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                      SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C. 20549

                                   FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934, AS AMENDED

                  For the fiscal year ended December 31, 2000
                                       OR

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934, AS AMENDED

             For the transition period from ________to ___________

                       Commission File Number 000-21735

                       CREDIT MANAGEMENT SOLUTIONS, INC.
            (Exact Name of Registrant as Specified in Its Charter)

           Delaware                                      52-1549401
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
Incorporation or Organization)

     135 National Business Parkway,                         07012
           Annapolis Junction, MD                         (Zip Code)
(Address of Principal Executive Offices)

(Registrant's Telephone Number, Including Area Code) (301) 362-6000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

     Title of each class               Name of each exchange on which registered
-----------------------------          -----------------------------------------
Common Stock, $0.01 par value                     Nasdaq National Market

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, as amended, 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.  [X]

At March 29, 2001 Credit Management Solutions, Inc. had 7,994,124 shares of
Common Stock, par value $0.01, outstanding.

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While it is difficult to determine the number of shares owned by non-affiliates,
the registrant estimates that the aggregate market value of outstanding Common
Stock on March 29, 2001 (based upon the average bid and asked prices of such
Common Stock on the Nasdaq National Market on March 29, 2001) held by non-
affiliates was approximately $ 17.7 million. For this computation, the
registrant has excluded the market value of all shares of its Common Stock
reported as beneficially owned by officers, directors and certain significant
stockholders of the registrant. Such exclusion shall not be deemed to constitute
an admission that any such stockholder is an affiliate of the registrant.

This Annual Report on Form 10K includes statements which may constitute forward-
looking statements made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Statements in this Report that are not
strictly historical are "forward-looking" statements, which are subject to the
many risks and uncertainties that exist in the Company's operations and business
environment. These risks and uncertainties may cause actual results to differ
materially from the expected results and include, but are not limited to, the
risk that the proposed merger with The First American Corporation may not be
completed, the Company's dependence upon the CreditRevue product line, the
limited market acceptance to date of the Company's CreditOnline network and
CreditConnection service, and other risks which are set forth in more detail
below in "Business - Risk Factors," as well as in other reports and documents
filed with the Securities and Exchange Commission.

PART I

Item 1.  Business.

     Credit Management Solutions, Inc. ("CMSI" or the "Company") provides
solutions and services for automation of the consumer and small business credit
analysis, approval and funding processes. Products and services offered by CMSI
or its subsidiaries are used in a wide range of credit products, including
vehicle loans and leases, home equity loans, student loans, telecommunications
services, credit cards and small business credit. CMSI's primary products and
services include:

 .  The CreditRevue software, which automates the entire credit application
   process -- from the entry of the credit application, through the making
   of the credit decision, to the transfer of the funding information to the
   credit provider's servicing system;

 .  The eValuate software, which is designed to work with a credit provider's
   chosen credit origination application workflow system to provide background
   credit analysis, decisioning and pricing capabilities, based on client-
   defined criteria;

 .  The CreditOnline online network, which links funding sources, credit
   information providers, and sources of credit origination, such as financing
   Web sites and retail management systems; and

 .  The CreditConnection service, which allows automobile dealers and other
   credit originators to submit credit applications to multiple lenders,
   retrieve and analyze credit information, and manage the credit application
   process through features such as workflow management tools, a payment
   calculator and receipt of news bulletins from participating funding sources.

Recent Event

On January 30, 2001, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement")  with The First American Corporation, a California
corporation ("First American"), and Rusti Corp., a wholly-owned subsidiary of
First American.  If the merger contemplated by the Merger

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Agreement is completed, the Company's stockholders will receive, for each share
of CMSI stock held by them, the right to receive such fraction of a share of
First American common stock equal to the quotient (rounded to the nearest ten-
thousandth decimal place) resulting from the division of $6.25 by the average
closing price per share of First American common stock as reported on the New
York Stock Exchange for the ten trading days ended on the third trading day
prior to the special meeting of CMSI's stockholders to be held for the purpose
of voting upon the merger; provided that if the average closing price is greater
than $30 per share, such average closing price shall be deemed to be $30 per
share, and if the average closing price is less than $22 per share, such average
closing price shall be deemed to be $22 per share. Consummation of the merger is
subject to various conditions, including, among other things, receipt of the
necessary approvals of the stockholders of CMSI, performance of covenants and
agreements by the parties and other customary terms. The merger is intended to
constitute a reorganization under Section 368(a) of the Internal Revenue Code of
1986, as amended. The companies expect the transaction to be completed in the
second quarter of 2001.

Products and Services

  CreditRevue

     CreditRevue is a UNIX-based software solution designed to automate the
credit application process from the entry of the credit application to the
credit decision, through the transfer of the funding information to the lender's
servicing system. Using CreditRevue, a lender can automate the analysis of a
wide range of consumer lending products, including vehicle loans and leases,
home equity loans, student loans, telecommunications services and credit cards.
Before CreditRevue is installed, the Company completes a review of the lender's
credit application processing environment. CreditRevue is then configured to
address the lender's specifications, including the lender's underwriting,
approval and funding processes. The Company designs interfaces from CreditRevue
to the lender's other related systems, such as its branch automation software,
customer information repository and loan servicing software.

The Company also markets the following supplemental CreditRevue products:

 .    CreditRevue Student Lending is a specialized version of CreditRevue which,
     in addition to providing the full functionality of CreditRevue, is
     configured to support the requirements of the student lending marketplace.

 .    CreditRevue Service Bureau is a product designed to allow lenders to
     connect multiple terminals or personal computers to a service bureau system
     in order to make use of the CreditRevue functionality. CreditRevue Service
     Bureau was designed to be used by small and medium sized financial
     institutions seeking to minimize the up-front hardware and software costs
     of an in-house system. The Company's original strategy was to enter into
     marketing alliances with established service bureau providers whereby such
     providers would re-market CreditRevue Service Bureau to their clients on a
     transaction fee basis. For the original CreditRevue Service Bureau product,
     the Company has converted its three strategic alliances into license
     agreements. The Company is considering changing its strategy to focus on an
     application service provider (ASP) or other service bureau model built
     around it's eValuate product and an enhanced CreditRevue product offering.
     The Company does not expect to offer new licenses for the original
     CreditRevue Service Bureau product.

The Company also plans to release the eValuate software. The Company expects
that the eValuate software will provide background credit analysis, decisioning
and pricing, based on client-defined criteria. The eValuate software is being
designed to work with the CreditRevue software or the customer's alternative
credit origination workflow system.

In conjunction with Dun & Bradstreet ("D&B") the Company also provides the
following credit processing products:

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 .    OneScore is a credit scoring product designed to assess credit risks
     associated with small businesses. Using advanced statistical techniques,
     D&B has developed a blended scoring model that permits D&B's comprehensive
     commercial information to be combined with information regarding the
     principals of the business concerned. The consumer information is provided
     by independent consumer bureaus to help customers better assess credit
     risks in dealings with smaller businesses. The Company uses its proprietary
     credit processing software to implement the D&B model on behalf of OneScore
     customers enrolled by D&B. This is a transaction fee-oriented service for
     which the Company receives a fee for each OneScore generated by a D&B
     client.

 .    Dun & Bradstreet Portfolio Monitoring Service allows businesses to
     proactively monitor individual small business credit relationships,
     automate various credit analyses and reporting functions, and identify
     cross-sales opportunities. The service is based on D&B's standard and
     custom credit scoring services and the Company's data integration and
     systems capabilities. The service offers standard and custom management
     reports and can forward processed portfolio accounts to a customer's
     internal data warehouse. The standard monitoring service uses OneScore.
     Customers can also use custom scorecards to process their internal account
     performance data with external commercial and/or consumer data. The
     advanced statistical scorecard provides a business with a customized view
     of the changing risk profiles in its small business portfolio. This is a
     transaction fee-oriented service for which the Company receives fees based
     upon the number of small business accounts monitored, the monitoring
     frequency and the amount of custom development work selected.


   CreditOnline Network and CreditConnection Service

     The CreditOnline network offers connectivity between points of credit
origination, such as automobile dealers, and funding sources.  The CreditOnline
network originated as part of the CreditConnection service, which was created to
connect automobile dealers to lenders.  In 1999, the Company introduced the
CreditOnline network, which expanded the CreditConnection service to link other
sources of credit applications, such as Internet financing Web sites, to funding
sources.  This connectivity enables the Company to offer a comprehensive "click-
and-mortar" strategy for online financing designed to service three types of
users -- lenders, credit originators such as dealers, and consumers.  The
CreditOnline network offers this connectivity, plus value-added services like
workflow management and management reporting, for both dealers and lenders.

     Today, the CreditOnline network acts as a portal to the credit origination
systems of many leading lending institutions. It also serves as a gateway to
major consumer and business credit bureaus and provides an interface to several
dealer management systems.

     The CreditOnline network supports several models of Internet financing, as
follows:

     1.   In the "lender-centric model", the CreditOnline network can be used to
          connect a lender's Web site to the lender's credit origination system.
          The CreditOnline network can also be used to transmit credit
          applications from one lender to another -- a service the Company calls
          CreditOnline LenderLink.

     2.   The CreditOnline network also supports a "dealer-centric" model, in
          which an automobile dealer uses the CreditConnection Service to submit
          credit applications to funding sources and receive decisions from the
          funding sources. A dealer also may enable its Web site to transmit
          credit applications entered by consumers to funding sources and
          receive related credit decisions.

     3.   A third model of Internet financing, "consumer-centric", allows a
          consumer to apply for credit with multiple financial institutions
          through a "loan marketplace" provided by a third party. For

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          example, the Company's strategic alliance with Lending Tree allows
          automobile credit applications completed on Lending Tree's Web site to
          be transmitted to multiple funding sources through the CreditOnline
          network.

     There are two primary means for gaining access to the CreditOnline network:

     1.   CreditOnline Gateway

          The CreditOnline Gateway provides a standard interface for sending
          credit applications to lenders and for receiving credit decisions back
          from lenders. It also offers a standard interface for requesting
          credit bureau reports.

     2.   CreditConnection Service

          Under the current model, the CreditConnection service provides a set
          of tools for subscribing dealers. The tools allow dealers to submit
          credit applications to funding sources on the CreditOnline network and
          receive credit decisions from those funding sources. The dealer also
          can request one or more credit bureaus to be reviewed in several
          different formats. The dealer can select one or more lending
          institutions to which the credit application should be sent, and can
          specify criteria which determine how the application is to be
          sequenced and forwarded to secondary sources. The dealer can then view
          the lenders' credit decisions online. The CreditConnection service
          provides several other features to dealerships, including workflow
          management tools, payment calculators and the ability to receive news
          bulletins from participating funding sources.

     Many of the Company's prior agreements with subscribing lending
institutions require that the Company and lending institution implement a
marketing plan describing how the lending institution will utilize its sales
force to increase dealership subscriptions to the CreditConnection service. The
Company's current standard agreements for subscribing lending institutions,
however, do not include this requirement. The Company also has been pursuing re-
marketing arrangements for the CreditConnection service with vendors that
provide automated systems for dealer management and operations. The Company has
signed strategic alliance agreements with the Dealer Service's Group of ADP
("ADP"), Universal Computer Systems ("UCS"), and Advent Resources ("Advent") to
re-market the CreditConnection service. These agreements provide that such
parties are to offer the CreditConnection service as their standard approach to
establishing electronic interfaces between dealerships and financial
institutions. Under certain limited circumstances, these re-marketers may
provide an interface that is different from the Company's. It is the Company's
understanding that ADP, UCS, and Advent do not currently re-market any third
party products or services that compete with the CreditConnection service. In
addition, the Company has entered into agreements with other providers of dealer
management systems or support, or Web sites used in the credit application
process, under which those providers re-market the CreditConnection service or
CreditOnline network. See "--Sales and Marketing."

Customers

     The Company's customers are categorized by product type. With respect to
the CreditRevue product, the Company has over 35 customers, including banks,
savings and loan associations, finance companies, sub-prime lenders, leasing
companies, student lenders and telecommunications companies. The Company intends
to continue to focus on the financial services industry and to target the
student lending, insurance, telecommunications, utilities and healthcare
industries. With regards to its CreditConnection service, at December 31, 2000,
the Company had contractual relationships with 30 lenders. The Company has
developed electronic connections linking 24 financial institutions to the
CreditConnection service.

     See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of those customers who have accounted
for 10% or more of the Company's revenues in either of

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the past two fiscal years.

