of the industry indicated the
value of shared  information  across the dispersed  providers of healthcare  and
related  businesses  such as employers  and insurers.  For example,  through the
Company's  acquisition in 1997, OAO HealthCare  Solutions  provides managed care
information   software   products  and  business   solutions   for  health  care
organizations   that  offer   risk-oriented   agreements   for  defined   member
populations.  The MC400 managed care software system is comprised of over thirty
modules  that  provide  a managed  care  organization  with all of the  required
processes and  methodologies  needed to manage  benefit  structures and provider
contracts.

     Healthcare  IT Solutions  provides  full service  solutions to users of the
managed care product MC400. This includes product development, customer service,
installation services, training and ongoing support. In addition, other services
may be  provided,  such as  total  project  management,  hardware  planning  and
implementation,  and custom programming. MC400 is currently installed at over 50
managed care organizations across the nation.  During 1999, the Company began to
web-enable MC400 and expanded its  functionality  by adding disease  management,
patient management,  utilization review, and other healthcare-critical  features
by purchasing  proprietary  software  programs from Advanced  Research  Systems.
These new  functionalities  enhanced the marketability of the MC400 Managed Care
solution.  The Company offers  customers the flexibility of purchasing the MC400
with a one-time license fee or on a per-member, per-month (PMPM) ASP basis.


Growth Strategy

     OAO Technology Solutions is dedicated to providing value-added,  enterprise
infrastructure  solutions that  facilitate our  customers'  success  through the
integration  of  business  and  IT  processes.  OAOT's  vision  is to  use  core
competencies  of people  and  technology  to meet its  customers'  technological
requirements in the new internet-centric  economy. The Company believes it has a
unique opportunity to capture opportunities and enhance its the market position.

1.   Leverage existing relationships with strategic customers.

     Revenues from the Company's two strategic  customers,  IBM and Compaq, were
$137.6 million, $102.5 million and $76.5 million in the years ended December 31,
1999, 1998 and 1997, respectively.  IBM accounted for 75.7%, 67.0% and 66.2% and
Compaq  accounted  for 15.9%,  23.4%,  and 24.1% of revenues for the years ended
December 31, 1999, 1998, and 1997, 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, 1999 the Company  earned 25.2% of revenues  from data center
management versus 60.2% in 1997.

     The Company's  traditional  marketing  method is to maintain and expand its
relationships with its


                                       9
<PAGE>


strategic  customers.  The  Company's  personnel  work or are  located  in these
customers'  office  locations.  By locating  management on site, this allows the
Company to establish a close alignment with each customers site  personnel,  and
thereby  anticipate  and respond to each  customer's  unique  local  needs.  The
Company  believes it could enhance its competitive  advantage in the IT industry
by aligning with selected strategic customer accounts.

     IBM. The Company's  relationship with its largest strategic  customer,  IBM
Global  Services,  has  continued to expand in terms of  revenues,  the range of
services  provided,  the number of  engagements  and the number of IBM  business
units which have  engaged the  Company's  services.  The Company was awarded its
first second-tier  engagement with IBM in January 1993,  successfully  competing
against  several  existing IBM  contractors.  The Company has since been awarded
long-term  engagements  supporting  three  of IBM  Global  Services'  four  U.S.
megacenters.

     IBM has also engaged the Company to perform IT services in support of other
large  outsourcing  contracts which it has been awarded,  including  engagements
with Ameritech,  Amtrak,  Blue Cross /Blue Shield of New Jersey and PECO Energy.
The Company was chosen to support Ameritech and PECO Energy engagements  without
having to submit  competitive  bids.  As recently  as December  1999 the Company
signed a 10-year  contract  with IBM Global  Services for $70 million for custom
application development (ADM) services.

     Compaq.  Compaq  became a  strategic  customer  in January  1995,  when the
Company  was  awarded a contract  to provide  services in support of an end-user
customer in Vancouver,  British Columbia. Later in 1995, the Company was awarded
additional  engagements with Compaq in Central and Eastern Canada.  During 1996,
the  Company  became a delivery  partner of Compaq  supporting  all of  Compaq's
Canadian outsourcing engagements. In 1996, Compaq was also awarded an engagement
to  provide  services  in  support  of  one of the  industry's  largest  desktop
outsourcing  engagements.  As a  result  of  these  engagements,  the  Company's
relationship  with Compaq has expanded into other geographic  areas,  throughout
North America and the United Kingdom.

     A decrease  in the  revenue or loss of a  strategic  customer  could have a
material adverse effect on the Company's business,  operating results, financial
condition  and cash  flows.  There can be no  assurance  that  either  strategic
customer will renew existing contracts maturing within the next twelve months or
continue to engage the Company's  services at historical  levels, if at all. The
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,  financial  conditions  and cash flows.  The Company's  data
center contracts with IBM are up for renewal during 2000.  Additionally,  in the
normal  course of business,  the Company must  periodically  renew its contracts
with  Compaq.  Several of these  contracts  are up for renewal in 2000.  Company
management  believes  that  OAOT  offers  the  best  solution  and  value to its
customers for these  services.  There can be no assurance that OAOT will win all
or any portion of these contracts or that all or any portion of these contracts,
if renewed, would continue at historical profitability levels

2.   Leverage  existing  core  competencies  to expand into higher margin faster
     growth businesses including e-business and healthcare IT solutions.

     The Company believes that its core competencies and skill sets are:

     1.   Experienced  people managing  network and system  solutions  including
          data center help desk,  desktop,  desk side and other  enterprise  and
          distributed systems management;

     2.   The  infrastructure  and  worldwide  ability  to  recruit  information
          technology personnel for OAOT and our customers;

     3.   Expertise in  proprietary,  web-enabled  software with ASP environment
          sales and implementation experience, and;

     4.   E-business solutions focused on application design,  integration,  and
          management.    These   solutions   are   supplemented   by   strategic
          relationships   with   independent   software   vendors  and  our  own
          proprietary software products.


                                       10
<PAGE>


During 1999 OAOT began to use its core  competencies  to reposition  itself into
higher margin,  faster growth businesses of e-business  solutions and Healthcare
IT  solutions  including  Siebel  CRM  software  solutions,  and  ADM  services.
Management  also  began to  reorganize  its  marketing  and sales  personnel  to
emphasis  the core  competencies  it has  gained as a  second-tier  provider  to
provide services directly to new customers. The Company is actively pursuing the
ASP market  with both third  party and its own MC400  Managed  Care  proprietary
software.  The Company  signed an  agreement  with Siebel  Systems  where it may
design,  implement,  sell and host  solutions  in North  America and Europe.  To
supplement the Siebel solutions,  an agreement was made with Qwest in early 2000
for them to co-host the Company's ASP solution  offerings.  Hosting is the means
of providing  customer's access to data and systems,  external to their internal
hardware infrastructures.

3.   Expand our sales and  marketing to increase  the  customer  base beyond the
     strategic customers and develop direct company customer relationships.

     During 1999 OAOT began to  reposition  itself into  higher  margin,  faster
growth  businesses  and is attempting  to enhance its position with new,  direct
customer relationships. Management reorganized and began to expand its marketing
and sales  personnel to begin to enhance its focus to extend beyond sales to its
strategic  customers.  Additionally,  the  Company  began to  focus  on  selling
e-business consulting services and healthcare IT solutions to new customers. The
Company is  actively  pursuing  the ASP market with both third party and its own
MC400 managed care proprietary software.

     These  expansions  work in tandem to  penetrate  new faster  growth  higher
margin markets and provide  customers  end-to-end IT solutions.  The Company has
begun to  employ  seasoned  personnel  to expand  its  marketing  practice.  The
marketing  personnel employ demand generation with early lead identification and
qualification  skills.  These marketing  efforts are expected to allow the sales
personnel  to  focus  entirely  on  qualified  leads,   rather  than  on  demand
generation.  The Company is also  focused on  expanding  sales by  ensuring  its
customers'  expectations  have been met.  The Company  expects to meet  customer
satisfaction levels by employing seasoned  solution-specific sales personnel and
training the existing sales personnel on technical solution capabilities.  These
customer-satisfaction  efforts are  expected to enhance  future  referral  based
sales.  The Company is expected to continue to make  significant  investments in
sales and marketing and product development to better position itself in key the
higher  margin faster growth  e-business  solutions and  Healthcare IT solutions
markets.

4.   Develop Industry-Specific Expertise.

     The Company  intends to selectively  develop  expertise in industries  that
will  allow  it  to  be a  premier  enterprise-wide  integrator  of  information
technology solutions that may offer higher-margin opportunities. During 1999 the
Company acquired teams of call center professionals to gain a market presence in
the customer relationship management (CRM) markets. During 1997 the Company made
a significant  investment in the healthcare industry by acquiring certain assets
of UniHealth Investment Company, a division of UniHealth, Inc., namely the MC400
managed care software.  Also,  during 1999 the Company  committed  itself to the
health care industry and its prior  investment  with the  acquisition of patient
management software that will help allow our programmers to web-enable the MC400
and strengthen its marketability.

     On 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,  from Capita
Business Services Limited,  a registered  English & Wales company.  Since making
this  acquisition,  this  enterprise  has  further  expanded  its UK service and
relationship with the Company's largest strategic customer.

     In July 1998,  the Company  expanded its offerings in the  Professional  IT
solutions industry with the acquisition of OAO Services, Inc. OAO Services, Inc.
offers a broad  range of IT  skills  including  systems  engineers,  architects,
managers,  and  ERP  specialties.  OAO  Services  is an IBM  National  Technical


                                       11
<PAGE>


Subcontracting  (NTS) Supplier.  It offers IBM Customer Support Center Services,
Year 2000 Support Services, and Deskside Support Services.

     The  acquisitions of DHR  Technologies,  Inc, ("DHR") in April of 1998, and
ETG, Inc.  ("ETG") in November of 1998,  contributed  to the  development of the
Enterprise   Resource   Planning  ("ERP")   expertise.   DHR  provides  advanced
computerized  solutions  and related  technical  services to power,  industrial,
healthcare and financial clients. ETG provides  integration,  implementation and
training services for SAP and Microsoft applications.


5.   Pursue Acquisitions and Alliances.

     Management  has been and intends to continue to reinvest  profits  from its
Network and Systems  Business  Solutions and Professional  Services  segments to
continue to develop new IT business in the E-Business  Consulting  Solutions and
HealthCare IT Solutions business  segments.  These businesses include e-business
application  solutions,  application  service  provider  services (ASP),  custom
software   application   development   and  maintenance   (ADM),   and  customer
relationship  management  services (CRM)  including  license sales,  application
hosting,  and consulting.  Company management believes that timely investment in
internet-centric businesses and digital technology infrastructure solutions will
result in improved long-term shareholder value.

     The  Company  is also  actively  evaluating  acquisition  opportunities  to
accelerate   its   transition  to  higher   margin  faster  growth   businesses.
Additionally,  the Company intends to continue to pursue expansion opportunities
through  strategic  alliances  and joint  ventures  to enhance  its  competitive
position and expand its services.

Competition

     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.

     Employees

     As  of  December  31,  1999,  the  Company  employed   approximately  2,160
employees,  of which 1,862 were full time  persons.  Approximately  142 of these
employees  have  managerial  responsibilities,  and over  1,333  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 5
of the Company's employees under a collective bargaining agreement which expires
on January 10, 2002,  and 10 of the Company's  employees are  represented by the
International Association of Machinists and Aerospace Workers under a collective
bargaining  agreement  which  expires  on  January  15,  2002.  The  Office  and


                                       12
<PAGE>


Professional  Employees  International  Union (the "OPEIU") represents 25 of the
Company's  employees  under a collective  bargaining  agreement  that expired on
February 29, 2000.  The Company  anticipates  the agreement will be renewed with
reasonably similar terms and conditions,  extending for a period of 2 years. 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 sixteen 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.

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, 1999,  there
were 714 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.

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

                                              1998
                                        --------------------
     Quarter                             High         Low
     ----------                         --------------------
     First                              $11.81       $7.38
     Second                               9.63        4.50
     Third                                5.25        3.13
     Fourth                               4.63        2.38

     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.


                                       13
<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
statement of operations data for the years ended December 31, 1999,  1998, 1997,
1996 and 1995 and the balance  sheet data as of December 31, 1999,  1998,  1997,
1996 and 1995 have been derived from  consolidated  financial  statements of the
Company which have been audited by Deloitte & Touche LLP, independent  auditors.
The Company began its operations in 1993 as a division of OAO Corporation (OAO),
was  incorporated  in March 1996 and was spun off from OAO  Corporation in April
1996.  In  July  1998,  the  Company  acquired  OAO  Services,   Inc.  from  OAO
Corporation.

<TABLE>
<CAPTION>
(In thousands, except per share amounts)                                  For the years ended December 31,
                                                               1999         1998         1997         1996         1995
<S>                                                       <C>          <C>          <C>          <C>          <C>
Statement of Operations Data:                             -------------------------------------------------------------
Revenues                                                  $ 150,162    $ 113,342    $  84,666    $  57,891    $  38,229
Direct costs                                                131,664       97,105       65,882       43,896       28,548
Selling, general and administrative                          16,014       19,100       13,551       10,824        7,338
Restructuring and other charges                                --          3,135         --           --           --
                                                          -------------------------------------------------------------
Income (loss) from operations                                 2,484       (5,998)       5,233        3,171        2,343
Interest and other income (expense), net                        921          619         (453)         (46)        (115)
                                                          -------------------------------------------------------------
Income (loss) before income taxes                             3,405       (5,379)       4,780        3,125        2,228
(Provision) benefit for income taxes                         (1,554)       1,881       (1,912)      (1,315)      (1,139)
                                                          -------------------------------------------------------------
Net income (loss)                                         $   1,851    $  (3,498)   $   2,868    $   1,810    $   1,089
                                                          -------------------------------------------------------------
Net income (loss) per common share:
    Basic (1)                                             $    0.11    $   (0.21)   $    0.27    $    0.18
                                                          =========    =========    =========    =========
    Diluted (1)                                           $    0.11    $   (0.21)   $    0.26    $    0.17
                                                          =========    =========    =========    =========

<CAPTION>
(In thousands, except per share amounts)                                        As of December 31,
                                                               1999         1998         1997         1996         1995
                                                          -------------------------------------------------------------
<S>                                                       <C>          <C>          <C>          <C>          <C>
Balance Sheet Data:
Working capital                                           $  28,555    $  26,394    $  33,249    $   4,718    $  (1,446)
Total assets                                                 61,355       51,118       50,342       12,828        5,801
Capital lease obligation, including current portion             143          883        1,435          476          251
Stockholders' equity                                         39,622       35,448       38,066        5,840        1,654
</TABLE>

(1)  See Note 5 to Notes to  Consolidated  Financial  Statements for information
     concerning calculation of basic and diluted net income per common share

                                       14
<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 the  Management's  Discussion and Analysis of Financial  Condition and
Results of  Operations,  and Notes to  Consolidated  Financial  Statements,  are
forward-looking statements that involve certain 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
customers, loss of or renegotiation of data center contracts, limited ability to
establish  new  strategic   customer   relationships,   risks   associated  with
fixed-price  contracts,  competition  in the  industry,  ability to sustain  and
manage growth, general economic conditions,  dependence on key personnel,  risks
associated with international sales,  uncertainties relating to the difficulties
of transacting on the internet,  integrating  solutions,  reducing expenses, and
transforming the Company's business to  internet-centric  businesses,  and other
risks  described  herein and in the  Company's  other  Securities  and  Exchange
Commission filings.


Overview

The Company is a global  enterprise-wide  integrator of  information  technology
(IT) solutions. The Company provides a wide range of outsourced IT solutions and
professional  services,  including the operation of large-scale service delivery
centers  and  networks,  distributed  systems  management,  custom  applications
software  development  and  maintenance,  professional  IT services,  enterprise
application  solutions,  integration,  implementation and training services, web
enablement and e-business solutions,  and proprietary software solutions for the
managed care  marketplace.  These  services are provided  through four  business
lines: Network and Systems Business Solutions; Professional Services; Healthcare
IT Solutions, and E-Business Consulting Solutions.

Management  intends to reinvest  profits  from its Network and Systems  Business
Solutions  and  Professional  Services  segments  to  continue to develop new IT
businesses in the  E-Business  Consulting  Solutions and Healthcare IT Solutions
business segments.  These businesses include e-business  application  solutions,
application  service  provider  services  (ASP),  custom  software   application
development and maintenance (ADM), and customer relationship management services
(CRM) including  license sales,  application  hosting,  and consulting.  Company
management  believes that timely investment in  internet-centric  businesses and
digital  technology  infrastructure  solutions will result in improved long-term
stockholder value.

The Company  provides  Network and Systems  Business  Solutions,  generally on a
long-term,  fixed-price  contractual basis, to strategic customers as part of an
IT outsourcing team,  providing services to a wide range of end-user  customers.
The  Company's   strategic  customers  include  IBM  and  Compaq  with  end-user
engagements  including:  Boeing,  Ames  Department  Stores,  United Health Care,
Campbell Soup, Ryder Systems Corporation, Citibank and others.

For the years ended December 31, 1999, 1998 and 1997 approximately  27.2%, 37.1%
and 60.8% of the Company's revenues, respectively, were derived from fixed-price
contracts.  Fixed-price  contracts  as a  percentage  of total  Company  revenue
declined in 1999 compared to 1998 primarily due to the  acquisition in July 1998
of OAO Services,  Inc., which forms the Company's Professional Services business
and which primarily has time and materials  contracts.  Certain of the Company's
fixed-price contracts require the Company to meet certain pre-established levels
of service, while achieving certain


                                       15
<PAGE>


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.

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. Professional
Services are offered as part of the Company's service offerings to its strategic
customers as well as non-strategic customers.

The Company's Healthcare IT Solutions practice provides proprietary managed care
software  application  solutions under software license agreements via its MC400
software.  The products  are provided on a one-time  license fee or a per member
per month (PMPM) long-term contractual basis and may include system development,
customer  service,  installation  services,  training,  and ongoing support.  In
addition,  other  services may be provided,  such as total  project  management,
hardware planning and implementation, and custom programming. MC400 is currently
installed at over 50 managed care sites in the United States and the Bahamas.

E-Business  Consulting  Solutions are generally provided on a time and materials
contractual  basis.  The Company,  through its E-Business  Consulting  Solutions
services, provides entire life cycle services for organizations.  These services
range from initial business  process  modeling and  development,  through system
installation  and  implementation.  The  Company  also  provides a full suite of
continuous  support  services  to  help  maintain  and  upgrade  these  complex,
mission-critical   systems.  The  E-Business  Consulting  Solutions  segment  is
dedicated  to  implementing  and  supporting   third-party   designed   software
applications and systems sold on a licensed and ASP basis.

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
Siebel  Systems,  NCR, SAP,  Compaq and Microsoft.  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 ASP basis,
Siebel solutions for commercial and public sector customers in North America and
Europe.  The  Company has also hired teams of Siebel  consultants  to  implement
comprehensive CRM solutions.

The  Company  has  experienced  substantial  growth  since its  inception,  with
revenues  increasing  to $150.2  million in 1999,  from  $12.1  million in 1993.
Engagements which involve new services to existing  customers or services to new
customers may 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.

Revenues from two strategic customers were $137.6 million and $102.5 million for
the years ended December 31, 1999 and 1998, respectively.  The largest strategic
customer  accounted  for 75.7%  and  67.0%,  and the  second  largest  strategic
customer  accounted for 15.9% and 23.4% of revenues for the years ended December
31, 1999 and 1998, 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, 1999,
the Company earned 25.2% of 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.
There can be no assurance  that either  strategic  customer will renew  existing
contracts  maturing  within the next  twelve  months or  continue  to engage the
Company's  services  at  historical  levels,  if  at  all.  The  termination  or
non-renewal  of a strategic  customer's  contract by an end-user  customer could


                                       16
<PAGE>


also  have a  material  adverse  effect  on the  Company's  business,  operating
results,  and financial  conditions.  The Company's data center contracts with a
strategic  customer are up for renewal  during the second half of 2000.  Company
management  believes  that  OAOT  offers  the  best  solution  and  value to its
customers for these  services.  There can be no assurance that OAOT will win all
or any portion of these contracts or that all or any portion of these contracts,
if renewed, would continue at historical profitability levels.

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,  primarily due to the Company's  practice of
retaining  the  majority of the  outsourced  personnel.  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  other
internet-centric and technology infrastructure solution businesses.  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.

The Company  often places its  employees in the  workplace of both its strategic
and end-user customers.  The Company is therefore exposed to potential liability
with  respect  to actions  taken by its  employees,  such as  damages  caused by
employee errors,  misuse of client-proprietary  information,  or theft of client
property. Due to the nature of the Company's potential liability with respect to
any such actions, there can be no assurance that any insurance maintained by the
Company will be adequate to cover any such liability.