Product Development

     Since its inception, the Company has made substantial investments in
product development and has a dedicated product development organization which
periodically releases new products and enhancements to existing products. The
Company believes that its future performance will depend in large part on the
Company's ability to enhance its current products and services and to develop
new products on a timely and cost-effective basis that will keep pace with
technological developments and evolving industry standards, as well as address
the increasingly sophisticated needs of the Company's customers. While the
Company anticipates that certain new products and services will be developed
internally, the Company may, based on timing and cost considerations, acquire or
license technology or software from third parties when appropriate. For a
discussion of certain risks associated with the Company's product development
program, see "-- Risk Factors -- Rapid Technological Change; Risk Associated
with New Products, Services or Enhancements" and "-- Risk Factors -- Risk of
Defects, Development Delays and Lack of Market Acceptance."

     As of December 31, 2000, the Company's product development staff consisted
of 27 employees. The Company anticipates that it will continue to commit
resources to product development in the future.

Customer Service and Support

     The Company believes that its success is dependent in part upon its ability
to provide customers with responsive, prompt and efficient support and training.
Each CreditRevue customer has a maintenance agreement, which is typically co-
terminous with the license agreement, providing for service, support and product
enhancements. The Company offers its clients a wide range of support services to
assist them in deriving the most effective use of the Company's products and
services, including technical support, formalized training and a user hotline.
The Company's services also include implementation planning and assistance,
software installation, software operations training and software maintenance.

     As of December 31, 2000, the Company's dedicated customer service and
support team included 22 employees. The Company's support personnel are
available to its customers 24 hours a day, 7 days a week through a hotline. The
Company tracks each customer's service history to identify trends or problem
areas and to recommend solution strategies. Most customer support questions are
answered during the initial call. The Company can access a customer's system
through a modem to diagnose the situation and implement corrective measures, if
necessary. The Company also makes on-site visits for emergency or serious
problem situations.

     The Company believes that its customers typically base their decisions to
purchase the Company's products and services partly on the support and
maintenance offered with such products and services.  The Company intends to
continue to strengthen its support team and reputation by adding professional
personnel with significant experience in the financial services and software
industries.

Sales and Marketing

     As of December 31, 2000, the Company's sales and marketing organization
consisted of 23 employees, 13 of whom were based at the Company's corporate
headquarters in Annapolis Junction, Maryland. To support its sales force, the
Company conducts comprehensive marketing programs, which include direct mail,
public relations, seminars, trade shows and ongoing customer communications
programs.

     The Company sells its CreditRevue products through a direct sales
organization.  The sales cycle begins with the generation of a sales lead or the
receipt of a request for proposals from prospective customers.  While the sales
cycle varies substantially from customer to customer, it typically requires six
to eight
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months.

     The CreditOnline network also is sold through direct sales efforts to
financial institutions, automobile superstores, independent dealerships, and
finance and insurance systems providers.  Direct selling is supported by
participation in both financial and automotive trade shows and conferences,
financial press relations, telemarketing, advertising campaigns and targeted
mailings.

     The Company employs an indirect sales strategy for the CreditConnection
service and CreditOnline network by supporting the sales efforts of certain
financial institutions which have well-established relationships with many of
the automobile dealerships in the United States. The Company supports these
indirect sales channels through a variety of marketing communications efforts
including the development of brochures and direct mail pieces, production of
sales videos, participation in trade shows and conferences, support for bank
dealer focus groups, advertising, press relations and seminar support.

     In November 1996, the Company entered into an agreement to form a strategic
alliance with the Dealer Services Group of ADP. The Company and ADP have
integrated CreditConnection with ADP's automated dealership management and
operations systems so that ADP may re-market and license CreditConnection to
ADP's automobile dealer customers.  In exchange for its services, ADP is
entitled to a percentage of the net revenues from transactions generated by
ADP's dealers.  In addition, pursuant to the agreement, ADP has the right to
name one director to the Company's Board of Directors.  In August 1997, the
Company entered into an agreement to form a strategic alliance with UCS whereby
UCS may re-market and license the CreditConnection service to UCS's automobile
dealer customers.  In May 1999, the Company entered into an agreement to form a
strategic alliance with Advent whereby Advent may re-market and license the
CreditConnection service to Advent's automobile dealer customers.  In addition,
the Company has entered into agreements with other providers of dealer
management systems or support, or Web sites used in the credit application
process, under which those providers re-market the CreditConnection service or
CreditOnline network.

Backlog

     At December 31, 2000, the Company had entered into contracts for its
services for which $0.8 million of revenues will be recognized in future
periods. At December 31, 1999, the comparable amount was $1.1 million.

Competition

     The credit processing software and services industry is intensely
competitive and rapidly changing. The Company believes its ability to compete
depends upon many factors within and outside its control, including the timing
and market acceptance of new products and services and enhancements developed by
the Company and its competitors, including (i) application software companies,
(ii) management information systems departments of potential customers, (iii)
third-party professional services organizations, and (iv) computer services
outsourcing providers which offer service bureau-based credit processing
solutions. The Company believes that competitors for CreditRevue include
American Management Systems, Inc., Appro Systems, Inc., Alltel Corporation,
Fair, Isaac and Company, Inc., CFI ProServices, Inc., Affinity Technology Group,
Inc., HNC Software and Lightbridge, Inc.

     The market for online credit origination also is intensely competitive and
changes rapidly.  The identities of competitors and the exact nature of their
offerings are subject to change and may not be known with certainty at any given
time. Currently, with respect to automobile lending, the Company believes that
the following entities have introduced or announced an intent to introduce
offerings competitive with the CreditConnection service or CreditOnline network
in the market for online automotive lending: e-fin (in which The Reynolds &
Reynolds Company has an interest), American Management Systems, Inc. and Dealer
Trak. Single lender online lending solutions also may be competitors of the
CreditConnection service or the CreditOnline network. In addition, various
entities have introduced or
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announced offerings in the marketplaces for online lending other than automotive
finance, such as mortgage and business-to-business lending, which also may
compete with the CreditConnection service or the CreditOnline network.

     Many of the Company's competitors are substantially larger than the Company
and have significantly greater financial, technical, and marketing resources and
established, extensive direct and indirect channels of distribution.  As a
result, they may be able to respond more quickly to new or emerging technologies
and changes in customer requirements, or to devote greater resources to the
development, promotion, and sale of their products and services than the
Company.

     As is typical in both the software and online credit origination
industries, many actual or potential customers of the Company may become
competitors by developing competitive technology internally. Due to the
relatively low barriers to entry, the Company expects additional competition
from other established and emerging companies as these markets continue to
develop and expand. The Company also expects that competition will increase as a
result of industry consolidations. The Company anticipates that its competitors
may develop or acquire products or services that provide functionality that is
similar to that produced by the Company's products and services, and that such
products and services may be offered at a significantly lower price or bundled
with other products and services. In addition, current and potential competitors
have established or may establish cooperative relationships among themselves or
with third parties to increase the ability of their products to address the
needs of the Company's prospective customers. Accordingly, it is possible that
new competitors or alliances among competitors may emerge and rapidly acquire
significant market share.

     Increased competition is likely to result in price reductions, reduced
gross margins and loss of market share, any of which could have a material
adverse effect on the Company's business, results of operations and financial
condition. There can be no assurance that the Company will be able to compete
successfully against current or future competitors or that competitive pressures
will not have a material adverse effect on the Company's business, results of
operations and financial condition.

Intellectual Property and Other Proprietary Rights

     The Company's success is heavily dependent upon its proprietary technology.
The Company regards its software products and services as proprietary, and
relies primarily on a combination of copyright protection, patent protection,
trade secrets protection, confidentiality agreements and contractual provisions
to protect its proprietary rights.  The Company has no patents on its
CreditRevue products currently in commercial use, and existing trade secrets,
copyright laws and contractual provisions afford only limited protection.  In
March 1999, the U.S. Patent and Trademark Office issued the Company U.S. Patent
5,878,403 on the technology supporting its CreditConnection service and
CreditOnline network. There can be no assurance this patent would survive a
legal challenge to its validity or provide adequate protection. Furthermore,
there can be no assurance that others will not design around any patents issued
to the Company.

     It is the Company's policy to generally enter into confidentiality and
assignment agreements with its employees.  Despite the Company's efforts to
protect its proprietary rights, unauthorized parties may attempt to copy or
otherwise obtain and use the Company's products or technology without
authorization, to obtain and use information that the Company regards as
proprietary, or to develop similar or superior products or technology
independently.  Policing unauthorized use of the Company's products is
difficult, and while the Company is unable to determine the extent to which
piracy of its software products exists, software piracy can be expected to be a
persistent problem, particularly in international markets and as a result of the
growing use of the Internet.  The source code for the Company's proprietary
software is protected both as a trade secret and as a copyrighted work.  The
Company has in the past and may in the future make source code for one or more
of its products available to certain of its customers and strategic partners,
which may increase the likelihood of misappropriation or other misuse of the
Company's software.  In addition, the laws of some foreign countries do not
protect the Company's proprietary rights

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to the same extent as do the laws of the United States. There can be no
assurance that the steps taken by the Company to protect its proprietary rights
will be adequate or that the Company's competitors will not independently
develop technologies that are substantially equivalent or superior to the
Company's technologies.

CREDITCONNECTION, CREDIT CONNECTION, CREDITONLINE, CREDIT ONLINE, CREDITREVUE,
EVALUATE, INCREDIT, LEAPSPEED, LENDERLINK and ORIGENATE, the associated logos
and designs, and the Company logos and designs, are trademarks, tradenames or
registered trademarks of the Company. The Company is not aware that any of its
products, services, trademarks or other proprietary rights infringes the
proprietary rights of third parties. However, there can be no assurance that
third parties will not assert infringement claims against the Company in the
future with respect to current or future products or services. As the number of
software and online credit products and services in the industry increases and
the functionality of these products and services further overlaps, the Company
believes that software developers and online credit product and service
providers may become increasingly subject to infringement claims. Furthermore,
there can be no assurance that former employers of the Company's present and
future employees will not assert claims that such employees have improperly
disclosed confidential or proprietary information to the Company. Any such
claims, with or without merit, can be time consuming and expensive to defend,
cause product and service delays, or require the Company to enter into royalty
or licensing agreements. Such royalty or licensing agreements, if required, may
not be available on terms acceptable to the Company, or at all, which could have
a material adverse effect on the Company's business, results of operations and
financial condition.

Employees

     As of December 31, 2000, the Company had 193 full time employees, including
27 in product development, 121 in technical operations, 23 in sales and
marketing and 22 in finance and administration. The Company's employees are not
covered by any collective bargaining agreements. The Company has experienced no
work stoppages and believes that its relations with its employees are good.

Financial Information About Geographic Areas

     Substantially all of the Company's revenues and assets are attributed to or
located in the United States.

Financial Information About Segments

     The Company currently has two reportable operating segments: CMSI Systems,
Inc. and Credit Online, Inc. See Note 13 in the Notes to the Consolidated
Financial Statements attached to this Report for more information about the
Company's reportable segments.

Risk Factors

     In addition to the other information in this Form 10-K, the following risk
factors should be carefully considered in evaluating the Company and its
business because such factors may have a significant impact on the Company's
business, operating results and financial condition.  If any of the risks set
forth in this Form 10-K or in the Company's other Securities and Exchange
Commission filings actually occur, the Company's business, financial conditions
and results of operations could be materially adversely affected.

  The Proposed Merger with First American May Not Be Completed

     If the proposed merger with First American is not completed for any reason,
the Company may be subject to a number of material risks, including the
following:

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     .    the price of the Company's common stock may decline to the extent that
          the current market price reflects a market assumption that the merger
          will be completed; and

     .    costs related to the merger, such as legal, accounting and financial
          advisor fees, must be paid even if the merger is not completed.

     In addition, the Company's customers and suppliers, in response to the
announcement of the merger, may delay or defer decisions concerning the Company
or decide to terminate their relationships with the Company.  Any delay or
deferral in those decisions or any decision to terminate such relationships by
the Company's customers or suppliers could have a material adverse effect on the
Company's business.  Similarly, this could adversely affect the Company's
ability to attract and maintain key management, sales, marketing and technical
personnel.

     Further, if the merger is terminated and the Company's Board of Directors
determines to seek another merger or business combination, there can be no
assurance that it will be able to find a partner willing to pay an equivalent or
more attractive price than the price to be paid in the merger.  In addition,
during the period in which the merger agreement is in effect, and subject to
very narrowly-defined exceptions, the Company is prohibited from soliciting,
initiating, knowingly encouraging, endorsing or entering into any competing
transaction.