Results of Operations

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

                                                     1999       1998      1997
                                                  ============================
Revenues .......................................    100.0 %    100.0 %   100.0 %
Direct Costs ...................................     87.7       85.7      77.8
Selling, general and administrative expense ....     10.7       16.9      16.0
Restructuring and other charges ................     --          2.7      --
                                                  ----------------------------
Income (loss) from operations ..................      1.6       (5.3)      6.2
Interest and other income (expense) net ........      0.6        0.5      (0.5)
                                                  ----------------------------
     Income (loss) before income taxes .........      2.2       (4.8)      5.7
(Provision) benefit for income taxes ...........     (1.0)       1.7      (2.3)
                                                  ----------------------------
     Net income (loss) .........................      1.2%      (3.1)%     3.4%
                                                  ============================


Comparison of Year Ended December 31, 1999 to 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  is  primarily  due to  increased  Professional  Services
revenues from the acquisition of OAO Services, Inc. in July 1998. Revenue growth
was also achieved  within the newer Company  businesses  (E-Business  Consulting
Solutions and Healthcare IT Solutions  segments).  These improved  revenues were
offset by lower revenues in the Network and Systems Business Solutions segment.


                                       17
<PAGE>


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

Revenues for the newer business segments of E-Business  Consulting Solutions and
Healthcare IT Solutions increased $9.5 million to $18.9 million, or 101% for the
year ended December 31, 1999 versus $9.4 million for the year ended December 31,
1998. The revenues increase in the E-Business  Consulting  Solutions segment was
due primarily to the ADM and CRM practices.  ADM revenues increased $3.1 million
to $4.6  million.  The  improvement  is due to increased  work  performed in our
Moncton,  Canada e-business  software solutions center.  Revenues also increased
due to expansion of the CRM consulting practice,  which is a new service offered
in 1999.

Revenues for the Healthcare IT Solutions segment 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  proprietary  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 an ASP type service priced on a per
member per month  (PMPM) basis to its  clients,  versus a one-time  license fee.
Management expects that PMPM type product sales will increase as a percentage of
the business,  which will allow the healthcare software applications business to
increase its recurring revenues and expand its customer base to small and medium
size healthcare membership plans.

Revenues from Network and Systems  Business  Solutions  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.  Revenues could be adversely affected
should OAOT's contracts for data center management not be renewed in 2000.


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 is primarily  due to OAOT  increasing  its  investment by $2 million to
$4.8  million to develop its newer  business  within its  E-Business  Consulting
Solutions  segment in 1999.  The  businesses  include ADM and CRM and e-business
consulting services.

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

Direct costs within the ADM business  increased $4.4 million to $7.2 million for
the year ended  December 31, 1999.  The increase is due to start-up costs on its
IBM Global  Services/AT&T  contract  that  include  employee  training,  travel,
relocation,  recruitment fees and commissions  incurred to place a programmer on
the project. E-Business Consulting 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.


                                       18
<PAGE>


Direct costs increased  proportionally  to revenues in the Company's Network and
Systems  Business  Solutions and Professional  Services  businesses 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 $4.2 million of provision for uncollectible accounts receivable.

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 is due to OAOT  leveraging  its  overhead  structure  as
revenues increased by reducing the cost of outside  consultants,  administrative
programs,  and  administrative  infrastructure.  The  Company  expects  selling,
general and  administrative  expenses  to increase in absolute  dollars and as a
percentage  of  revenues  as it  continues  to expand  its  sales and  marketing
expenditures to penetrate new markets and expand its client base.


Interest and Other Income and Provisions 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.  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.


Comparison of Year Ended December 31, 1998 to Year Ended December 31, 1997

Revenues

The  Company's  revenues  increased  33.8% to $113.3  million for the year ended
December 31, 1998, from $84.7 million for the year ended December 31, 1997. This
increase was primarily due to increased revenues as a result of acquisitions.

Revenues from Network and Systems Business Solutions (formerly Managed Services)
decreased  4.2% to $73.5 million for the year ended December 31, 1998 from $76.7
million  for the year ended  December  31,  1997.  This  decrease  is due to the
expiration  of several  significant  contracts and  strategic  customer  pricing
pressures.

Revenues from  Professional  Services  (formerly Staff  Augmentation)  was $30.5
million for the year ended December 31, 1998. In July 1998, the Company acquired
certain  assets  of OAO  Services,  Inc.  in a cash  purchase  transaction.  The
acquisition has been accounted for under the purchase method of accounting, thus
the results of  operations  of the acquired  company  have been  included in the
consolidated  financial  statements from the date of  acquisition.  Prior to the
acquisition,  OAO Services, Inc. had revenues of $29.3 million and $65.8 million
for the six months  ended June 30, 1998 and twelve  months  ended  December  31,
1997.

E-Business  Consulting  Solutions  (formerly ERP) revenues were $3.3 million for
the year ended  December  31,  1998.  E-Business  Consulting  Solutions is a new
business  segment  formed by two  acquisitions.  The Company also  initiated ADM
services in 1998 that generated revenues of approximately $1.5 million. In April
1998, the Company  acquired certain assets of DHR  Technologies,  Inc. (DHR) for
approximately $1.1 million in cash. DHR, a Maryland-based information technology
services company and software developer,


                                       19
<PAGE>


provides   technical   services   in  a  variety   of   disciplines,   including
object-oriented software engineering;  World Wide Web/multi-media  applications;
training and consulting;  and  maintenance  engineering.  Effective  November 1,
1998, the Company acquired Enterprise  Technologies Group, Inc. (ETG).  Pursuant
to the  agreement,  ETG  shareholders  exchanged all the issued and  outstanding
stock of ETG  consisting  of 1,000  shares of Common  Stock,  par value $.10 per
share  into  222,222  shares of Common  Stock,  par value  $.01 per share of the
Company.  The ETG  stockholders  were granted certain  "piggyback"  registration
rights whereby under certain  circumstances,  and subject to certain conditions,
they may include these shares of OAOT Common Stock in any registration of shares
of OAOT Common Stock.  The Company,  prior to the merger,  provided ETG interest
free advances totaling  approximately  $216,000.  Additionally,  at closing, the
Company repaid ETG's stockholders' loans of $109,000.

Revenues from the Healthcare IT Solutions  service line increased  60.5% to $6.1
million for the year ended  December  31,  1998,  from $3.8 million for the year
ended  December 31,  1997.  The  increase in revenues  was  attributable  to the
Company's subsidiary,  OAO HealthCare Solutions.  OAO HealthCare Solutions sells
the MC400 software package and was acquired by the Company in November 1997.

Direct Costs

The  Company's  direct costs  increased  by 47.3% to $97.1  million for the year
ended  December 31,  1998,  from $65.9  million for the year ended  December 31,
1997. As a percentage of revenues,  direct costs increased to 85.7% for the year
ended  December 31, 1998,  from 77.8% for the year ended  December 31, 1997. The
Company  attributes  this  increase  to  increased  costs  associated  with  the
establishment  and  development  of its  newer  businesses  in  ADM,  E-Business
Consulting Solutions, and Healthcare IT Solutions service offerings.


Selling, General and Administrative Expenses

Selling,  general and  administrative  expenses increased 40.4% to $19.1 million
for the year ended  December  31,  1998,  from $13.6  million for the year ended
December 31, 1997.  As a percentage of revenues  these costs  increased to 16.9%
for the year ended  December 31, 1998 from 16.0% for the year ended December 31,
1997,  primarily  due to provisions  for  uncollectible  accounts  receivable of
approximately $4.2 million recorded during 1998. The Company intends to continue
building its marketing, financial and administrative infrastructure to enable it
to support its growth opportunities.


Restructuring and Other Charges

During 1998, in  connection  with  management  plans to reduce costs and improve
operating  efficiencies,  the Company recorded pre-tax  restructuring charges of
approximately   $1,035,000.   The   restructuring   costs  relate  primarily  to
involuntary employee termination benefits. Employee termination benefits include
severance, wage continuation,  outplacement services, and other benefits. All of
the terminated  employees were notified of their  termination  and the terms and
conditions  of  their  severance  in  writing.  Although  some of the  severance
payments were made in equal semi-monthly  amounts up to a twelve-month period of
time, the  terminated  employees are not obligated to provide any services after
their date of termination.

During 1997, the Company began  implementation of an  enterprise-wide  financial
management  project.  The program included modules for general ledger,  accounts
receivable,  accounts payable, project accounting,  and human resources.  During
the  third  quarter  of 1998,  due to  significant  cost  overruns  and  project
definition changes, the Company hired an outside consultant to review the status
of this project. Based on this review, the Company has abandoned the majority of
the original software modules and the related  implementation  costs. Except for
the human resources module,  none of the remaining modules had been implemented,
and all the related  implementation  software  documentation for these abandoned
modules has been  discarded.  As a result,  the Company  recorded a write-off of
approximately $2.1 million related to this abandonment.


                                       20
<PAGE>


Interest Expense and Provision for Income Taxes

Interest  expense was not material in either year as the Company  satisfied  its
working  capital needs through cash  generated  from  operations and the initial
public  offering in 1997.  The effective tax rate decreased to 35.0 % benefit in
1998 from a 40.0% provision in 1997.


Liquidity and Capital Resources

Cash and cash  equivalents  were $13.1 million as of December 31, 1999, and $9.6
million as of December 31, 1998.  Cash provided by  operations  was $6.9 million
for the year ended  December  31, 1999 versus a use of $3.2 million for the year
ended December 31, 1998. Cash provided by operations for the year ended December
31, 1999 was primarily  generated from OAOT's  business  segments of Network and
Systems Business Solutions and Professional  Services,  improved  collections of
accounts receivable,  and cash management.  These increased cash flows were used
to fund the Company's  newer  Healthcare IT Solutions and E-Business  Consulting
Solutions business segments,  including its ADM business.  Cash was also used to
acquire the unowned portion of OAO/ICOR UK Ltd. from the Company's joint venture
partner, and the acquisition of a patient and disease management software system
for resale with OAOT's MC400 system.

Cash was used by  operations  for the year ended  December 31,  1998,  due to an
increase in income tax  receivable as well as decreases in accounts  payable and
accounts  receivable.  Additional cash was used in investing  activities for the
year ended December 31, 1998, primarily to acquire OAO Services,  Inc. (now part
of  Professional  Services) and DHR  Technologies,  Inc. (now part of E-Business
Consulting  Solutions).  The  Company's  business  operations  are  not  capital
intensive,  and  expenditures in any given year are ordinarily not  significant.
However,  the Company  expects to continue  to invest in the  operations  of its
newer business segments including E-Business Consulting Solutions and Healthcare
IT  Solutions  for projects  including  ADM and  enhancement  of its ASP product
during 2000.  The Company will also invest in sales and marketing as it develops
its demand generation capabilities for these newer business services. 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.

The Company entered into a $35 million  combined  revolving credit and term loan
agreement (the "Agreement") with Bank of America on June 30, 1999. 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 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 term loan
facility,  in the amount of $20 million,  matures on May 31, 2001. The term loan
facility  provides for a draw fee of 0.50%  payable when drawn upon and interest
at LIBOR  plus a risk  adjusted  premium.  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  among the  restrictions,  and replaces the
Company's Revolving Credit Agreement with another commercial bank. There were no
borrowings  outstanding  under this or its predecessor  Agreement as of December
1999 or 1998.

The Company  currently  anticipates  that its existing  cash balances as well as
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.


                                       21
<PAGE>


Impact of the Year 2000 "Y2K" Issue

The Company  surveyed and  remediated  where  necessary  all of its business and
mission-critical  systems among other  procedures and tests,  as part of its Y2K
planning process.

The total incremental cost of replacement  systems and Y2K contingency  planning
was estimated at $100,000.  As of March 6, 2000, the Company had not experienced
any significant Y2K related disruptions.


Item 7.a.  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 year ended December 31, 1999 and
1998. 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.  The Company does not expect the
amount of foreign  currency  risk to be  material in the  future.  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.











                                       22
<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.

<TABLE>
<CAPTION>
Index to Financial Statements and Schedule                                                       Page
------------------------------------------                                                       ----

<S>                                                                                               <C>
Financial Statements:

       Independent Auditors' Report...........................................................    24

       Consolidated Statements of Operations and Comprehensive Income for the years ended
           December 31, 1999, 1998, and 1997..................................................    25

       Consolidated Balance Sheets as of December 31, 1999 and 1998...........................    26

       Consolidated Statements of Cash Flows for the years ended December 31, 1999,
             1998 and 1997....................................................................    27

       Consolidated Statements of Stockholders' Equity for the years ended December 31,
             1999, 1998 and 1997..............................................................    28

       Notes to Consolidated Financial Statements.............................................    29

Schedule:

       Schedule II - Valuation and Qualifying Accounts........................................    45
</TABLE>


     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.










                                       23
<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, 1999 and 1998,  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, 1999.  Our audits also  included  the  financial  statement
schedule on page 45. These  financial  statements  and the  financial  statement
schedule are the responsibility of the Company's management.  Our responsibility
is to express an opinion on these financial statements based on our audits.

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

     In our opinion,  such consolidated  financial statements present fairly, in
all material respects, the financial position of OAO Technology Solutions,  Inc.
and  subsidiaries  as of December  31,  1999 and 1998,  and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting  principles.
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 herein.



Deloitte & Touche LLP
McLean, VA
February 9, 2000






                                       24
<PAGE>


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

<TABLE>
<CAPTION>
                                                    For the years ended December 31,
                                                 -----------------------------------
                                                   1999         1998          1997
                                                 -----------------------------------
<S>                                              <C>          <C>          <C>
Revenues                                         $ 150,162    $ 113,342    $  84,666
Direct costs                                       131,664       97,105       65,882
Selling, general and administrative                 16,014       19,100       13,551
Restructuring and other charges                         --        3,135           --
                                                 -----------------------------------
Income (loss) from operations                        2,484       (5,998)       5,233
Interest and other income (expense), net               921          619         (453)
                                                 -----------------------------------
Income (loss) before income taxes                    3,405       (5,379)       4,780
(Provision) benefit for income taxes                (1,554)       1,881       (1,912)
                                                 -----------------------------------
Net income (loss)                                    1,851       (3,498)       2,868
Other comprehensive income (loss) :
    Foreign currency translation adjustment            186         (435)          --
                                                 -----------------------------------
Comprehensive income (loss)                      $   2,037    $  (3,933)   $   2,868
                                                 -----------------------------------

Net income (loss) per common share:
    Basic                                        $    0.11    $   (0.21)   $    0.27
                                                 -----------------------------------
    Diluted                                      $    0.11    $   (0.21)   $    0.26
                                                 -----------------------------------

Weighted average number
 of shares outstanding:
    Basic                                           16,856       16,434       10,598
                                                 -----------------------------------
    Diluted                                         17,362       16,434       11,202
                                                 -----------------------------------
</TABLE>

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


                                       25
<PAGE>


                          OAO TECHNOLOGY SOLUTIONS, INC
                           Consolidated Balance Sheets
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                            December 31,
                                                                        --------------------
                                                                          1999        1998
                                                                        --------------------
ASSETS
<S>                                                                     <C>         <C>
Current assets:
    Cash and cash equivalents                                           $ 13,142    $  9,615
    Accounts receivable
      Billed, net of allowance of $1,014 and $959, respectively           21,066      15,458
      Unbilled, net of allowance of $493 and $710, respectively            5,059      11,082
                                                                        --------------------
                                                                          26,125      26,540
    Note receivable - OAO Corporation                                      2,520       2,520
    Deferred income taxes                                                  1,031       1,136
    Income tax receivable                                                    934       1,337
    Other current assets                                                   6,447         469
                                                                        --------------------
      Total current assets                                                50,199      41,617
Property and equipment, net                                                4,387       4,007
Purchased and developed computer software for sale, net                    1,596          --
Deposits and other assets                                                    192         455
Goodwill                                                                   4,981       5,039
                                                                        --------------------
      Total assets                                                      $ 61,355    $ 51,118
                                                                        ====================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                                                    $  8,470    $  6,481
    Accrued expenses                                                      11,718       7,761
    Income taxes payable                                                     605          --
    Unearned revenue                                                         797         545
    Current portion of capital lease obligations                              54         436
                                                                        --------------------
      Total current liabilities                                           21,644      15,223

Capital lease obligations, net of current portion                             89         447
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;
      18,101,124 and 16,694,060 shares issued and outstanding
      at December 31, 1999 and 1998, respectively                            181         167
    Additional paid-in capital                                            40,743      35,729
    Deferred compensation                                                   (131)       (173)
    Accumulated other comprehensive loss                                    (249)       (435)
    Shareholders' receivable                                              (2,933)         --
    Retained earnings                                                      2,011         160
                                                                        ====================
      Total stockholders' equity                                          39,622      35,448
                                                                        ====================
      Total liabilities and stockholders' equity                        $ 61,355    $ 51,118
                                                                        ====================
</TABLE>

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


                                       26
<PAGE>


                          OAO TECHNOLOGY SOLUTIONS, INC
                      Consolidated Statements of Cash Flows
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                         For the years ended December 31,
                                                                        ---------------------------------
                                                                            1999        1998        1997
                                                                        ---------------------------------
<S>                                                                     <C>         <C>         <C>
Cash Flows from Operating Activities:
    Net income (loss)                                                   $  1,851    $ (3,498)   $  2,868
    Adjustment to reconcile net income (loss) to net
      cash provided by (used in) operating activities:
      Depreciation and amortization                                        2,164       1,248         413
      Asset abandonment costs                                                 --       2,100          --
      Deferred income taxes                                                  105      (1,136)        466
    Change in assets and liabilities, net of effects of acquisitions:
      Accounts receivable, net                                               589       5,471     (11,406)
      Income tax receivable                                                  403      (1,337)         --
      Other current assets                                                (3,243)        189        (545)
      Deposits and other assets                                              (76)        328        (765)
      Accounts payable                                                     2,274      (6,841)      2,014
      Accrued expenses                                                     2,009         652       2,039
      Unearned revenue                                                       252         166        (552)
      Income taxes payable                                                   605        (591)        336
                                                                        ---------------------------------
        Net cash provided by (used in) operating activities                6,933      (3,249)     (5,132)
                                                                        ---------------------------------

Cash Flows from Investing Activities:
    Cash paid for the acquisition of OAO/ICOR UK Ltd.                       (141)         --          --
    Cash paid for the acquisition of OAO Services, Inc.                     (148)     (2,195)         --
    Payment on OAO Services debt agreement                                    --      (3,465)         --
    Cash paid for the acquisition of DHR Technologies, Inc.                   --        (938)         --
    Cash received in the acquisition of ETG                                   --          28          --
    Cash paid for the acquisition of OAO HealthCare Solutions, Inc.           --          --        (398)
    Expenditures for property and equipment                               (3,389)     (2,233)     (1,969)
                                                                        =================================
        Net cash used in investing activities                             (3,678)     (8,803)     (2,367)
                                                                        ---------------------------------

Cash Flows from Financing Activities:
    Borrowings under revolving credit agreement                               --          --       6,800
    Proceeds from the sale of common stock, net                            1,277         298      29,339
    Payments on credit agreements                                             --          --      (6,800)
    Receipt of stockholders' receivable                                       --         133          --
    Payments on capital lease obligations                                   (740)       (552)       (495)
    Payments on notes payable                                                 --        (378)         --
                                                                        ---------------------------------
         Net cash provided by (used in) financing activities                 537        (499)     28,844
                                                                        =================================
Effect of exchange rate changes on cash                                     (265)        (55)         --
Net increase (decrease) in cash and cash equivalents                       3,527     (12,606)     21,345
Cash and cash equivalents, beginning of period                             9,615      22,221         876
                                                                        =================================
Cash and cash equivalents, end of period                                $ 13,142    $  9,615    $ 22,221
                                                                        =================================
</TABLE>

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


                                       27
<PAGE>


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

                For the years ended December 31, 1999, 1998 ,1997
<TABLE>
<CAPTION>
                                                                                 Accumulated
                                       Common Stock    Additional                  Other                                  Total
                                    -----------------   Paid-in     Deferred   Comprehensive  Stockholders'  Retained  Stockholders'
                                    Shares     Amount   Capital   Compensation     (loss)      Receivable    Earnings     Equity

<S>                                 <C>      <C>       <C>        <C>          <C>            <C>            <C>       <C>
Balance, January 1, 1997            10,000   $   100   $  4,950   $       --   $      --         $    --     $    790  $    5,840
Net income                              --        --         --           --          --              --        2,868       2,868
Exercise of stock options               50         1         99           --          --              --           --         100
Sale of common stock                 6,235        62     29,310           --          --            (133)          --      29,239
Option grants to non-employees          --        --         95          (95)         --              --           --          --
Amortization of
    deferred compensation               --        --         --           19          --              --           --          19
                                  -----------------------------------------------------------------------------------------------
Balance, December 31, 1997          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
Options 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
                                  ===============================================================================================
</TABLE>

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


                                       28
<PAGE>


                         OAO TECHNOLOGY SOLUTIONS, INC.

                    NOTES TO CONSOLIDATE FINANCIAL STATEMENTS

1.   Description of Company and Corporate Organization

OAO  Technology   Solutions,   Inc.  (the  "Company"  or  "OAOT")  is  a  global
enterprise-wide  integrator of information  technology  solutions.  The Company,
along with its wholly owned  subsidiaries,  provides a wide range of  outsourced
information  technology  solutions and  professional  services.  These  services
include the  operation of  large-scale  service  delivery  centers and networks;
distributed systems management;  custom  applications  software  development and
maintenance;   professional  IT  services;   enterprise  application  solutions,
integration, implementation and training services; web enablement and e-business
solutions;  and proprietary software solutions for the managed care marketplace.
These  services are provided  through four business  lines:  Network and Systems
Business  Solutions,   Professional  Services,   Healthcare  IT  Solutions,  and
E-Business Consulting Solutions.