   Uncertainty of Future Results of Operations; Fluctuations in Quarterly
   Results of Operations

     Prior growth rates in the Company's revenue and net income should not be
considered indicative of future results of operations.  Future results of
operations will depend upon many factors, including market acceptance of new
services, such as the Company's CreditConnection, eValuate and CreditOnline
products and services, the demand for the Company's products and services, the
success of the Company's relationships with third party re-marketers of the
CreditConnection service and CreditOnline network, the successful transition
from predominantly license fee-based revenue to predominantly transaction fee-
based revenue, the timing of new product and service introductions and software
enhancements by the Company or its competitors, the level of product, service
and price competition, the length of the Company's sales cycle, the size and
timing of individual transactions, the delay or deferral of customer
implementations, the Company's success in expanding its customer support
organization, direct sales force and indirect distribution channels, the nature
and timing of significant marketing programs, the mix of products and services
sold, the timing of new hires, the ability of the Company to develop and market
new products and services and control costs, competitive conditions in the
industry and general economic conditions.  In addition, the decision to
implement the Company's products or services typically involves a significant
commitment of customer resources and is subject to the budget cycles of the
Company's customers.  Licenses of CreditRevue generally reflect a relatively
high amount of revenue per order.  The Company typically enters into an initial
contract with each client for the purposes of developing an analysis of the
customer's credit operations and a functional specification for the customer's
proposed CreditRevue system.  Following this initial contract phase, customers
may elect to not proceed with the CreditRevue license and system implementation.
The loss, cancellation or delay of individual orders, therefore, would have a
significant impact on the Company's revenue and quarterly results of operations.
The timing of revenue is difficult to predict because of the length and
variability of the Company's sales cycle, which has ranged to date from two to
18 months from initial customer contact to the execution of a license agreement.
In addition, since a substantial portion of the Company's revenue is recognized
on a percentage-of-completion basis, the timing of revenue recognition for its
licenses may be materially and adversely affected by delays, deferrals or
cancellation of customer implementations.  Such delays or deferrals may also
increase expenses associated with such implementations which would materially
and adversely affect related operating margins.  The Company's operating
expenses are based in part on planned product and service introductions and
anticipated revenue trends and, because a high percentage of these expenses are
relatively fixed, a delay in the recognition of revenue from a limited number of
transactions could cause significant variations in operating results from
quarter-to-quarter and could result in operating losses.  To

                                       10
<PAGE>

the extent such expenses precede, or are not subsequently followed by, increased
revenues, the Company's results of operations could be materially and adversely
affected. As a result of these and other factors, revenues for any quarter are
subject to significant variation, and the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance. There can be no
assurance that the Company will be profitable in any future quarter or that such
fluctuations in results of operations will not result in volatility in the price
of the Company's Common Stock. Due to all of the foregoing factors, it is likely
that in some future quarter the Company's results of operations will be below
the expectations of public market analysts and investors. In such event, the
market price of the Company's Common Stock may be materially and adversely
affected. See "-- Market Acceptance of CreditOnline and CreditConnection;
Transition to Transaction-Based Revenue" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

  Dependence on CreditRevue Product Line

     License fees, maintenance fees and third-party computer hardware sales
associated with licenses and installations of CreditRevue accounted for the
majority of the Company's revenues through December 31, 2000.  Although the
Company introduced its CreditConnection service in the fourth quarter of 1996,
its Dun & Bradstreet OneScore Service in the fourth quarter of 1997, its
CreditRevue Service Bureau in January 1998, and its CreditOnline network in
February 1999, the Company expects that revenues generated from licenses and
installations of CreditRevue will continue to account for a significant portion
of the Company's revenues for the foreseeable future.  The life cycles of the
Company's products and services are difficult to predict due to the effect of
new product and service introductions or software enhancements by the Company or
its competitors, market acceptance of new and enhanced versions of the Company's
products and services, and competition in the Company's marketplace.  A decline
in the demand for CreditRevue, whether as a result of competition, technological
change, price reductions or otherwise, could have a material adverse effect on
the Company's business, results of operations and financial condition.  See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

  Lengthy Sales and Implementation Cycle

     The licensing of the Company's software products and services is often an
enterprise-wide decision by prospective customers and generally requires the
Company to provide a significant level of education to prospective customers
regarding the use and benefits of the Company's products and services.  In
addition, the implementation of the Company's software products involves a
significant commitment of resources by prospective customers and is commonly
accompanied by substantial reengineering efforts and a review of the customer's
credit analysis, decisioning and funding processes.  The cost to the customer of
the Company's products and services is typically only a portion of the related
hardware, software, development, training and integration costs associated with
implementing a large-scale automated credit origination information system.  For
these and other reasons, the period between initial customer contact and the
implementation of the Company's products is often lengthy (ranging from between
two and 18 months) and is subject to a number of significant delays over which
the Company has little or no control.  The Company's implementation cycle could
be lengthened by increases in the size and complexity of its license
transactions and by delays or deferrals in its customers' implementation of
appropriate interfaces and networking capabilities.  Delays in the sale or
implementation of a limited number of license transactions could have a material
adverse effect on the Company's business, results of operations and financial
condition and cause the Company's results of operations to vary significantly
from quarter to quarter.  See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

  Market Acceptance of CreditOnline and CreditConnection; Transition to
   Transaction-Based Revenue

     The Company's CreditConnection service was commercially introduced in 1996,
and the Company's CreditOnline network was introduced in February 1999.  The
CreditConnection service and CreditOnline

                                       11
<PAGE>

network are projected to account for a significant portion of the Company's
revenues in the future. As a result, demand and market acceptance for these
services are subject to a high level of uncertainty, and the Company will be
heavily dependent on their market acceptance. There can be no assurance that
these products and services will be commercially successful. The failure of the
Company to generate demand for the CreditConnection service or CreditOnline
network, or the occurrence of any significant technological problems with such
products or services, could have a material adverse effect on the Company's
business, results of operations and financial condition. Historically, the
majority of the Company's revenues have been derived from license fees,
maintenance fees and hardware sales associated with licenses and installations
of CreditRevue. Under the terms of its license agreements, a majority of the
Company's revenues are realized during the configuration and installation of
CreditRevue and the subsequent custom enhancements provided by the Company's
professional services staff. However, the Company anticipates that a significant
portion of the Company's future revenues will be derived from per-usage
transaction-based fees and subscription fees charged to credit originators and
financial institutions for transactions originated through the CreditConnection
service or CreditOnline network. There can be no assurance that the Company will
successfully manage the transition of a significant portion of its revenues from
license-based revenue to transaction-based revenue. The failure of the Company
to successfully manage the transition to a transaction-based revenue stream
would have a material adverse effect on the Company's business, results of
operations and financial condition.

  Reliance on Certain Relationships

     The Company has established relationships with a number of companies that
it believes are important to its sales, marketing and support activities, as
well as to its product, service and software development efforts. The Company
has relationships with automated scorecard companies, hardware vendors and
credit bureaus. There can be no assurance that these relationships will be
successful on an ongoing basis. Moreover, there can be no assurance that these
companies, most of which have significantly greater financial and marketing
resources than the Company, will not develop or market products and services
which will compete with the Company's products and services in the future.
Furthermore, since many of these relationships are informal in nature, they are
terminable by either party at will. Other relationships are terminable by either
party after a relatively short notice period. There can be no assurance that
these companies will not otherwise discontinue their relationships with or
support of the Company. The failure by the Company to leverage and maintain its
existing relationships or to establish new relationships in the future, because
of a divergence of interests, acquisition of one or more of these third parties
or other reasons could have a material adverse effect on the Company's business,
results of operations and financial condition. See "--Sales and Marketing."

     In addition, the Company has formed strategic alliances with companies that
re-market the CreditConnection service or CreditOnline network, and with D&B for
the marketing of OneScore and Portfolio Monitoring.  There can be no assurance
that these relationships will be successful.  Moreover, there can be no
assurance that these companies will actively re-market the CreditConnection
service, CreditOnline network or OneScore or Portfolio Monitoring.  The failure
by the Company to leverage and maintain its existing re-marketing relationships,
or to establish new relationships in the future, because of a divergence of
interests, acquisition of one or more of these third parties or other reasons,
could have a material adverse effect on the Company's business, results of
operations and financial condition.  See "-- Sales and Marketing."

  Dependence on Large License Fee Contracts and Customer Concentration

     A relatively small number of customers have accounted for a significant
percentage of the Company's revenues.  License fees for CreditRevue are based on
a percentage-of-completion method on a cost-incurred basis with the final
installment being paid in full upon acceptance of the Company's software.  The
Company receives continuing revenues on CreditRevue from annual maintenance
agreements which commence upon acceptance of the software by the customer.
Maintenance agreements are renewable annually by the customer, and the license
agreements are co-terminous with the maintenance agreements.

                                       12
<PAGE>

Although the Company has experienced a high degree of customer loyalty, the
Company cannot predict how many maintenance agreements will be renewed or the
number of years of renewal. Revenues generated by the Company's ten largest
customers accounted for 56.6% and 55.1% of total revenues in 2000 and 1999,
respectively. One of the Company's customers individually accounted for 10% or
more of total revenues in 2000. None of the Company's customers individually
accounted for 10% or more of total revenues in 1999. The Company expects that a
limited number of customers will continue to account for a significant
percentage of revenue for the foreseeable future. The loss of any major customer
or any reduction or delay in orders by any such customer, delay or deferral in
configurations or enhancements by such customers, termination of orders by any
such customer, or the failure of the Company to successfully market its products
or services to new customers, could have a material adverse effect on the
Company's business, results of operations and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."


  Dependence on Consumer Retail Lending Industry; Cyclical Nature of Consumer
   Lending

     The Company's business is currently concentrated in the consumer lending
industry and is expected to be so concentrated for the foreseeable future,
thereby making the Company susceptible to a downturn in the consumer lending
industry.  For example, a decrease in consumer lending could result in a smaller
overall market for the Company's products and services.  Furthermore, banks in
the United States are continuing to consolidate, decreasing the overall
potential number of customers for the Company's products and services.  In
addition, demand for consumer loans has been historically cyclical, in large
part based on general economic conditions and cycles in overall consumer
indebtedness levels.  Changes in general economic conditions that adversely
affect the demand for consumer loans, the willingness of financial institutions
to provide funds for such loans, changes in interest rates and the overall
consumer indebtedness level, as well as other factors affecting the consumer
lending industry, could have a material adverse effect on the Company's
business, results of operations and financial condition.  See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

  Management of Changing Business

     The Company has experienced significant changes in its business, including
changes in the Company's staff and customer base and the development of new
products, services and enhancements to its software, including the commercial
release of CreditConnection in 1996, CreditRevue Service Bureau in 1998 and the
CreditOnline network in 1999.  Such changes have placed, and may continue to
place, a significant strain upon the Company's management, systems and
resources. The Company's ability to compete effectively and to manage future
changes will require the Company to continue to improve its financial and
management controls, reporting systems and procedures, budgeting and forecasting
capabilities on a timely basis, expand its sales and marketing work force and
train and manage its employee work force. There can be no assurance that the
Company, or the Company's current management, will be able to manage such
changes successfully. The Company's failure to do so could have a material
adverse effect upon the Company's business, results of operations and financial
condition. See "-- Sales and Marketing."

  Dependence on Key Personnel

     The Company's future performance depends in significant part upon the
continued service of its key technical, sales and senior management personnel,
particularly Scott L. Freiman, President and Chief Executive Officer.  The
Company has obtained key-person life insurance on the life of Mr. Freiman,
although the Company does not believe that such insurance is adequate to
compensate for the loss of Mr. Freiman.  The loss of the services of one or more
of the Company's executive officers could have a material adverse effect on the
Company's business, results of operations and financial condition.  The Company
retains its key employees through the use of equity incentive programs,
including stock option plans, employee stock purchase plans, and competitive
compensation packages.  Although the Company

                                       13
<PAGE>

has entered into employment agreements with its executive officers, there can be
no assurances that it will be successful in retaining such personnel. The
Company's future success also depends on its continuing ability to attract and
retain highly qualified managerial, sales, technical, and customer support
personnel. In particular, the Company has encountered difficulties in hiring
sufficient numbers of programmers and technical personnel. Competition for
qualified personnel is intense, and there can be no assurance that the Company
will be able to retain its key technical, sales and managerial employees or that
it can attract, assimilate or retain other highly qualified technical, sales and
managerial personnel in the future.