2.   Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying  consolidated  financial statements include the accounts of OAO
Technology Solutions, Inc. and its wholly owned subsidiaries: OAO Systems, Inc.;
OAO HealthCare Solutions, Inc.; OAO Services, Inc.; Enterprise Technology Group,
Inc.(ETG);  OAO Canada Limited.;  Canadian  Network  Resources,  Ltd.;  Canadian
Resource  Management,  Ltd.; OAO Technology  Solutions de Mexico,  S.A. de C.V.;
OAO/ICOR  do Brasil  Ltda.;  and  OAO/ICOR  UK Ltd.  All  accounts  of  non-U.S.
subsidiaries  have been  translated  into U.S.  dollars and are  included in the
consolidated  financial  statements.  All intercompany 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 times the
labor hours plus other direct costs as they are incurred. Losses, if any, on all
contracts are recognized as soon as they become known.

The Company  accounts  for  software  revenues in  accordance  with the American
Institute of Certified Public  Accountants'  (AICPA) Statement of Position (SOP)
97-2,  "Software  Revenue  Recognition"  and SOP 98-4 "Deferral of the Effective
Date of a Provision of SOP 97-2, Software Revenue Recognition."  Revenues earned
under  software  license  agreements  with  end-users  are  recognized  when the
software has been delivered and accepted by the customer, persuasive evidence of
a contractual  arrangement  exists,  the Company's fee is fixed or determinable,
and collectibility is probable.

Maintenance  and support  revenues are  recognized  ratably over the term of the
related agreements, which range from one to five years. Revenues from consulting
services  under time and materials  contracts and for training are recognized as
services are performed.

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, 1999 and
1998, the Company's cash equivalents  consisted of overnight reverse  repurchase
agreements and demand deposits.


                                       29
<PAGE>


Property and Equipment

Property  and  equipment  are  recorded at cost.  The cost of office  furniture,
computer and office  equipment,  and purchased  software is depreciated from the
date of installation  using the  straight-line  method over the estimated useful
lives of the assets, which range from three to five years.  Included in property
and  equipment  are  leasehold  improvements  and  leased  equipment,  which are
amortized  using the  straight-line  method over the shorter of their  estimated
useful  lives or the term of the  related  leases.  Software  development  costs
incurred for products to be used internally are capitalized and are amortized on
a straight-line basis over five years.

Purchased and Developed Software 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.  The Company  considers
technological feasibility to be established when all planning, designing, coding
and  testing  have been  completed  according  to design  specifications.  After
technological  feasibility is established,  any additional costs are capitalized
in accordance  with Statement of Financial  Accounting  Standards  (SFAS) No. 86
"Accounting for the Costs of Computer Software to be Sold,  Leased, or Otherwise
Marketed." Purchased and developed software 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 were $86,000 in 1999 and $0 in 1998.

Unearned Revenue

Unearned  revenue  at  December  31,  1999 and 1998  represents  prepayment  for
purchases of services that had not been rendered as of the respective dates.

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.

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  reporting  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 stockholders' equity.

Use of Estimates

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

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,


                                       30
<PAGE>


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.  Management  believes no material  impairment  of
these assets exists at December 31, 1999.

Concentration of Risk

The Company has two strategic  customers.  One strategic  customer accounted for
75.7%,  67.0% and 66.2%, and the other accounted for 15.9%,  23.4% and 24.1%, of
total  revenues  for  the  years  ended  December  31,  1999,   1998  and  1997,
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 61.9% and
22.1%,  respectively,  of accounts  receivable as of December 31, 1999 and 53.7%
and 30.7%,  respectively,  as of December 31, 1998. The Company did not have any
other  customers  with balances in excess of 10.0% of accounts  receivable as of
December 31, 1999 and 1998,  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, 1999 and 1998,  the Company had  invested
approximately $8.5 and $6.0 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.

Stock-Based Compensation

The Company follows the provisions of 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  Issue 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.

Reclassifications

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


3. Supplemental Disclosure of Cash Flow Information

<TABLE>
<CAPTION>
                                                                         For the years ended
(Amounts in thousands)                                                       December 31,
                                                                      ------------------------
                                                                        1999     1998     1997
                                                                      ------------------------
<S>                                                                   <C>      <C>      <C>
Cash paid during the year for:
    Interest                                                          $   52   $  135   $  176
    Income taxes                                                       1,494    1,180      884

Supplemental noncash investing and financing activities:
    Capital asset and lease obligation additions                      $   --   $   --   $1,454
    Fair value of stock issued  to vendor                              2,288       --       --
    Fair value of stock issued for note receivable from stockholder    2,933       --       --
</TABLE>


                                       31
<PAGE>


4. Acquisitions

OAO/ICOR UK Ltd. Acquisition

On 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 from Capita
Business Services  Limited,  a registered  English & Wales company.  The Company
paid  $161,900 for the  outstanding  capital  stock and $526,200 as repayment to
Capita  Business  Services  Limited for amounts  due from  OAO/ICOR UK Ltd.  The
acquisition  was accounted for under the purchase  method of accounting  and the
Company  has  included  the  results of  operations  of  OAO/ICOR  UK Ltd.  as a
consolidated  entity from the effective  date of the  acquisition.  The purchase
resulted  in  an  excess  of  purchase   price  over  net  assets   acquired  of
approximately  $501,000,  which is being amortized on a straight-line basis over
seven years. The Company previously used the equity method of accounting for the
results of operations prior to this acquisition.  Pro forma information  related
to this acquisition is not included herein as the acquisition was not material.

ETG, INC. Acquisition

Effective  November 1, 1998,  the Company  entered into an agreement and plan of
merger  with ETG  Acquisition  Corporation,  a wholly  owned  subsidiary  of the
Company with Enterprise Technology Group, Inc., a Delaware corporation (ETG) and
ETG's three stockholders.  In accordance with the agreement, ETG was merged with
ETG Acquisition  Corporation,  with ETG Acquisition Corporation continuing on as
the  surviving  corporation.  By virtue  of  merger,  the name of the  surviving
corporation  was changed to Enterprise  Technology  Group,  Inc. In January 2000
Enterprise Technology Group, Inc. was merged into OAO Technology Solutions, Inc.

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.  The ETG  stockholders  were  granted  certain
"piggy-back"  registration  rights  whereby  under  certain  circumstances,  and
subject to certain  conditions,  they may  include  these  shares of OAOT common
stock in any  registration  of shares of OAOT common stock.  The Company's Chief
Executive  Officer was one of the ETG selling  stockholders,  and  exchanged 500
shares of ETG common stock he owned for 111,111  shares of the Company's  common
stock.  The Company,  prior to the merger,  provided ETG interest  free advances
totally  approximately  $216,000.  Additionally  at closing,  the Company repaid
ETG's stockholder loans of approximately $109,000.

The  acquisition has been accounted for under the purchase method of accounting,
thus the results of operations of the acquired company have been included in the
consolidated  financial  statements from the date of  acquisition.  The purchase
price was allocated  based on the fair value of the assets  acquired,  including
approximately  $28,000  of  cash,  and the  liabilities  assumed  at the date of
acquisition. The purchase results in an excess of purchase price over net assets
acquired  of  approximately  $1.0  million,   which  is  being  amortized  on  a
straight-line  basis over seven  years.  Pro forma  information  related to this
acquisition is not included herein as the acquisition was not material.

OAO Services, Inc. Acquisition

On  July  24,  1998,  the  Company  completed  the  acquisition  of  all  of the
outstanding  capital stock of OAO Services,  Inc.,  pursuant to a Stock Purchase
Agreement dated July 24, 1998 among OAO Services,  Inc., the Company, OAO and an
individual  stockholder  (the  individual  stockholder  together  with OAO,  the
"Stockholders"). The acquisition was effective as of July 1, 1998.

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  (of this amount,
$3,465,611 is a retirement of the portion of the debt  allocated to the Company,
with the remainder  being a payment of the balance  allocated to OAO), and (iii)
earn-out  payments to the Stockholders in amounts equal to 10% of OAOT's pre-tax
profit.


                                       32
<PAGE>


Under the terms of the Company's acquisition of OAO Services,  Inc. from OAO and
another  stockholder  of OAO  Services,  Inc.,  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 increases,  for the three years ended
December 31, 1999,  2000 and 2001.  The aggregate  earn-out  payments  shall not
exceed $5 million.  For the year ended December 31, 1999, the Company recognized
$148,000 of earn-out payments due to OAO and the other stockholder.  The amounts
earned under this agreement  increase the amount of goodwill  recognized by this
transaction.

Also on July 24, 1998, in connection with the acquisition of OAO Services,  Inc.
OAOT entered into an Administrative Services Agreement with OAO, under which OAO
will provide OAO Services, Inc. with administrative support services through the
earlier of the date that OAOT  determines,  at its sole  discretion,  that it no
longer  requires such services,  or December 31, 1998.  During the  twelve-month
period ended  December 31, 1998,  the Company  incurred  $364,000 of costs under
this agreement.

Also,  in  connection  with its  purchase of OAO  Services,  Inc.  from OAO, the
Company  loaned OAO  approximately  $2.5  million.  The Company  entered  into a
promissory note from OAO for this amount bearing interest at prime plus 2.0% due
December 1, 1999.  In December  1999,  the Company and OAO modified the terms of
the note to a demand  note with an  increased  interest  rate of prime plus 2.5%
payable quarterly.  The note has quarterly  principal payments until demand. All
other terms remain  substantially  unchanged.  The Vice Chairman of the Board of
Directors  of the Company,  and owner of  approximately  18% of the  outstanding
shares of common stock of the Company has pledged as security  approximately 1.3
million shares of Company stock.

The total purchase price of $2,305,000 consisted of a cash payment of $2,195,000
and other non-cash consideration of $110,000. The acquisition has been accounted
for under the purchase  method of accounting,  and  accordingly,  the results of
operations  of OAO  Services,  Inc.  have  been  included  in  the  consolidated
financial  statements  from the date of  acquisition.  The  purchase  price  was
allocated to the net assets and  liabilities  acquired based on their  estimated
fair values at the date of acquisition.

The purchase resulted in an excess of purchase price over net assets acquired of
approximately  $2.3 million,  which is being amortized on a straight-line  basis
over ten years.

The unaudited pro forma  information for the periods set forth below give effect
to the OAO Services,  Inc. acquisition as if it had occurred at the beginning of
each period.  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).