  Rapid Technological Change; Risk Associated with New Products, Services or
   Enhancements

     The credit processing software products and services industry in which the
Company competes is characterized by rapid technological change, frequent
introductions of new products and services, changes in customer demands and
evolving industry standards.  The introduction or announcement of new products,
services or enhancements by the Company or one or more of its competitors
embodying new technologies or changes in industry standards or customer
requirements could render the Company's existing products or services obsolete
or unmarketable.  Accordingly, the life cycles of the Company's products are
difficult to estimate.  The Company's future results of operations will depend,
in part, upon its ability to enhance its products and services and to develop
and introduce new products and services on a timely and cost-effective basis
that will keep pace with technological developments and evolving industry
standards, as well as address the increasingly sophisticated needs of the
Company's customers.  The Company has in the past and may in the future
experience significant delays in product development.  There can be no assurance
that these new products and services, if developed, will gain market acceptance
or that the Company will be successful in developing and marketing new products
or services that respond to technological change, evolving industry standards
and changing customer requirements, that the Company will not experience
difficulties that could delay or prevent the successful development,
introduction and marketing of these products or services, or that its new
products or services will adequately meet the requirements of the marketplace
and achieve any significant degree of market acceptance.  In addition, a
majority of the Company's current products operate in the UNIX operating system.
Although the Company's software is designed to work with other operating
environments, a requirement to port to a different operating system could be
costly and time consuming and could have a material adverse effect on the
Company's business, results of operations and financial condition.  Failure of
the Company to develop and introduce, for technological or other reasons, new
products and services in a timely and cost-effective manner could have a
material adverse effect on the Company's business, results of operations and
financial condition.  Furthermore, the introduction or announcement of new
product or service offerings or enhancements by the Company or the Company's
competitors may cause customers to defer or forgo purchases of the Company's
products or services, which could have a material adverse effect on the
Company's business, results of operations and financial condition.  See "--
Product Development."

  System Interruption and Security Risks; Potential Liability;
   Possible Lack of Adequate Insurance; and System Inadequacy

     The Company's operations are dependent, in part, on its ability to protect
its system from interruption by damage from fire, earthquake, power loss,
telecommunication failure, unauthorized entry or other events beyond the
Company's control. The Company's computer equipment constituting its central
computer system, including its processing operations, is currently located at a
single site. The Company relocated operations to new leased facilities in
Annapolis Junction, Maryland in late 1998. The new facilities, which include the
Company's main data center, have become the primary production center for the
Company's data processing needs. The Company currently does not have a separate
back-up facility to mitigate certain substantial risks to the Company's
operations, including temporary interruptions resulting from damage caused by
any one or more of the foregoing factors or due to other causes including
computer viruses, hackers or similar disruptive problems. While the Company
maintains $1.6 million of property insurance coverage, business interruption
insurance coverage, $2.0 million of errors and omissions insurance coverage and
$10.0 million of umbrella insurance coverage, such insurance may not be adequate
to compensate the Company for all

                                       14
<PAGE>

losses that may occur or to provide for costs associated with system failure or
business interruption. Any damage or failure that causes interruptions in the
Company's operations could have a material adverse effect on the Company's
business, results of operations and financial condition.

     Persistent problems continue to affect public and private data networks.
For example, in a number of networks, hackers have bypassed firewalls and have
appropriated confidential information. Such computer break-ins and other
disruptions may jeopardize the security of information stored in and transmitted
through the computer systems of the parties utilizing the Company's services,
which may result in significant liability to the Company and also may deter
potential customers from using the Company's services. In addition, while the
Company attempts to be careful with respect to the employees it hires and
maintain controls through software design and security systems to prevent
unauthorized employee access, it is possible that, despite such safeguards, an
employee of the Company could obtain access, which would also expose the Company
to a risk of loss or litigation and possible liability to users. The Company
attempts to limit its liability to customers, including liability arising from
the failure of the security features contained in the Company's system and
services, through contractual provisions. However, there can be no assurance
that such limitations will be enforceable. There can be no guarantee that the
growth of the Company's customer base will not strain or exceed the capacity of
its computer and telecommunications systems and lead to degradations in
performance or system failure. Any damage, failure or delay that causes
interruptions in the Company's operations could have a material adverse effect
on the Company's business, results of operations and financial condition.

  Risk of Defects, Development Delays and Lack of Market Acceptance

     Software products and services as sophisticated as those offered by the
Company often encounter development delays and may contain defects or failures
when introduced or when new versions are released.  The Company has in the past
and may in the future experience significant delays in the development of
software and has discovered, and may in the future discover, software defects in
certain of its products.  Such delays and defects may result in lost revenues
during the time corrective measures are being taken and may result in additional
development costs.  Although the Company has not experienced material adverse
effects resulting from any such defects to date, there can be no assurance that,
despite testing by the Company, errors will not be found in its existing
software or in future releases or enhancements.  The Company may continue to
experience development delays, resulting in delays in the commercial release of
new products and services, the loss of market share or the failure to achieve
market acceptance.  Any such occurrence could have a material adverse effect
upon the Company's business, results of operations and financial condition.  See
"-- Products and Services" and "-- Product Development."

  Future Capital Needs; Uncertainty of Additional Financing

     The Company currently anticipates that its available cash resources
combined with anticipated funds from operations and its bank line of credit will
be sufficient to meet its presently anticipated working capital and capital
expenditure and debt repayment requirements through 2001. Thereafter, in the
event that the proposed merger with First American is not completed, the Company
may need to raise additional funds. The Company may need to raise additional
funds sooner in order to fund more rapid expansion, to develop new or enhanced
products and services, to respond to competitive pressures or to acquire
complementary businesses or technologies. If additional funds are raised through
the issuance of equity securities, the percentage ownership of the shareholders
of the Company will be reduced, shareholders may experience additional dilution,
or such equity securities may have rights, preferences or privileges senior to
those of the holders of the Company's Common Stock. There can be no assurance
that additional financing will be available when needed on terms favorable to
the Company or at all. If adequate funds are not available or are not available
on acceptable terms, the Company may be unable to develop or enhance its
products and services, take advantage of future opportunities or respond to
competitive pressures, which could have a material adverse effect on the
Company's business, results of operations and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of

                                       15
<PAGE>

Operations-- Liquidity and Capital Resources."

  Government Regulation and Uncertainties of Future Regulation

     The Company's current and prospective customers, which consist of state and
federally chartered banks, savings and loan associations, credit unions,
consumer finance companies and other consumer lenders, as well as customers in
the industries that the Company may target in the future, operate in markets
that are subject to extensive and complex federal and state regulations.  While
the Company may not itself be directly subject to such regulations, the
Company's products and services must be designed to work within the extensive
and evolving regulatory constraints in which its customers operate.  These
constraints include federal and state truth-in-lending disclosure rules, state
usury laws, the Equal Credit Opportunity Act, the Fair Credit Reporting Act and
the Community Reinvestment Act. Furthermore, some consumer groups have expressed
concern regarding the privacy and security of automated credit processing, the
use of automated credit scoring tools in credit underwriting and whether
electronic lending is a desirable technological development in light of the
current level of consumer debt. The failure by the Company's products and
services to support customers' or the Company's compliance with current
regulations and to address changes in customers' or the Company's regulatory
environments, or to adapt to such changes in an efficient and cost-effective
manner, could have a material adverse effect on the Company's business, results
of operations and financial condition.

  Control by Existing Shareholders

     Assuming no exercise of outstanding options, James R. DeFrancesco co-
founder and Director of the Company, and Scott L. Freiman, the Company's
President and Chief Executive Officer, collectively beneficially own
approximately 49% of the outstanding shares of Common Stock. As a result, these
stockholders will be able to exercise control over matters requiring
shareholders approval, including the election of directors, and the approval of
mergers, consolidations and sales of all or substantially all of the assets of
the Company, including the upcoming vote on the Company's proposed merger with
First American. With regard to the vote on the First American merger, Messrs.
DeFrancesco and Freiman have executed Voting Agreements with respect to shares
representing, in the aggregate, approximately 49% of the outstanding shares of
Common Stock, pursuant to which they have agreed to vote for the merger. This
may prevent or discourage competing offers to acquire the Company's Common
Stock.

  Possible Volatility of Stock Price

     The trading price of the Company's Common Stock has in the past and may in
the future be subject to significant fluctuations in response to variations in
quarterly operating results, changes in earning estimates by analysts, the gain
or loss of significant orders, announcements of technological innovations or new
products by the Company or its competitors, general conditions in the consumer
lending and software industries, credit processing software and services, and
other events or factors. Furthermore, the price of the Company's Common Stock
may fluctuate as a result of fluctuations in the market price of First
American's Common Stock. In addition, the stock market in general has
experienced extreme price and volume fluctuations which have affected the market
price for many companies in industries similar to or related to that of the
Company and which have been unrelated to the operating performance of these
companies. These market fluctuations may adversely affect the market price of
the Company's Common Stock.

  Effect of Certain Charter Provisions; Antitakeover Effects of Certificate of
   Incorporation, Bylaws and Delaware Law

     The Company's Board of Directors has the authority to issue up to 1,000,000
shares of Preferred Stock and to determine the price, rights, preferences,
privileges and restrictions, including voting rights of those shares, without
any further vote or action by the stockholders.  The Preferred Stock could be
issued with voting, liquidation, dividend and other rights superior to those of
the Common Stock.  The rights of the holders of Common Stock will be subject to,
and may be adversely affected by, the rights of the

                                       16
<PAGE>

holders of any Preferred Stock that may be issued in the future. The issuance of
Preferred Stock could have the effect of making it more difficult for a third
party to acquire a majority of the outstanding voting stock of the Company.
Further, certain provisions of the Company's Certificate of Incorporation,
including provisions that create a classified Board of Directors, and certain
provisions of the Company's Bylaws and of Delaware law could delay or make more
difficult a merger, tender offer or proxy contest involving the Company. The
Company currently has no plans to issue Preferred Stock, and the Merger
Agreement with First American substantially limits the Company's ability to
issue equity securities without the prior consent of First American.


Item 2.  Properties.

     The Company's principal executive offices are located in Annapolis
Junction, Maryland in a leased facility consisting of approximately 71,000
square feet of office space under lease that expires in 2008. The Company
additionally has the right to either one five-year or one three-year renewal
option. The Company has a right of first refusal on additional office space in
the same building. The Company previously occupied approximately 55,000 square
feet of office space in Columbia, Maryland under several leases that expire in
2002. As of December 31, 2000, the Company subleases to others but remains
liable for approximately 10,000 square feet of the previously occupied space.

     In early 2000 the Company entered into a lease for approximately 4,000
square feet of office space in the Hunt Valley, Maryland area.

     In December 2000 the Company entered into a lease for approximately 1,500
square feet of office space in the Gaithersburg, Maryland area.

Item 3.  Legal Proceedings.

     No material legal proceedings.

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

     Not applicable.


                                    PART II

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

                                       17
<PAGE>


Market Information

     The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "CMSS." The following table sets forth, for the calendar periods
indicated, the range of high and low bid quotations as reported by the Nasdaq
National Market. These quotations reflect inter-dealer prices, without retail
mark-up, markdown or commission and may not necessarily represent actual
transactions.

<TABLE>
<CAPTION>
                                                          Stock Price
                                                      -------------------
                                                       High          Low
                                                      ------        -----
<S>                                                   <C>           <C>
Calendar Year 1999:
  First Quarter                                       $ 5.75        $3.63
  Second Quarter                                      $ 5.00        $3.50
  Third Quarter                                       $ 7.75        $4.50
  Fourth Quarter                                      $ 9.00        $3.88

Calendar Year 2000:
  First Quarter                                       $14.50        $7.25
  Second Quarter                                      $ 8.50        $3.63
  Third Quarter                                       $ 5.75        $3.75
  Fourth Quarter                                      $ 4.25        $0.88
</TABLE>


     On March 23, 2000, the last reported sales price for the Company's common
stock on the Nasdaq National Market was $6.00.

Holders

     As of March 29, 2001, the approximate number of registered shareholders of
record of the Common Stock was 190.

Dividends

     The Company has not paid any cash dividends since its inception, and does
not anticipate paying any cash dividends in the foreseeable future. The Company
currently intends to retain any future earnings for use in its business. In
addition, the Company's bank line of credit prohibits the payment of cash
dividends without the bank's prior written consent, and the Merger Agreement
with First American prohibits the payment of dividends without First American's
prior written consent.

Item 6.  Selected Financial Data.