                                        For the years ended December 31,
                                               1998               1997
                                        ------------------------------

Revenue                                 $   142,140        $   146,312

Net (loss) income                            (2,986)             3,018

Basic (loss) earnings per share               (0.18)              0.28

Diluted (loss) earnings per share             (0.18)              0.27


DHR Technologies Acquisition

On April 2, 1998, the Company  acquired  certain  assets and  liabilities of DHR
Technologies,  Inc.  (DHR)  for  approximately  $1.1  million  in cash.  DHR,  a
Maryland-based  information  technology services company and software developer,
provided   technical   services   in  a  variety   of   disciplines,   including
object-oriented  software engineering;  World Wide Web/multimedia  applications;
training and consulting;  and maintenance engineering.  The acquisition has been
accounted  for under the purchase  method of  accounting;  thus,  the results of
operations  of the  acquired  company  have been  included  in the  consolidated
financial statement


                                       33
<PAGE>


from the date of acquisition. The purchase price was allocated based on the fair
value  of  the  assets   acquired,   including  among  other  assets,   cash  of
approximately  $162,000, and the liabilities assumed at the date of acquisition.
The  purchase  resulted  in an excess of  purchase  price  over net  liabilities
acquired  of  approximately  $1.5  million,   which  is  being  amortized  on  a
straight-line  basis over seven  years.  Pro forma  information  related to this
acquisition is not included herein as the acquisition was not material.

OAO HealthCare Solutions, Inc. Acquisition

In November 1997, the Company  acquired  certain assets of UniHealth  Investment
Company, a division of UniHealth, Inc., for approximately $398,000 in cash. This
division  produces a software  product named MC400,  which assists  managed care
organizations  in  the  administration  of  benefits   structures  and  provider
contracts.  This acquisition has been accounted for under the purchase method of
accounting, and accordingly,  the results of operations of the acquired division
have been included in the  consolidated  financial  statements  from the date of
acquisition.  The purchase  price was  allocated  based on the fair value of the
acquired assets and assumed liabilities at the date of acquisition. The purchase
resulted  in  an  excess  of  purchase   price  over  net  assets   acquired  of
approximately  $340,000,  which is being amortized on a straight-line basis over
seven years. Pro forma  information  related to this acquisition is not included
herein as the acquisition was not material.


5. Net Income Per Common Share

<TABLE>
<CAPTION>
(Dollars in thousands, except per share amounts)                            For the years ended December 31,
                                                                     ===============================================
                                                                       1999               1998                1997
                                                                     -----------------------------------------------
<S>                                                                  <C>                <C>                 <C>
Basic Earnings (loss) Per Share
    Net income (loss)                                                $  1,851           $ (3,498)           $  2,868
    Weighted average number of shares                                  16,856             16,434              10,598
                                                                     -----------------------------------------------
    Basic earnings (loss) per share                                  $   0.11           $  (0.21)           $   0.27
                                                                     ===============================================
Diluted Earnings (loss) Per Share
    Net income (loss)                                                $  1,851           $ (3,498)           $  2,868
    Weighted average number of shares and equivalents:
      Weighted average number of shares                                16,856             16,434              10,598
      Shares issuable upon exercise of stock options                      506                 --                 604
                                                                     -----------------------------------------------
      Total weighted average shares and equivalents                    17,362             16,434              11,202
                                                                     -----------------------------------------------
     Diluted earnings (loss) per share                                $  0.11           $  (0.21)           $   0.26
                                                                     ===============================================
</TABLE>

Options to purchase approximately 1,244,071 shares of common stock at or greater
than $4.21 were outstanding during 1999. Options to purchase 315,000 and 364,000
shares at $8.50 and $5.10 were  outstanding  during 1998 and 1997  respectively.
These  options  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.

6. Recent Accounting Pronouncements

In June 1998,  the  Financial  Accounting  Standards  Board 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 statement was originally effective for fiscal years
beginning after June 15, 1999. In June 1999, FASB delayed implementation of this
statement by one year, to June 15, 2000.  The Company will adopt SFAS No. 133 in
the first quarter of 2001 and is evaluating  the impact that  implementation  of
this statement will have on its consolidated financial statements.


7. Comprehensive Income (Loss)

The Company's source of other comprehensive  income (loss) other than net income
is from foreign currency translation adjustments.


                                       34
<PAGE>


8. Unbilled Accounts Receivable

Unbilled accounts  receivable include certain costs and a portion of the fee and
expected  profit,  which is billable  upon  completion  of the  contracts or the
completion  of certain  tasks under terms of the  contracts.  Unbilled  accounts
receivable  as of December  31, 1999 and 1998  consisted  of the  following  (in
thousands):

<TABLE>
<CAPTION>
                                                                        1999           1998
                                                                    -----------------------
<S>                                                                 <C>            <C>
Amounts billable                                                    $  4,727       $  8,208
Amounts billable subject to the completion of contract milestones        602          1,464
Amounts billable pending receipt of  contractual documents
    authorizing billing                                                  223          2,120
Allowance for doubtful accounts                                         (493)          (710)
                                                                    -----------------------
Unbilled accounts receivables                                       $  5,059       $ 11,082
                                                                    =======================
</TABLE>

During 1999 and 1998,  the Company made  provisions for  uncollectible  accounts
related  to certain  billed  and  unbilled  receivables  totaling  approximately
$474,000 and $4.2 million, respectively.

9. Other Current Assets

The Company entered into a Value Added Industry Remarketer (VAIR) agreement with
Siebel Systems, Inc., on August 31, 1999. As part of this agreement, the Company
purchased  software  licenses for $5.1 million for resale to third parties.  The
software  licenses  were  purchased  with cash of $2.8 million and the Company's
common stock. The common stock consisted of 228,800 shares with a guaranteed per
share value of $10 at September 1, 2000.  The  difference,  if any,  between the
share price at September 1, 2000 and the guaranteed  price will be paid in cash.
The  balance  of the  licenses  are  included  in other  current  assets  on the
consolidated balance sheet at December 31, 1999.

10. Property and Equipment

Property and equipment at December 31, 1999 and 1998  consisted of the following
(in thousands):

<TABLE>
<CAPTION>
                                                                      1999              1998
                                                                    -------------------------
<S>                                                                 <C>               <C>
Furniture and equipment                                             $ 5,427           $ 3,394
Leasehold improvements                                                  386               323
Purchased software                                                    1,689             2,031
                                                                    -------------------------
                                                                      7,502             5,748
    Less accumulated depreciation and amortization                   (3,115)           (1,741)
                                                                    -------------------------
      Property and equipment, net                                   $ 4,387           $ 4,007
                                                                    =========================
</TABLE>

The Company leases  furniture,  equipment and automobiles,  and financed certain
leasehold  improvements  under capital leases. The capitalized costs and related
accumulated  amortization,  included in the  property and  equipment  amounts at
December 31, 1999 and 1998 are (in thousands):

<TABLE>
<CAPTION>
                                                                     1999              1998
                                                                    -------------------------
<S>                                                                 <C>               <C>
Furniture and equipment                                             $   699           $   772
Leasehold improvements                                                   --               205
Purchased software                                                       --               814
                                                                    -------------------------
                                                                        699             1,791
    Less accumulated depreciation and amortization                     (337)             (386)
                                                                    -------------------------
      Net leased property and equipment                             $   362           $ 1,405
                                                                    =========================
</TABLE>


                                       35
<PAGE>


11. Accrued Expenses

Accrued  expenses at December 31, 1999 and 1998  consisted of the  following (in
thousands):

<TABLE>
<CAPTION>
                                                                     1999            1998
                                                                   -----------------------
<S>                                                                <C>             <C>
Accrued salaries, bonuses, and other employee benefits             $ 5,445         $ 4,206
Payroll taxes and amounts withheld from employees                    2,012           1,226
Accrued subcontractor and professional fees                          1,135           1,991
Trade vendors                                                        2,747             237
Other                                                                  379             101
                                                                   -----------------------
Total accrued expenses                                             $11,718         $ 7,761
                                                                   =======================
</TABLE>


12. Credit Agreements

The Company entered into a $35 million  combined  revolving credit and term loan
agreement (the "Agreement") with Bank of America 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.  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 and replaces the Company's
Revolving   Credit  Agreement  with  another  bank.  There  were  no  borrowings
outstanding  under either credit  arrangement  for the years ended  December 31,
1999 and 1998.

13. 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, 1999 are as follows (in thousands):

                                                       Capital     Operating
                                                        Lease        Leases
                                                       -------------------------
Future minimum lease payments:
Year ended December 31:
     2000                                              $    68     $   1,628
     2001                                                   59         1,492
     2002                                                   39         1,150
     2003                                                    -           953
     2004                                                    -           357
                                                       ----------------------
                                                           166     $   5,580
                                                                   =========
Less amount representing interest                          (23)
                                                       -------
Present value of lease payments                            143
Current portion of capital leases                          (54)
                                                       =======
Noncurrent portion of capital leases                   $    89
                                                       =======

Capital lease  obligations  bearing  interest at 9.43% to 11.85% have  aggregate
monthly  payments  of $9,187 and  $3,475,  respectively.  A number of  operating
leases have escalation clauses for increases in real estate


                                       36
<PAGE>


taxes, operating costs and inflation, and various renewal options for up to five
years.  Rent  expense  for the years  ended  December  31,  1999,  1998 and 1997
approximated $1,707,000, $1,297,000 and $821,000, respectively.

14. Restructuring and Other Charges

During 1998, in  connection  with  management  plans to reduce costs and improve
operating  efficiencies,  the Company recorded pre-tax  restructuring charges of
approximately   $1,035,000.   The   restructuring   costs  relate  primarily  to
involuntary employee termination benefits. Employee termination benefits include
severance, wage continuation,  outplacement services, and other benefits. All of
the thirteen  terminated  employees were notified of their  termination  and the
terms and  condition  for  their  severance  in  writing.  Although  some of the
severance  payments  are  being  made  in  equal  semi-monthly  amounts  up to a
twelve-month  period of the time,  the  terminated  employee is not obligated to
provide  services  after  the date of  termination.  As of  December  31,  1998,
approximately $594,000 was recorded in accrued expenses.

During 1997, the Company began  implementation of an  enterprise-wide  financial
management  project.  The program included modules for general ledger,  accounts
receivable,  accounts payable, project accounting,  and human resources.  During
the  third  quarter  of 1998,  due to  significant  cost  overruns  and  project
definition changes, the Company hired an outside consultant to review the status
of this project.  Based on this review, the Company has completely abandoned the
majority of the original software modules and the related  implementation costs.
Except for the human resources  module,  none of the remaining  modules had been
implemented, and all the related implementation software documentation for these
abandoned  modules  have been  discarded.  As a result,  the Company  recorded a
write-off of approximately $2.1 million related to this abandonment.