     The consolidated statement of operations data set forth below for the
fiscal years ended December 31, 1996, 1997, 1998, 1999 and 2000 and the
consolidated balance sheet data at December 31, 1996, 1997, 1998, 1999 and 2000
have been derived from the audited consolidated financial statements of the
Company. The consolidated balance sheets at December 31, 1999 and 2000, and the
consolidated statement of operations for each of the years in the three year
period ended December 31, 2000, together with the notes thereto and the related
report of Ernst & Young LLP, are included elsewhere in this Report. The selected
financial data set forth below are qualified in their entirety by, and should be
read in conjunction with, the consolidated financial statements, the related
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Report.

                                       18
<PAGE>

<TABLE>
<CAPTION>
                                                           Year Ended December 31,
                                     --------------------------------------------------------------------
                                        1996          1997           1998          1999          2000
                                        ----          ----           ----          ----          ----
<S>                                  <C>           <C>            <C>           <C>           <C>
Statement of
Operations Data:
Revenues
License and software
development fees                     $10,101,377   $11,549,378   $ 10,186,421   $12,872,321   $12,349,667
Maintenance fees                       2,045,258     3,311,013      4,294,572     5,059,352     6,442,967
Computer hardware sales                2,106,634     1,656,530        776,790     1,248,615       972,337
Service bureau revenues                       --       640,818      1,644,991     3,594,717     5,408,256
                                     -----------   -----------   ------------   -----------   -----------
                                      14,253,269    17,157,739     16,902,774    22,775,005    25,173,227
Costs of revenues
Cost of license and
software development fees              5,095,814     7,329,091      6,988,649     6,504,519     7,323,375
Cost of maintenance fees                 452,559       880,360      1,108,367       940,091     1,402,122
Cost of computer
hardware sales                         1,782,166     1,504,915        952,662     1,528,243     1,201,837
Cost of service bureau                        --     2,085,543      3,398,453     3,038,483     4,595,746
Selling, general and
Administrative expenses                6,126,494     8,537,967     12,823,909    12,122,557    12,011,636
Research and
development costs                        526,521     1,790,709      1,964,057     1,458,331       758,440
                                     -----------   -----------   ------------   -----------   -----------
                                      13,983,554    22,128,585     27,236,097    25,592,224    27,293,156
                                     -----------   -----------   ------------   -----------   -----------
Income (loss) from operations            269,715    (4,970,846)   (10,333,323)   (2,817,219)   (2,119,929)

Other income
(expense)
Interest income (expense) net            (78,009)    1,181,411        763,292       262,443       211,351
Amortization of excess of
assigned value of identifiable
assets over cost of an acquired
interest                                 304,749        50,792             --            --            --
                                     -----------   -----------   ------------   -----------   -----------
                                         226,740     1,232,203        763,292       262,443       211,351
                                     -----------   -----------   ------------   -----------   -----------
Income (loss) before
income taxes                         $   496,455   $(3,738,643)  $ (9,570,031)  $(2,554,776)  $(1,908,578)
Income tax expense                       201,487            --             --            --            --
                                     -----------   -----------   ------------   -----------   -----------
Net income (loss)                    $   294,968   $(3,738,643)  $ (9,570,031)  $(2,554,776)  $(1,908,578)
                                     ===========   ===========   ============   ===========   ===========
Basic earnings (loss)
per common share                     $      0.06   $     (0.49)  $      (1.25)  $     (0.33)  $     (0.24)
Diluted earnings (loss)
per common share                     $      0.05   $     (0.49)  $      (1.25)  $     (0.33)  $     (0.24)
</TABLE>

                                       19
<PAGE>

<TABLE>
<CAPTION>

                                        ----          ----           ----          ----          ----
                                        1996          1997           1998          1999          2000
                                        ----          ----           ----          ----          ----
<S>                                  <C>           <C>            <C>           <C>           <C>
Balance Sheet Data:

Cash and cash equivalents            $23,501,633   $20,569,300    $ 3,090,565   $ 3,594,328   $ 1,588,133
Investments available-for-sale                --            --      6,482,021     1,316,470     2,529,097
Working capital                       21,056,337    19,502,516      6,450,498     4,240,019     2,101,403
Total assets                          28,451,530    28,956,723     25,109,676    19,492,590    20,264,500
Long term debt and other
lease obligations, less
current portion                         220,341        101,390        761,092            --            --
Shareholders' equity                 22,587,896     23,211,385     13,849,643    11,476,121    10,305,550
</TABLE>

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

The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's results
of operations and financial condition.  The discussion should be read in
conjunction with the audited consolidated financial statements of the Company
and notes thereto.  The discussion contains certain statements of a forward-
looking nature relating to future events or the future financial performance of
the Company.  Investors are cautioned that such statements are only predictions
and that actual events or results may differ materially.  In evaluating such
statements, investors should carefully consider the various factors identified
in this Report which could cause actual results to differ materially from those
indicated by such forward-looking statements, including the matters set forth in
"Business -- Risk Factors."

General

     The Company was incorporated in 1987 to commercialize an automated credit
processing system developed by James R. DeFrancesco, the Company's co-founder,
and Scott L. Freiman, the Company's President, Chief Executive Officer and co-
founder, while they were employed by American Financial Corporation ("AFC"), an
automobile finance servicing company owned by Mr. DeFrancesco.  AFC was acquired
in October 1987 by Perpetual Savings Bank, FSB. Mr. DeFrancesco and Mr. Freiman
retained ownership of AFC's credit processing software which formed the basis
for CreditRevue.  CreditRevue was initially released in 1988.  Since its initial
release, the Company has continually enhanced CreditRevue in response to the
needs of its customers. CreditConnection, the Company's online credit
information and processing service, became commercially available in July 1996.
The Dun & Bradstreet OneScore product was commercially released in October 1997,
CreditRevue Service Bureau was introduced in January 1998, Dun & Bradstreet
Portfolio Monitoring was introduced in June 1998 and the CreditOnline network
was introduced in February 1999.  In March 1999, the Company announced
CreditRevue Maestro, an automated analysis engine for evaluating and decisioning
consumer and small business credit applications.  During 1999, the CreditRevue
Maestro product was renamed eValuate.  The Company currently expects eValuate to
be released in the second quarter of 2001.  Fees from licenses of CreditRevue
and related maintenance fees and resales of third-party computer hardware and
software associated with installations of CreditRevue accounted for the majority
of the Company's revenue through December 31, 2000.  See Business -- Risk
Factors - Dependence on CreditRevue Product Line."

       License fees for CreditRevue are recognized based on a percentage-of-
completion method, measured generally on a cost-incurred basis.  The Company
typically charges a nonrefundable fee of 25% of the preliminary estimate of the
total license fee to develop an analysis of the customer's credit operations and
a

                                       20
<PAGE>

plan for the configuration and implementation of CreditRevue according to the
customer's requirements. At the completion of this initial contract phase, a
client decides whether to proceed with a software license and system
implementation or terminate the project. Historically, there have been very few
projects terminated at the completion of the commencement phase of the project.
Costs consist primarily of direct labor and temporary contract labor. Contracts
in progress are reviewed periodically, and revenues and earnings are adjusted
based on revisions in contract value and estimated costs to completion. For a
description of certain risks associated with the lengthy implementation time
associated with installations of CreditRevue, see "Business -- Risk Factors --
Lengthy Sales and Implementation Cycle." The Company recognizes revenue for
maintenance fees pro rata over the term of the related agreement, which is
generally one year. Maintenance fees received in advance of revenue recognition
are included in deferred revenue. In addition, as a convenience to its
customers, the Company offers third-party computer hardware through various
reseller arrangements. However, neither third-party hardware nor third-party
software sales are a focus of the Company's overall marketing strategy. For the
year ended December 31, 2000, revenues from third-party hardware and software
sales accounted for 3.9% and 4.0% of total revenues, respectively. Revenues from
resales of third-party computer hardware and software are recognized at the time
of shipment and installation.

     Certain of the Company's products and services, including the
CreditConnection service, Dun & Bradstreet's OneScore, and the CreditOnline
network, are charged on a per transaction basis. As a result, the Company
anticipates that transaction-based revenue will represent an increasing
proportion of the Company's revenue. The Company's sales and marketing efforts
will no longer be exclusively targeted at generating license-based revenue but
will be increasingly focused on generating transaction-based revenue from
prospective customers. The Company's anticipated future growth is based, in
large part, on the success of these products and services and the transition to
a transaction-based revenue stream. Accordingly, the failure by the Company to
generate demand for the CreditConnection service, Dun & Bradstreet's OneScore,
Dun & Bradstreet Portfolio Monitoring, CreditOnline network, eValuate, the
occurrence of any significant technological problems, such as a system failure
incurred prior to the implementation of a fully functioning back-up computer
system, any inadequacy of the Company's business interruption insurance to cover
costs associated with system failure or business interruptions, or the failure
of the Company to successfully manage the transition to a transaction-based
revenue stream could have a material adverse effect on the Company's business,
results of operations and financial condition. See "Business -- Risk Factors --
Market Acceptance of CreditOnline and CreditConnection; Transition to
Transaction-Based Revenue" and "-- System Interruption and Security Risks;
Potential Liability; Possible Lack of Adequate Insurance; and System
Inadequacy."

     Since 1987, the Company has continually invested in the development and
introduction of new products, services and enhancements to its software.
Research and development expenditures are expensed as incurred.  Certain
software development costs are capitalized subsequent to the establishment of
technological feasibility in accordance with Statement of Financial Accounting
Standards No. 86, Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed.  Based on the Company's current research and
development process, technological feasibility is established upon completion of
a detailed design.  The Company intends to continue to expend substantial
resources on developing new products and services and enhancements to its
software to incorporate technological developments and satisfy evolving customer
needs.

Results of Operations

     The following table sets forth certain operating data as a percentage of
total revenues for the periods indicated (subtotals not adjusted for rounding):

                                       21
<PAGE>

<TABLE>
<CAPTION>
                                                 Year Ended December 31,
                                            -------------------------------
                                             1998         1999         2000
                                             ----         ----         ----
<S>                                         <C>          <C>          <C>
Percentages of Total Revenues
Revenues
   License and software development fees     60.3         57.8         49.1
   Maintenance fees                          25.4         22.2         25.6
   Computer hardware sales                    4.6          5.5          3.8
   Service bureau fees                        9.7         14.5         21.5
                                            -----        -----        -----
                                            100.0        100.0        100.0
                                            -----        -----        -----
Costs and Expenses
   Cost of license and software
   development fees                          41.3         28.6         29.1
   Cost of maintenance fees                   6.6          4.1          5.6
   Cost of computer hardware sales            5.6          6.7          4.8
   Cost of service bureau fees               20.1         13.3         18.3
   Selling, general and                      75.9         53.2         47.6
   administrative expenses
   Research and development costs            11.6          6.4          3.0
                                            -----        -----        -----
                                            161.1        112.4        108.4
                                            -----        -----        -----
Loss from operations                        (61.1)       (12.4)        (8.4)
Other income
   Interest income, net                       4.5          1.2          0.8
                                            -----        -----        -----
                                              4.5          1.2          0.8
                                            -----        -----        -----
   Net loss                                 (56.6)       (11.2)        (7.6)
                                            =====        =====        =====

</TABLE>

  Total Revenues

     Total revenues increased 34.7% from $16.9 million in 1998 to $22.8 million
in 1999, and increased 10.5% from $22.8 million in 1999 to $25.2 million in
2000. The Company's revenues are derived from four sources: license and software
development fees, maintenance fees, computer hardware sales, and service bureau
fees. The Company's ten largest customers accounted for 55.1% and 56.6% of total
revenues in 1999 and 2000, respectively. None of the Company's customers
accounted for 10% or more of total revenues in 1999 and one of the Company's
customers accounted for 10% or more of total revenues in 2000. Growth in the
Company's professional consulting, maintenance and service bureau revenues
contributed to the year-to-year growth in total revenues from 1999 to 2000.

  License and Software Development Fees

     CreditRevue accounted for the majority of the Company's license and
software development fee revenue through December 31, 2000. License and software
development fees increased 29.2% from $10.2 million in 1998 to $13.2 million in
1999, and decreased 6.2% from $13.2 million in 1999 to $12.3 million in 2000.
The increase in 1999 was primarily the result of signing, in late 1998, nine
new contracts for CreditRevue with an aggregate contract value of approximately
$7 million. Work on these new contracts began in late 1998 and early 1999 with
the completion of many of these projects running into late 1999. Longer sales
cycles and fewer new license sales in 1999 and 2000 resulted in a decline in
pure license revenue in 2000. A large portion of the decrease in license revenue
was offset by increases in software development fees generated by the Company's
professional services staff on a time and material basis. From 1999 to 2000,
pure license revenues decreased approximately $2.4 million, while at the same
time

                                       22
<PAGE>

software development fees increased approximately $1.3 million.

  Maintenance Fees

     Maintenance fees include fees from software maintenance agreements.
Maintenance fees increased 17.8% from $4.3 million in 1998 to $5.1 million in
1999, and 27.3% from $5.1 million in 1999 to $6.4 million in 2000.  The growth
in these revenues during the periods presented was primarily the result of
increased maintenance fees associated with the increased number of licenses of
CreditRevue outstanding during such periods.  Enhancements to previously
installed CreditRevue systems performed by the Company's professional services
staff are also subject to maintenance and contribute to growth in maintenance
revenues.

  Computer Hardware Sales

     Computer hardware sales revenue increased 60.7% from $0.8 million in 1998
to $1.2 million in 1999, and decreased 22.1% from $1.2 million in 1999 to $1.0
million in 2000. Computer hardware sales revenue consists of revenues received
from resales of third-party hardware in connection with the license and
installation of the Company's software. The fluctuation in such revenues during
these periods is the result of customer purchase preferences for computer
hardware systems. In certain instances, CreditRevue customers have volume
discount arrangements with hardware resellers making them eligible for discounts
greater than those offered by the Company.

  Service Bureau Fees

     Service bureau revenues originate from the CreditConnection service
transaction and interface fees, from Dun & Bradstreet OneScore and Portfolio
Monitoring transaction fees, CreditRevue Service Bureau fees, from transaction
fees related to dedicated electronic interfaces implemented for CreditRevue
customers and the resale on a transaction basis of third party value guides.

     CreditConnection service related revenues increased 68.3% from $1.3 million
in 1998 to $2.1 million in 1999 and increased 119.1% from $2.1 million in 1999
to $4.6 million in 2000. Revenue increases are the result of increases in the
number of dealers and lenders enrolled in the CreditConnection service and the
resulting growth in transaction volume. At December 31, 2000, there were
approximately 350 dealers enrolled in the service compared to approximately 250
dealers at December 31, 1999, and approximately 150 dealers at December 31,
1998. As of December 31, 2000, there were approximately 24 lenders connected to
the CreditConnection service, compared to 22 at December 31, 1999, and 21 at
December 31, 1998.

     Dun & Bradstreet related revenues decreased slightly from $0.4 million in
1999 to $0.3 million in 2000. The Dun & Bradstreet OneScore service was
commercially released in the fourth quarter of 1997 and the Portfolio Monitoring
Service was released in June of 1998.

     The CreditRevue Service Bureau was released in January 1998, but did not go
into full production until January 1999.  During 1999, CreditRevue Service
Bureau revenues were $0.8 million. Due to the substantial costs of continued
development and support for the CreditRevue service bureau model, the Company
decided to change its strategy and discontinue further sales of the CreditRevue
Service Bureau product during 2000. Accordingly, CreditRevue Service Bureau
revenues in 2000 declined to $0.7 million and are expected to cease entirely in
2001.

  Cost of License and Software Development Fees

     Cost of license and software development fees consist primarily of salaries
and benefits for in-house programmers and the cost of temporary contract labor.
Cost of license and software development fees decreased 6.9% from $7.0 million
in 1998 to $6.5 million

                                       23
<PAGE>

in 1999, and increased 12.6% from $6.5 million in 1999 to $7.3 million in 2000.
As a percentage of license and software development fees, cost of license and
software development fees were 68.6%, 49.4% and 59.3% in 1998, 1999 and 2000,
respectively. The changes in cost of license and software fees as a percentage
of license and software development fees over these periods is related to the
fluctuation in the Company's quarterly revenues and hourly labor costs
associated with temporary contractors during periods in which the Company
experienced increased demand for its products. With respect to temporary
contractors, the Company's costs on a full-time equivalent basis for these
contractors is generally twice the amount incurred by the Company for its in-
house technical personnel. The increase in license contract sales in late 1998
created demand for the internal resources and enabled the Company to better
manage staff utilization during 1999, resulting in lower implementation costs
per revenue dollar. The sales cycle for license software is often difficult to
predict accurately. The skills and knowledge required to perform the licensed
software implementation requires the Company to maintain certain levels of
specialized staffing, occasionally creating production capacity in excess of
sales demand which can result in higher costs and lower margins. In 2000, when
license contract sales declined, the cost of retaining staff with the
specialized skills and knowledge required to perform license implementations
resulted in increased costs per dollar of license and software development fees.
Additionally, the increase in lower margin software development fees as a
percent of license revenue contributed further to the increase in costs of
license and software development as a percentage of related revenues.

  Cost of Maintenance Fees

     Cost of maintenance fees consists primarily of personnel and related costs
for customer maintenance and support. Cost of maintenance fees decreased 15.2%
from $1.1 million in 1998 to $0.9 million in 1999, and increased 49.1% from $0.9
million in 1999 to $1.4 million in 2000. As a percentage of maintenance fee
revenue, cost of maintenance fees was 25.8%, 18.6% and 21.8% in 1998, 1999 and
2000, respectively. The fluctuation in the percentage of cost of maintenance
fees to maintenance fee revenues in 1998, 1999 and 2000 is primarily the result
of incremental increases in staffing for maintenance personnel as maintenance
revenues have increased. Staffing utilization efficiencies will vary based on
the timing and training of additions to maintenance staff personnel.

  Cost of Computer Hardware Sales

     Cost of computer hardware sales consists of (i) the Company's cost of
computer hardware resold to the Company's customers that are licensing
CreditRevue and (ii) salaries and benefits for systems integration employees.
Cost of computer hardware sales increased 60.4% from $1.0 million in 1998 to
$1.5 million in 1999, and decreased 21.4% from $1.5 million in 1999 to $1.2
million in 2000. As a percentage of computer hardware sales revenue, cost of
computer hardware sales was 122.6%, 122.4% and 123.6% in 1998, 1999 and 2000,
respectively. The dollar fluctuation in the cost of computer hardware sales
reflects the fluctuation in computer hardware sales during the periods
presented. The Company's margin on computer hardware sales fluctuates based on
changes in product sales mix, volume discounts to significant customers and
negotiated mark-ups with customers. In many instances, hardware revenues may not
be large enough to offset both the direct cost and the hardware being sold as
well as certain fixed costs associated with the salaries and benefits for
systems integration employees, thereby resulting in negative margins.

  Cost of Service Bureau Revenues

     Cost of service bureau revenues consists primarily of personnel costs
associated with the operation and support of the service bureau.  Other costs of
service bureau revenues include equipment rental expenses, communications
network costs from third parties and hardware and software pass through
expenses.  Service bureau costs decreased 10.6% from $3.0 million in 1998 to
$3.0 million in 1999 and increased 51.3% from $3.0 million in 1999 to $4.6
million in 2000.  As a percentage of service bureau revenue, cost of service
bureau sales was 206.6%, 84.5% and 85.0% in 1998, 1999 and 2000, respectively.

                                       24
<PAGE>

     The decreases in service bureau costs in 1999 were related to improved
staffing utilization and efficiencies related to the new data center operations
which commenced production early in 1999 following the Company's relocation to
Annapolis Junction from Columbia, Maryland.  The increases in service bureau
costs in 2000 relate to the increases in service bureau revenues in 2000.  As a
percent of service bureau revenues, service bureau costs remained flat at 85.0%
in 2000 and 1999.

  Selling, General and Administrative Expenses

     Selling, general and administrative expenses decreased 5.5% from $12.8
million in 1998 to $12.1 million in 1999, and decreased 0.92% from $12.1 million
in 1999 to $12.0 million in 2000. Selling, general and administrative expenses
as a percent of total revenues were 75.9%, 53.5% and 47.7% in 1998, 1999 and
2000 respectively. The decrease in selling, general and administrative expenses
in 1999 was primarily the of result of reductions to office expense
(approximately $1.0 million), and the non-recurrence of one-time expenses
related to the Company's relocation in 1998 (approximately $0.9 million). The
reduction in office expense relates to subleasing the Company's former offices
which resulted in the recovery of approximately $1.0 million of the reserve
recorded in 1998. The decline in selling, general and administrative expenses in
2000 resulted primarily from the reduction in selling, general and
administrative staffing from 24 employees in 1999 to 22 employees in 2000. The
other major contributor to the reduction in selling, general and administrative
costs was telecommunications expense which decreased by approximately $0.4
million as a result of entering into longer term usage agreements at more
favorable rates.

  Research and Development Costs

     Research and development costs consist primarily of salaries and benefits
of in-house programmers. These costs decreased $0.5 million or 25.7%, from $2.0
million in 1998 to $1.5 million in 1999 and decreased $0.7 million, or 48.0%,
from $1.5 million in 1999 to $0.8 million in 2000. These reductions are due in
part to the capitalization of certain software development expenses. The
capitalized expenses include the direct payroll costs of certain programmers and
certain third party development expenses. During 1998, approximately $0.3
million of costs associated with the development of eValuate expenses were
capitalized. During 1999, approximately $1.7 million of eValuate expenses were
capitalized, resulting in lower year to year research and development expenses
being recorded. During 2000 approximately $1.7 million of eValuate expenses were
capitalized. See Note 1 of the Notes to Consolidated Financial Statements. Other
factors contributing to the reduction of research and development costs include
the discontinuation of the CreditRevue service bureau product and the
organization of various development initiatives into smaller, more streamlined
and efficient development teams.

  Interest Income (Expense)

     Interest expense was $0.1 million in both 1999 and 2000. Interest income
was $0.3 million in both 1999 and 2000. The interest expense reported in 1999
and 2000 relates to borrowings under the Company's line of credit and
obligations under capital lease. The interest income reported in 1999 and 2000
results from invested proceeds from the Company's initial public offering.

                                       25
<PAGE>

  Income Tax Expense

     From its inception in 1987 until its reincorporation in Delaware in
November 1996, the Company had been treated for income tax purposes as a
corporation subject to federal and state taxation under Subchapter S of the
Internal Revenue Code of 1986, as amended and comparable state laws. As a
result, for federal and state income tax purposes, the Company's earnings had
been taxed directly to the Company's shareholders. Upon termination of the
Company's Subchapter S status in November 1996, the Company determined the
differences between the financial reporting and income tax bases of its assets
and liabilities, and recorded at that date the resulting deferred tax liability
and income tax expense. Income tax amounts and balances are accounted for in
accordance with Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes. At December 31, 2000, the Company had net operating loss
carryforwards of approximately $21.1 million which will begin to expire in 2011.
See Note 2 to the Consolidated Financial Statements for more information
regarding the Company's income tax status.

Liquidity and Capital Resources

     The Company has funded its working capital needs and investments in
property and equipment from operating cash flows and approximately $22.1 million
of net proceeds from the Company's initial public offering completed in December
1996. During 1998 and 1999, the Company's operations consumed cash of $7.3
million and $3.4 million, respectively. During 2000, the Company's operations
generated cash of $1.1 million. The cash flow deficiencies during 1998 and 1999
were primarily caused by operating losses, an increase in accounts receivable in
1998 and a decrease in accounts payable in 1999. In 2000, reduced operating
losses, and increases in accounts payable and deferred revenue contributed to
the generation of cash from operations.

     The Company's cash used for investing activities consists principally of
investments in property and equipment and capitalized software development
costs.  During the years ended December 31, 1998, 1999 and 2000, the Company
invested a total of $4.3 million, $2.2 million and $2.6 million, respectively,
in property and equipment and capitalized software development costs.  These
investments were directly attributable to the Company's growth in operations.
The Company did not have any material commitments for the purchase of property
and equipment at December 31, 2000.

     The Company has relied principally on its bank line of credit and proceeds
from its initial public offering completed in December 1996 for its financing
needs.  The Company received $22.1 million of net proceeds from its initial
public offering.  The Company maintains a secured bank line of credit in the
amount of $1.5 million.  At December 31, 2000, there was an outstanding balance
of approximately $0.8 million on the line of credit.  The bank line of credit
requires the bank's written consent prior to, among other things, (i) the
payment of cash dividends, (ii) the Company's engagement in a substantially
different business activity, or (iii) the purchase by the Company of any
interest in another enterprise or entity.

     The Company currently anticipates that its available cash resources,
expected cash flows from operations and its bank line of credit will be
sufficient to meet its presently anticipated working capital, capital
expenditure and debt repayment requirements through 2001.

     The Company has entered into an Agreement and Plan of Merger with First
American and its wholly-owned subsidiary which substantially limits the
Company's ability to incur indebtedness without the consent of First American.
In addition, the Merger Agreement generally precludes the issuance of debt or
equity securities by the Company without the prior consent of First American.