15. Stockholders' Equity

During  1999,  the Board of  Directors  approved  an  increase  in the number of
authorized  shares of common stock to 50 million shares, at a par value of $0.01
per  share.  In  addition,  the Board  approved  an  increase  in the  number of
authorized  shares of preferred  stock up to 10 million shares at a par value of
$.01 per share, none of which have been issued.

On August 31,  1999 the Company  issued  228,800  shares of common  stock with a
guaranteed market price of $10 per share to Siebel Systems, Inc. in exchange for
certain Siebel software  license  applications for resale by the Company as part
of its business.  The Company has agreed to pay Siebel Systems, Inc. in cash the
difference if the market price on September 1, 2000 is less than the  guaranteed
price of $10 per share. At December 31, 1999 the fair value of this guarantee of
approximately $1.3 million is included in accrued expenses.

16. Stock-Based Compensation

In 1996,  the Company  adopted the 1996 Equity  Compensation  Plan (the  "Plan")
under  which the Company is  authorized  to grant  stock  options to  employees,
officers, directors and consultants. The original Plan provides for the issuance
of up to 3.2 million  shares of common stock  pursuant to the grant of incentive
stock  options,  nonqualified  stock options,  stock  appreciation  rights,  and
restricted  stock awards for a maximum of 1.6 million  shares of common stock in
any one year.  During 1999, the Board of Directors  amended the Plan authorizing
the issuance of an additional 3.4 million shares of common stock, for a total of
6.6 million authorized common shares. Generally, these options 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 estimated
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
$42,000,  $30,000  and  $19,000 of  compensation  expense on options  granted to
non-employees   for  the  years  ended   December  31,  1999,   1998  and  1997,
respectively.


                                       37
<PAGE>


A summary  of the  Company's  stock  option  plan  changes  for the years  ended
December 31, 1999, 1998, and 1997 is presented below:

<TABLE>
<CAPTION>
                                              Number of     Exercise Price        Weighted-Average
                                            Option Shares      Per Share            Exercise Price
                                          --------------------------------------------------------
<S>                                             <C>          <C>     <C>          <C>
Outstanding December 31, 1996                    1,116,666   $2.00 - $2.40        $           2.02
Granted                                            505,083    2.40 -  5.10                    4.74
Canceled                                           (66,223)   2.00 -  2.40                    2.01
Exercised                                          (50,050)           2.00                    2.00
--------------------------------------------------------------------------------------------------
Outstanding, December 31, 1997                   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
                                          ========================================================
</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, 1999:

<TABLE>
<CAPTION>
                 Options Outstanding                                            Options Exercisable
---------------------------------------------------------                 -----------------------------
                                Weighted
                                Average
                  Number       Remaining                                     Number
               Outstanding at  Contractual    Weighted                     Exercisable at    Weighted
   Range of     December 31,     Life         Average                       December 31,     Average
Exercise Prices    1999       (in Years)   Exercise Price                      1999      Exercise Price
---------------------------------------------------------                 -----------------------------
<S>     <C>           <C>             <C>    <C>                               <C>          <C>
 $2.00 -$2.40         424,188         4.84   $     2.01                       315,599       $    2.01
  3.32 - 3.50         856,445         4.67         3.46                       191,572            3.49
  4.01 - 4.97         294,780         3.49         4.66                       171,070            4.80
  5.00 - 5.19         934,291         5.21         5.16                       186,212            5.07
         5.63          55,000         4.38         5.63                        13,750            5.63
         8.50          40,000         4.11         8.50                        28,750            8.50
---------------------------------------------------------                 -----------------------------
 $2.00 -$8.50       2,604,704         4.74   $     4.09                       906,953       $    3.74
---------------------------------------------------------                 -----------------------------
</TABLE>

As of December 31, 1999, 1998 and 1997, options of 906,953;  670,322 and 550,104
were  exercisable  with a weighted  average  exercise price of $3.74,  $3.53 and
$3.58,  respectively.  As of December 31, 1999, 1998 and 1997, approximately 2.8
million, 200,000 and 1.2 million options were available for grant, respectively.

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  used for  grants  in 1999,  1998 and 1997  respectively:  risk-free
interest rates of 5.50, 5.17 and 6.15 percent;  no expected dividend yields; and
expected lives of 5.0, 5.0 and 3.83 years,  respectively.  In 1999 and 1998, the
expected  volatility  was 70% and 55%,  respectively.  As no grants were made in
1997 subsequent to the Company's  Offering,  no volatility was considered in the
calculation  for 1997.  Using  these  assumptions,  the fair  value of the stock


                                       38
<PAGE>


options  granted in 1999, 1998 and 1997 on a per share,  weighted  average basis
was  $2.94,  $2.58  and  $0.96,  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  (in  thousands,  except per share
data):


                                                  1999        1998         1997
                                              ----------------------------------
Consolidated net income (loss):
      As reported                             $   1,851   $  (3,498)   $   2,868
      Pro forma                               $     807   $  (4,563)   $   2,663
Basic net income (loss) per common share:
      As reported                             $    0.11   $   (0.21)   $    0.27
      Pro forma                               $    0.05   $   (0.28)   $    0.25
Diluted net income (loss) per common share:
      As reported                             $    0.11   $   (0.21)   $    0.26
      Pro forma                               $    0.05   $   (0.28)   $    0.24

17. Income Taxes

The Company's  provision for income taxes for the years ended December 31, 1999,
1998 and 1997 consisted of the following (in thousands):


                                                      1999      1998       1997
                                                    ----------------------------
Current:
     Federal                                        $   615   $  (134)   $   829
     Foreign                                            605      (410)       481
     State                                              128        (6)       136
                                                    ----------------------------
        Total current provision (benefit)             1,348      (550)     1,446
Deferred:
     Federal                                            167    (1,153)       411
     State                                               39      (178)        55
                                                    ----------------------------
        Total deferred (benefit) provision              206    (1,331)       466
                                                    ----------------------------
Total provision (benefit)                           $ 1,554   $(1,881)   $ 1,912
                                                    ----------------------------


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

                                                      1999      1998       1997
                                                      --------------------------
Expected statutory amount                             34.0%    (34.0)%     34.0%
Nondeductible expense                                  0.8      (1.3)       1.4
Foreign income taxes                                   7.7        --         --
State income taxes, net of federal benefit             3.1      (1.5)       4.6
Other                                                   --       1.8         --
                                                      --------------------------
Effective rate                                        45.6%    (35.0)%     40.0%
                                                    ----------------------------

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, 1999 and 1998 are as follows (in thousands):


                                       39
<PAGE>


                                                           1999            1998
                                                       ------------------------
Deferred tax assets:
     Bad debt                                           $   510         $   974
     Accrued employee benefits                              169             100
     Goodwill                                               202              94
     Charitable contributions                                69              --
     Severance                                               --              59
     Other expense items                                    195              --
     Depreciation                                            --              29
                                                       ------------------------
        Total deferred tax assets                         1,145           1,256
Deferred tax liabilities                                   (114)           (120)
                                                       ------------------------
        Net deferred tax assets                         $ 1,031         $ 1,136
                                                    ----------------------------

18. Employee Benefit Plans

Effective  September 30, 1996,  the Company  established a 40l(k) Plan,  the OAO
International  Corporation  Employee  Savings  Plan,  (the  "40l(k)  Plan").  On
December  1,  1997,  the  401(k)  Plan  name  subsequently  changed  to the  OAO
Technology Solutions Employee Savings Plan shortly after the Company changed its
name on July 7, 1997. The 40l(k) Plan covers  substantially all of the Company's
U.S. employees. Participants may contribute to the 401(k) 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%.  Company
matching contributions amounted to approximately $649,000, $586,000 and $353,000
in 1999, 1998 and 1997, respectively.

Effective  January 16,  1995,  the Company  established  the OAO Canada  Limited
Employee  Retirement  Savings  Plan (the  "RRSP  Plan").  The RRSP  Plan  covers
substantially  all  of  the  Company's  Canadian  employees.   Participants  may
contribute  to the RRSP 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%. Company matching contributions amounted to
approximately   $115,000,   $102,000  and  $103,000  in  1999,  1998  and  1997,
respectively.

The  Company's  Board  of  Directors  adopted,  and the  Company's  Stockholders
approved,  the Company's  Employee  Stock  Purchase Plan (ESPP) on May 21, 1998,
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 1999 the Company issued 210,021 shares at
an average price per share of $2.75 and during 1998 no shares were issued.

19. Segment and Geographic Information

The Company manages its business  segments  primarily by service line. The names
of the  Company's  reportable  segments  have  been  changed  in 1999 to  better
represent  the  services  provided;  however,  the  composition  of the reported
segments  have not been  changed,  except  as  described  below.  The  Company's
reportable segments are Network and Systems Business Solutions, formerly Managed
Services;   Professional  Services,  formerly  Staff  Augmentation;   E-Business
Consulting Solutions,  formerly ERP; Healthcare IT Solutions remained unchanged.
In addition, the Company's custom application  development and maintenance (ADM)
product has been reclassified into the E-Business  Consulting  Solutions segment
in 1999, from the Network and Systems Business Solutions segment.  The effect of
the reclassification was to increase the E-Business Consulting Solutions segment
and  decrease the Network and Systems  Business  Solutions  segment  revenues by
$4.62  million and $1.47 million in 1999 and 1998,  respectively,  gross loss by
$2.57  million  and $1.31  million in 1999 and 1998,  respectively,  and segment
assets by $2.46  million and $350,000 in 1999 and 1998,  respectively.  The 1998
results have been  reclassified to conform to 1999,  while the 1997 results were
not affected.


                                       40
<PAGE>


Network  and  Systems  Business   Solutions  includes   data-center   operations
management, distributed systems management, and other IT services.

Professional  Services  are  provided  by OAO  Services,  Inc,  a  wholly  owned
subsidiary.  OAO  Services,  Inc.  provides  technical  IT skills  to  strategic
customers nationwide on a time and materials basis. Highly skilled professionals
are provided to augment the client's staffing or to respond to requirements that
cannot be sufficiently defined to permit fixed prices.

E-Business   Consulting  Solutions  provides  entire  life  cycle  services  for
organizations.  These services range from initial  business process modeling and
development,  through system installation and implementation and custom software
application development and maintenance. The Company's service line is dedicated
to  implementing  and  supporting  systems  from Siebel  Systems,  NCR,  SAP and
Microsoft.  This segment also  provides  third party  vendor  packaged  software
including Siebel Systems, SAP and Microsoft, IBM and Rational on both a licensed
and ASP basis.

Healthcare  IT Solutions  provides  proprietary  software  products and business
solutions for healthcare organizations. OAO HealthCare Solutions, Inc., a wholly
owned  subsidiary,  provides full service  solutions via its  proprietary  MC400
software on a one-time license and ASP basis. This includes product development,
customer service, and installation service, training and ongoing support.