                                       26
<PAGE>

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

     The Company is exposed to market risk related to changes in interest rates.
The Company invests its excess cash balances in cash equivalents and municipal,
commercial and government agency obligations which are interest rate sensitive.
However, the maturities of these obligations is less than one year, mitigating
their sensitivity to interest rates.  The Company believes that the effect, if
any, of reasonably possible near-term changes in interest rates on the Company's
financial position, results of operations and cash flows is not material.

Item 8.  Financial Statements and Supplementary Data.

The information required by the item is incorporated herein by reference to the
consolidated financial statements listed in Item 14 below and attached to this
Report.

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

     None.

                                       27
<PAGE>

                                   PART III

Item 10. Directors and Executive Officers of the Registrant.

The directors and executive officers of the Company, their ages and their
positions with the Company are as follows:

      NAME                 AGE                     POSITION
--------------------------------------------------------------------------------

Scott L. Freiman           38   President, Chief Executive Officer and Director
Howard L. Tischler         47   Senior Vice President; President and Chief
                                Executive Officer of Credit Online, Inc.
Robert P. Vollono          52   Senior Vice President, Chief Financial Officer,
                                Treasurer and Director
John J. McDonnell, Jr      63   Chairman of the Board of Directors
James R. DeFrancesco       52   Director
Stephen X. Graham          48   Director

Scott L. Freiman, a co-founder of the Company, has served as the Company's
President and Chief Executive Officer since September 1999, and as a director
since 1987. Mr. Freiman served as Executive Vice President of the Company from
October 1987 to September 1999. From 1985 to 1987, Mr. Freiman served as
Technology Director of American Financial Corporation, an automobile
finance/leasing company, where he worked with Mr. DeFrancesco to develop the
Company's credit origination software. Prior to 1985, Mr. Freiman served as a
development engineer for IBM and AT&T Bell Laboratories.

Howard L. Tischler has served since February 2000 as the Company's Senior Vice
President and as President and Chief Executive Officer of the Company's
subsidiary, Credit Online, Inc. From November 1999 to February 2000, Mr.
Tischler served as General Manager of the Company's e-Commerce division,
predecessor to Credit Online, Inc. From 1995 to 1999, Mr. Tischler was President
of SunGard Healthcare, a wholly owned subsidiary of SunGard Data Systems, Inc.
Mr. Tischler was President of the Healthcare Systems Group of Intelus
Corporation from 1993 until the acquisition of Intelus by SunGard Data Systems
in 1995. From 1986 to 1993, Mr. Tischler served as Executive Vice President and
Vice President, Operations, for Intelus Corporation.

Robert P. Vollono has served as the Company's Senior Vice President and Chief
Financial Officer since April 1995, and as the Company's Treasurer and a
director since October 1996. Since February 1999, Mr. Vollono has served as
Chief Financial Officer of CMSI Systems, Inc. and Credit Online, Inc. From 1988
to April 1995, Mr. Vollono served as Vice President and Chief Financial Officer
of Carey International, Inc., a transportation services company. From 1986 to
1988, Mr. Vollono served as Vice President and Chief Financial Officer of
Commercial Office Environments, Inc.

John J. McDonnell, Jr. has served as a director since November 1996, and as
Chairman of the Board since September 1999. Mr. McDonnell has served as a
General Partner of McDonnell & Associates Investment Co., L.P., a private
investment company, since September 2000.  From February 2000 to September 2000,
Mr. McDonnell served as President and Chief Executive Officer of Paylinx
Corporation, a leading provider of Internet payment solutions. Mr. McDonnell
served as President, Chief Executive Officer and a director of Transaction
Network System, Inc., a nationwide communications network company specializing
in transaction-oriented data services from 1990 until its acquisition by PSInet,
Inc. in November 1999. From 1987 to 1989, Mr. McDonnell served as President and
Chief Executive Officer of Digital Radio Network, Inc., a local access carrier
for point-of-sale transactions. Mr. McDonnell has previously served as Group
Vice President for the Information Technologies and Telecommunications Group of
the Electronic Industries Association (EIA); Vice President, International
Operations and Vice President, Sales, for Tymnet, Inc. with the responsibility
for both private network sales and public services; and Director of Technology
and Telecommunications for the National Commission on Electronic Funds Transfer.
Mr. McDonnell was one of the founding members and is currently a member of the
Executive Committee of the Board of Directors of the Electronics Funds Transfer
Association. Mr. McDonnell currently serves on the Boards of Directors of
Intelidata Data Technologies Corp., and CyberSource Corporation, as well as
several private companies.

                                       28
<PAGE>

James R. DeFrancesco, a co-founder of the Company, has served as a director of
the Company since 1987. Mr. DeFrancesco served as the Company's Chief Executive
Officer from 1987 to May 1999, as Chairman of the Board of Directors from 1987
to September 1999 and as President from 1987 to 1998. Since 1989, Mr.
DeFrancesco has served as the President of Businessliner, Inc., a company which
leases an airplane to the Company for business travel. From August 1997 to May
1999, Mr. DeFrancesco served as a Vice President of D & R Investments, L.L.C., a
company that leased an airplane to the Company for business travel during that
period. From 1986 to April 1999, Mr. DeFrancesco served as President of
Financial Design Systems, a software company.  From 1987 to 1992, Mr.
DeFrancesco served as President of Perpetual Leasing Services, Inc., the
automobile leasing subsidiary of Perpetual Savings Bank, FSB. From 1976 to 1987,
Mr. DeFrancesco founded and served as President and Chief Executive Officer of
American Financial Corporation, an automobile finance/leasing company.

Stephen X. Graham has served as a director since October 1996. Since 1998, he
has been the President and Chief Executive Officer of Cross Hill Financial
Group, Inc., a private investment banking firm. From 1988 to 1998, Mr. Graham
served as President of Graham, Hamilton & Co., which merged into Cross Hill in
1998.  Since 1996, Mr. Graham has also served as Chief Executive Officer of
Prestwick Scientific Capital.  From 1982 to 1988 Mr. Graham was a Vice President
of Kidder, Peabody & Co.

Section 16(a) Beneficial Ownership Reporting Compliance

Under the securities laws of the United States, the Company's directors and
executive officers, and any persons holding more than ten percent of the
Company's Common Stock, are required to report their ownership of the Company's
Common Stock and any changes in that ownership to the Securities and Exchange
Commission. Specific due dates for these reports have been established and the
Company is required to report in this Report any failure to file by these dates
during 2000. Based solely on its review of such reports received by it from such
persons for their 2000 transactions, the Company believes that all directors,
executive officers and beneficial owners of more than ten percent of the
Company's Common Stock were in compliance with all such filing requirements.

                                       29
<PAGE>

Item 11. Executive Compensation.

Summary Compensation Table

The following table provides certain summary information concerning the
compensation earned by each person who served as an executive officer of the
Company during the fiscal year ended December 31, 2000, for services rendered in
all capacities to the Company and its subsidiaries for the fiscal years ended
December 31, 1998, 1999 and 2000. The listed individuals shall be hereinafter
referred to as the "Named Executive Officers".

<TABLE>
<CAPTION>
                                                              Annual                            Long-Term
                                                           Compensation                        Compensation
                                                 -----------------------------------------------------------------
                                                                                       Securities
                                                                      Other Annual     Underlying      All Other
Name and Principal                     Fiscal    Salary     Bonus     Compensation       Options      Compensation
     Position                           Year       ($)       ($)         ($) (1)          (#)(2)          ($)
------------------------------------------------------------------------------------------------------------------
<S>                                    <C>       <C>        <C>       <C>              <C>            <C>
Scott L. Freiman                        2000     207,047     5,000         --                 --         9,854(3)
Chief Executive Officer                 1999     189,070        --         --             24,000         6,000(4)
and President                           1998     192,923        --         --                 --         6,000(4)
------------------------------------------------------------------------------------------------------------------
Howard L. Tischler                      2000     164,032    32,000         --                 --         7,530(5)
Senior Vice President;                  1999       5,000        --         --                 --         1,000(4)
President and Chief Executive           1998          --        --         --                 --            --
Officer of Credit Online, Inc.
------------------------------------------------------------------------------------------------------------------
Robert P. Vollono                       2000     173,847     5,000         --                 --         7,589(6)
Senior Vice President,                  1999     155,968        --         --             24,000            --
Treasurer and                           1998     159,769        --         --                 --            --
Chief Financial Officer
------------------------------------------------------------------------------------------------------------------
Miles H. Grody                          2000     174,924     5,000         --                 --         9,356(8)
Senior Vice President;                  1999     157,220        --         --             24,000            --
President and Chief Executive           1998     158,654        --         --                 --            --
Officer of CMSI Systems,
Inc.(7)
</TABLE>

(1)  Other compensation in the form of perquisites and other personal benefits
     has been omitted as the aggregate amount of such perquisites and other
     personal benefits did not exceed the lesser of $50,000 or 10% of the total
     annual salary and bonus for the executive officer for such year.
(2)  The Company did not grant any stock appreciation rights or make any long-
     term incentive plan payments to any Named Executive Officer in 2000, 1999
     or 1998.
(3)  Consists of an automobile allowance of $6,000 and $3,854 in matching
     contributions to the Company's 401(k) plan.
(4)  Consists of an automobile allowance.
(5)  Consists of an automobile allowance of $6,000 and $1,530 in matching
     contributions to the Company's 401(k) plan.
(6)  Consists of an automobile allowance of $6,000 and $1,589 in matching
     contributions to the Company's 401(k) plan.
(7)  Mr. Grody departed from his positions as an executive officer of the
     Company effective as of March 2, 2001.
(8)  Consists of an automobile allowance of $6,000 and $3,356 in matching
     contributions to the Company's 401(k) plan.

                                       30
<PAGE>

Option Grants in Last Fiscal Year

No stock options or stock appreciation rights were granted to the Named
Executive Officers during the last fiscal year.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values

The following table sets forth certain information with respect to the Named
Executive Officers regarding stock option holdings as of December 31, 2000. No
stock options were exercised by any Named Executive Officer during 2000. No
stock appreciation rights were exercised by any Named Executive Officer during
2000 and no stock appreciation rights were outstanding as of December 31, 2000.

<TABLE>
<CAPTION>
                              Number of Securities Underlying
                               Unexercised Options at Fiscal            Value of Unexercised In-The-Money
                                        Year-End (#)                    Options at Fiscal Year-End ($)(1)
---------------------------------------------------------------------------------------------------------
             Name            Exercisable          Unexercisable         Exercisable         Unexercisable
---------------------------------------------------------------------------------------------------------
<S>                          <C>                  <C>                   <C>                 <C>
Scott L. Freiman                 6,000                18,000                 --                   --
Robert P. Vollono              351,382                58,598                 --                   --
Howard L. Tischler              80,682               294,318                 --                   --
Miles H. Grody                 351,382                58,598                 --                   --
</TABLE>

(1)  Based upon the closing selling price of the Company's Common Stock as
     reported on the Nasdaq National Market, of $1.13 per share on December 29,
     2000.


Compensation of Directors

Cash Compensation. Employee directors do not currently receive a fee for
attending Board of Directors or committee meetings, but are reimbursed for
ordinary and necessary travel expenses related to such director's attendance at
Board of Directors and committee meetings. Each non-employee director is paid
$2,000 for each meeting of the Board of Directors or any committee thereof
attended. Commencing in January 2000, each of Stephen Graham and John McDonnell
were granted annual retainers of $24,000. Both Messrs. Graham and McDonnell have
elected to apply 100% of their 2000 annual retainer fee to the acquisition of a
special stock option grant pursuant to the Director Fee Option Grant Program
under the Company's 1997 Stock Incentive Plan.

Stock Option Grant. Pursuant to the Company's 1997 Stock Incentive Plan, each
non-employee director is automatically granted a non-qualified stock option to
purchase 5,000 shares of Common Stock upon such director's initial election to
the Board of Directors and on each anniversary of such election while still
serving on the Board of Directors. Such options vest 50% six months from the
date of grant and 50% over six successive equal monthly installments thereafter.
Directors who are employees of the Company do not receive any compensation as
directors of the Company beyond that paid to them on account of their services
as employees of the Company. On October 10, 2000, Mr. Graham was granted options
to buy 5,000 shares of the Company's Common Stock at an option price of $3.313
per share. On November 15, 2000, Mr. McDonnell was granted options to buy 5,000
shares of the Company's Common Stock at an option price of $2.75 per share.
These options vest 50% six months from date of grant and 50% over six successive
equal monthly installments thereafter.