The accounting  policies of the various segments are the same as those described
in the "Summary of Significant  Account Policies," Note 2. The Company evaluates
the  performance  of each segment  based on segment  revenues and gross  profit.
Segment  gross  profit   includes  only  direct   costs.   Sales,   general  and
administrative costs are currently not allocated to each segment.

Summary  information by segment as of and for the years ended December 31, 1999,
1998 and 1997 is as follows (in thousands):


                                                1999         1998         1997
                                             -----------------------------------
NETWORK and SYSTEMS BUSINESS SOLUTIONS
    Revenues                                 $  67,117    $  73,465    $  76,729
    Gross profit                                14,136       14,396       15,768
    Segment assets                              24,496       24,281       39,351
PROFESSIONAL SERVICES
    Revenues                                    64,126       30,461        4,185
    Gross profit                                 6,074        2,920        1,216
    Segment assets                              14,025       12,981        2,399
E-BUSINESS CONSULTING SOLUTIONS
    Revenues                                     8,353        3,289           --
    Gross (loss)                                (4,226)      (2,671)          --
    Segment assets                               9,786        3,420           --
HEALTHCARE IT SOLUTIONS
    Revenues                                    10,566        6,127        3,752
    Gross profit                                 2,514        1,592        1,800
    Segment assets                               5,958        2,556        5,250
SEGMENT TOTALS
    Revenues                                 $ 150,162    $ 113,342    $  84,666
    Gross profit                                18,498       16,237       18,784
    Segment assets                              54,265       43,238       47,000


                                       41
<PAGE>


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.

<TABLE>
<CAPTION>
(Amounts in thousands)                                        For the years ended December 31,
                                                                 1999       1998        1997
                                                               -------------------------------
<S>                                                            <C>        <C>         <C>
Gross profit for reportable segments                           $ 18,498   $ 16,237    $ 18,784
    Selling, general and administrative expenses unallocated     16,014     19,100      13,551
    Restructuring and other charges unallocated                      --      3,135          --
                                                               -------------------------------
       Total consolidated income (loss) from operations           2,484     (5,998)      5,233
    Interest and other income (expense) unallocated                 921        619        (453)
                                                               -------------------------------
       Total consolidated income (loss) before income taxes    $  3,405   $ (5,379)   $  4,780
                                                               -------------------------------

Total assets for reportable segments                           $ 54,265   $ 43,238    $ 47,000
    Note receivable- OAO corporation                              2,520      2,520          --
    Property and equipment unallocated                            2,605      2,887       3,342
    Deferred income taxes unallocated                             1,965      2,473          --
                                                               -------------------------------
       Total consolidated assets                               $ 61,355   $ 51,118    $ 50,342
                                                               -------------------------------
</TABLE>

The Company generated substantially all of its revenues in the United States and
Canada during the three years ended December 31, 1999. The following  represents
a summary of information by geographic area (in thousands):


                                            For the years ended December 31,
                                              1999         1998         1997
                                            -----------------------------------
Revenues:
     United States                          $ 131,261    $  93,066    $  64,080
     Canada                                    16,029       20,193       20,421
     Other consolidated entities                2,872           83          165
                                            -----------------------------------
                                            $ 150,162    $ 113,342    $  84,666
                                            -----------------------------------
Income (loss) before income taxes:
     United States                          $   4,722    $  (4,435)   $   5,011
     Canada                                    (1,575)        (964)       1,501
     Other consolidated entities                  258           20       (1,732)
                                            -----------------------------------
                                            $   3,405    $  (5,379)   $   4,780
                                            -----------------------------------
Identifiable assets:
     United States                          $  51,702    $  46,879    $  47,413
     Canada                                     9,493        5,258        3,798
     Other consolidated entities                  160       (1,019)        (869)
                                            -----------------------------------
                                            $  61,355    $  51,118    $  50,342
                                            -----------------------------------

Sales  between  geographic  areas are not  material.  Costs  related to business
development in international  locations other than Canada of approximately  $1.8
million have been included in "Other  Consolidated  Entities" for the year ended
December 31, 1997.  Identifiable  assets are those assets used in the operations
in each geographic area.


                                       42
<PAGE>


20. Related Party Transactions

The Company has entered into an administrative  service agreement with Safeguard
Scientifics, Inc., which provides for payment of a maximum administrative fee of
1.0% of gross revenues per year, not to exceed $500,000. The Company expensed an
administrative  fee of  $500,000  to  operations  for  each of the  years  ended
December  31,  1999,  1998 and  1997,  respectively,  in  connection  with  this
agreement.  In addition to the  administrative  fee, the Company has  reimbursed
travel  expenses  and paid other  professional  services  pass  through  fees of
$3,000,  $160,000 and $76,000 for the years ended  December  31, 1999,  1998 and
1997, respectively.

Prior to the July 1998  acquisition  of OAO Services,  Inc., the Company and OAO
Services,  Inc., a subsidiary of OAO, were related parties, as a common group of
stockholders held a substantial ownership interest in both companies. During the
first half of 1998, and for the year ended December 31, 1997, the Company served
as a subcontractor on several  contracts with OAO Services,  Inc. Total revenues
recorded under these contracts amounted to $494,000 and $4.2 million for the six
month  period  ended  June 30,  1998,  and the year  ended  December  31,  1997,
respectively.  All  inter-company  receivables  as of December 31, 1998 had been
eliminated.

During 1999,  1998 and 1997,  the Company served as a  subcontractor  on several
contracts with OAO. Revenues under these contracts  totaled  $949,000,  $291,000
and $299,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
The Company had $660,000,  $298,000 and $159,000 in billed  receivables due from
OAO as of  December  31,  1999,  1998 and 1997,  respectively.  The  Company had
$2,000, $0 and $139,000 of unbilled  receivables related to services provided to
OAO as of December 31, 1999, 1998 and 1997, respectively.

In connection with the acquisition of ETG, the ETG  stockholders,  including the
Company's  Chief   Executive   Officer,   were  granted   certain   "piggy-back"
registration rights whereby under certain circumstances,  and subject to certain
conditions,  they  may  include  these  shares  of  OAOT  common  stock  in  any
registration  of shares of OAOT common  stock.  The  Company's  Chief  Executive
Officer, as one of the ETG selling stockholders,  received 111,111 shares of the
Company's common stock in exchange for his 500 shares of ETG common stock. Prior
to the  merger,  the  Company  provided  ETG  interest  free  advances  totaling
approximately  $216,000.  Additionally  at  closing,  the Company  repaid  ETG's
stockholder loans of approximately $109,000.

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 also pledged as security interest to the Company.
The Chief Executive Officer has personally guaranteed the note.

21. Commitments and Contingencies

The Company 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 this litigation will not have a material  adverse effect on
the accompanying financial statements.








                                       43
<PAGE>


22. Quarterly Financial Data (Unaudited)

Set forth below are selected  unaudited  financial  statements of operations for
the last eight fiscal  quarters of the Company.  In  management's  opinion,  the
results  below have been  prepared  on the same basis as the  audited  financial
statement contained herein and include all material  adjustments,  consisting of
only normal  recurring  adjustments  necessary  for a fair  presentation  of the
information  for  the  periods.  Results  of any one or  more  quarters  are not
necessarily indicative of annual results or continuing trends.

<TABLE>
<CAPTION>
(In thousands, except per share data)                  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



<CAPTION>
(In thousands, except per share data)                  1998 Quarters Ended
                                             -------------------------------------------
                                             March 31   June 30     Sept 30     Dec 31
                                             --------   -------     -------     ------
<S>                                          <C>        <C>         <C>         <C>
Revenues                                     $ 23,006   $ 20,340    $ 34,520    $ 35,476
Income (loss) from operations                     879     (4,374)     (3,152)        649
Income (loss) before income taxes               1,065     (4,179)     (3,018)        753
Net income (loss)                                 638     (2,672)     (1,972)        508
Net income (loss) per common share:
     Basic                                       0.04      (0.16)      (0.12)       0.03
     Diluted                                     0.04      (0.16)      (0.12)       0.03
Weighted average number of
shares outstanding:
     Basic                                     16,299     16,392      16,430      16,610
     Diluted                                   17,175     16,392      16,430      16,977
</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.




                                       44
<PAGE>


                         OAO TECHNOLOGY SOLUTIONS, INC.
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
           For the years ended December 31, 1999, 1998, 1997 and 1996

<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, 1997....    $   400         --         50        (161)          --     $   289
    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
</TABLE>


(A)  Reflected on the Balance Sheet as a reduction of Accounts Receivable.

(B)  A reduction of accounts receivable  purchased in the acquisition of certain
     assets  of  UniHealth  Investment  Company  (see  Note  4 in the  Notes  to
     Consolidated  Financial Statements) for the year ended December 31, 1997. A
     reduction of accounts receivable purchased in acquisition of certain assets
     of OAO Services, Inc. for the year ended December 31, 1998.

(C)  A recovery of revenue.

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


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 12, 2000 (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.


                                       45
<PAGE>


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.


                                     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 23.

(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 1999.

(c)  Exhibits

<TABLE>
<CAPTION>
     Exhibit                                                                                            Page
      No.                           Description                                                         No.
     ------------------------------------------------------------------------------------------------------
     <S>   <C>
     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 datedDecember 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)
</TABLE>


                                       46
<PAGE>


<TABLE>
<CAPTION>

     <S>   <C>
     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)


     21.1  Subsidiaries of the Registrant. (1)

     27.1  Financial Data Schedule. (1)...........................................................     49


(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.
</TABLE>









                                       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 24, 2000                                  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.

<TABLE>
<CAPTION>
     Signature                             Title                                       Date


     <S>                                   <C>                                         <C>
       /s/ Gregory A. Pratt                Chief Executive Officer,
       --------------------                President and Director
           Gregory A. Pratt                (Principal Executive Officer)               March 24, 2000


       /s/ J. Jeffrey Fox                  Vice President of Finance and               March 24, 2000
       --------------------                Chief Financial Officer
          J. Jeffrey Fox


       /s/ Jerry L. Johnson                Chairman of the Board of Directors          March 24, 2000
       --------------------
           Jerry L. Johnson


       /s/ Cecile D. Barker                Director                                    March 24, 2000
       --------------------
           Cecile D. Barker


     /s/ Yvonne Brathwaite Burke           Director                                    March 24, 2000
     ---------------------------
         Yvonne Brathwaite Burke


       /s/ Frank B. Foster, III            Director                                    March 24, 2000
       ------------------------
           Frank B. Foster, III


       /s/ John F. Lehman                  Director                                    March 24, 2000
       ------------------
           John F. Lehman


       /s/ Richard B. Lieb                 Director                                    March 24, 2000
       -------------------
           Richard B. Lieb

</TABLE>


                                       48