                                       31
<PAGE>

Employment Contracts, Termination of Employment and Change in Control
Arrangements

During 2000, the Company entered into employment agreements with each of Scott
Freiman, Howard Tischler, Miles Grody and Robert Vollono, pursuant to which the
Company agreed to continue to employ such persons as President and Chief
Executive Officer of the Company, President and Chief Executive Officer of
Credit Online, Inc., President and Chief Executive Officer of CMSI Systems, Inc.
and Chief Financial Officer of the Company, respectively. The agreements provide
for the payment of a minimum annual salary of $220,000 to Mr. Freiman and
$175,000 to each of Messrs. Tischler, Grody and Vollono, subject to increase at
the discretion of the Company. Each agreement provides for the payment of
bonuses in the Company's sole discretion, based upon criteria determined by the
Company. In addition, under each agreement the applicable executive is entitled
to participate in all employee benefit plans provided by the Company from time
to time, to receive 184 hours of paid leave per year of employment (two-thirds
of which is considered to be vacation time), to be provided term life insurance
with benefits equal to the executive's annual salary (up to a maximum of
$400,000), a monthly automobile allowance of no less than $500, and
reimbursement for all reasonable out-of-pocket expenses. If at any time the
executive's employment under the agreement is terminated by the Company for any
reason other than for cause or the executive resigns for good reason, then such
executive will become entitled to the following severance benefits: (i)
continued payment of his full salary for six months, (ii) continued medical,
life and disability coverage for a period of six months, and (iii) immediate
vesting of all of his outstanding stock options. If such termination or
resignation occurs within a specified period of time before, or 18 months after,
a change in control (as defined in the agreements) of the Company or an
affiliate of the Company which employs the executive (the "Change In Control
Period"), whether by merger, asset sale, tender or exchange offer for more than
50% of the outstanding voting securities of the Company or such affiliate,
adoption by the Board (or the board of directors of such affiliate) of a plan of
liquidation or a change in the majority of the Board (or the board of directors
of such affiliate) by one or more contested elections, then the executive would
instead become entitled to the following: (i) a lump sum payment equal to 2.99
times his average annual cash compensation during the previous five years (or
such shorter period as he shall have been employed by the Company), (ii) upon
his surrender of all rights to vested and unvested stock options granted to him
by the Company, a lump sum payment equal to the difference between the exercise
price of such options and the greater of the fair market value of the Common
Stock on the date of the termination or the highest effective price paid for the
Common Stock by any acquirer in connection with the change in control provided
that if any acquiror of the Company elects to treat the transaction as a pading
of interests for accounting purposes, then this benefit is deleted and replaced
by immediate vesting of all outstanding options, (iii) continued medical, life
and disability coverage for 12 months (or until he receives comparable coverage
from a new employer, if sooner), and (iv) immediate vesting of all accrued
retirement and deferred compensation plans. The Company's obligation to provide
any such severance benefits is contingent upon the executive executing and
delivering to the Company a general release of all claims against the Company,
and is subject to reduction by the amount necessary to avoid the Company
becoming subject to any excise tax under Section 4900 of the Internal Revenue
Code and therefore not being able to take a federal tax deduction in connection
with those benefits. In addition, all unvested stock options accelerate and vest
in full upon a change of control. The term "cause" is defined under the
agreements to include continued failure by the executive to perform his duties,
conviction of a felony, willful or reckless misconduct which is injurious to the
Company or any affiliate or the commission of fraud or malfeasance. The term
"good reason" is defined to include a reduction in annual salary, the Company's
failure to provide fringe benefits comparable to those offered to other
executives, the failure of any successor to the Company to assume the Company's
obligations under the employment agreements or a relocation of the executive's
worksite to a location which increases the distance from his home to his
worksite by more than 50 miles.

Mr. Vollono is subject to a separate letter agreement pursuant to which his
employment is to be terminated during the Change In Control Period in connection
with the proposed merger with First American. He will then be entitled to
receive severance benefits in accordance with his employment agreement.
Mr. Grody's employment under his employment agreement terminated effective as
of March 2, 2001. Mr. Grody was subject to a letter agreement similar to the one
to which Mr. Vollono is subject. Accordingly, upon the consummation of the
proposed merger with First American, Mr. Grody will be entitled to the severance
benefits provided under his employment agreement in connection with a change in
control.

The Compensation Committee of the Board of Directors, as Plan Administrator of
the Company's 1997 Stock Incentive Plan, has the authority to provide for
accelerated vesting of the shares of Common Stock subject to any outstanding
options held by the Chief Executive Officer or any other executive officer or
any unvested share issuances actually held by such individual, in connection
with certain changes in control of the Company or the subsequent termination of
the officer's employment following the change in control event.

Compensation Committee Interlocks and Insider Participation

John J. McDonnell, Jr. and Stephen X. Graham served as members of the Company's
compensation committee during 2000. Neither Mr. McDonnell nor Mr. Graham has
been an officer or employee of the Company at any time.

                                       32
<PAGE>


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

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March  13, 2001 by (i) each
stockholder known to the Company to beneficially own more than five percent of
the outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each of the Named Executive Officers and (iv) all current executive officers and
directors as a group. Unless otherwise indicated, the mailing address of each
beneficial owner listed is 135 National Business Parkway, Annapolis Junction,
Maryland 20701.

<TABLE>
<CAPTION>
                                                                              Amount and Nature
                  Name of Beneficial Owner                                 of Beneficial Ownership     Percent of Class
                                                                                    (1)                    (1) (2)
------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                         <C>
James R. DeFrancesco(3)                                                           2,569,397                  32.1
Scott L. Freiman(4)                                                               1,362,160                  17.0
Jon D. Gruber(5)                                                                    692,500                   8.7
Cumberland Associates LLC(6)                                                        688,000                   8.6
J. Patterson McBaine(5)                                                             651,800                   8.2
Dolphin Offshore Partners, L.P.(7)                                                  643,659                   8.1
Eric B. Swergold(5)                                                                 614,900                   7.7
Gruber & McBaine Capital Management, LLC(5)                                         610,000                   7.6
Thomas O. Lloyd-Butler(5)                                                           610,000                   7.6
Miles H. Grody(8)                                                                   409,980                   5.1
Robert P. Vollono(9)                                                                351,407                   4.2
John J. McDonnell, Jr.                                                              226,400                   2.8
Howard L. Tischler(10)                                                               90,681                   1.1
Stephen X. Graham(11)                                                                29,721                   0.4
All current executive officers and directors as a group (6 persons)(12)           4,629,766                  54.8
</TABLE>

(1)  Gives effect to the shares of Common Stock issuable within 60 days of March
     13, 2001, upon the exercise of all options and other rights beneficially
     owned by the indicated stockholders on that date. Unless otherwise
     indicated, the persons named in the table have sole voting and sole
     investment control with respect to all shares beneficially owned.
     Beneficial ownership is determined in accordance with the rules of the
     Securities and Exchange Commission and includes voting and investment power
     with respect to shares.
(2)  Percent ownership is based upon 7,994,124 shares of Common Stock issued and
     outstanding as of March 29, 2001.
(3)  Includes an aggregate of 1,355,925 shares held by grantor retained annuity
     trusts established by Mr. DeFrancesco. Mr. DeFrancesco is the sole trustee
     of each of such trusts. In connection with the execution of the Merger
     Agreement, Mr. DeFrancesco and each of his grantor retained annuity trusts
     entered into a Voting Agreement with First American dated January 30, 2001,
     pursuant to which they must (i) vote their shares of Company Common Stock
     in favor of the approval and adoption of the Merger Agreement and the
     merger and any other matter or transaction reasonably required to effect
     the merger and other transactions contemplated by the Merger Agreement, and
     (ii) not vote those shares in favor of any competing proposal or any matter
     that could facilitate a competing proposal or impede the merger.
     Accordingly, Mr. DeFrancesco may be deemed to share voting power with
     respect to all of the shares held by him or any of his trusts.
(4)  Includes 6,000 shares of common stock issuable upon exercise of stock
     options exercisable within 60 days and 84,476 shares held by Mr. Freiman's
     wife and children, as to which Mr. Freiman disclaims

                                       33
<PAGE>

     beneficial ownership. In connection with the execution of the Merger
     Agreement, Mr. Freiman entered into a Voting Agreement with First American
     dated January 30, 2001, pursuant to which Mr. Freiman must (i) vote the
     1,271,684 shares held directly by him in favor of the approval and adoption
     of the Merger Agreement and the merger and any other matter or transaction
     reasonably required to effect the merger and other transactions
     contemplated by the Merger Agreement, and (ii) not vote those shares in
     favor of any competing proposal or any matter that could facilitate a
     competing proposal or impede the merger. Accordingly, Mr. Freiman may be
     deemed to share voting power with respect to such shares.
(5)  Pursuant to a Schedule 13D filed on August 2, 2000 with the Securities and
     Exchange Commission, Gruber & McBaine Capital Management, L.L.C. ("G&MCM")
     reported that as of that date it shared voting and dispositive power with
     respect to the 610,000 shares beneficially owned by it. Jon D. Gruber
     ("Gruber") and J. Patterson McBaine ("McBaine"), as managers of
     G&MCM,reported that they shared voting and dispositive powers with respect
     to the same 610,000 shares. In addition, Gruber reported having sole voting
     and dispositive power with respect to an additional 82,500 shares and
     McBaine reported having sole voting and dispositive power with respect to
     an additional 41,800 shares. Thomas Lloyd-Butler and Eric B. Swergold
     ("Swergold"), members of G&MCM, reported having shared voting and
     dispositive power with respect to the 610,000 shares. In addition, Swergold
     reported having sole voting and dispositive power with respect to an
     additional 4,900 shares. The mailing address of each of G & MCM, Gruber,
     McBaine, Thomas Lloyd-Butler and Swergold is 50 Osgood Place, Penthouse,
     San Francisco, California 94133
(6)  Pursuant to a Schedule 13G filed February 14, 2001 with the Securities and
     Exchange Commission, Cumberland Associates LLC reported that as of
     December 31, 2000 it had sole voting power and dispositive power with
     respect to 634,650 of the shares and shared voting and dispositive power
     with respect to the remaining 53,350 shares. Cumberland Associates LLC's
     mailing address is 1114 Avenue of the Americas, New York, New York 10036.
(7)  Pursuant to a Schedule 13D filed on February 10, 2000 with the Securities
     and Exchange Commission, Peter E. Salas, as general partner of Dolphin
     Offshore Partners, L.P. ("DOP"), reported that as of December 31, 1999 he,
     as general partner of DOP, had sole voting and dispositive power with
     respect to all 643,659 shares. Mr. Salas's mailing address is c/o Dolphin
     Asset Management, 129 East 17th Street, New York, New York 10003.
(8)  Consists of shares of Common Stock issuable upon exercise of stock options.
(9)  Includes 25 shares held by Mr. Vollono's spouse and 351,382 shares of
     Common Stock issuable upon exercise of stock options.
(10) Includes 80,681 shares of Common Stock issuable upon exercise of stock
     options.
(11) Includes 20,000 shares of Common Stock issuable upon exercise of stock
     options.
(12) See Notes (3),(4)and (9) through (11).

Changes in Control

As described under "Business - Recent Event" in Item 1 of this Report, the
Company has entered into the Merger Agreement with First American.

Item 13. Certain Relationships And Related Transactions.

James R. DeFrancesco owns 50% of the outstanding stock, and is the President, of
Businessliner, Inc. This Company leases airplanes to the Company for business
travel. Businessliner pays an hourly fee for its use of each airplane and a
portion of the monthly cost of maintaining the airplane. The Company believes
that the amounts paid for the leases of the airplanes are comparable to the
amounts the Company would have otherwise paid for comparable services from
unaffiliated parties. For the fiscal year ended December 31, 2000, the Company
paid Businessliner, Inc. $39,200 under this leasing arrangement.

In addition, on May 20, 2000, the Company entered into a Consulting Agreement
with Businessliner pursuant to which, effective as of January 1, 2000,
Businessliner agreed to provide consulting services to

                                       34
<PAGE>

the Company and its affiliates, for an annual fee of $213,200. The term of the
Consulting Agreement was originally scheduled to expire on December 31, 2000. On
January 15, 2001, the Consulting Agreement was amended to extend the term
through June 30, 2001. The parties have since agreed in principle that the term
of the Consulting Agreement will expire on March 31, 2001.

In addition, the information set forth under "Employment Contracts, Termination
of Employment and Change in Control Arrangements" in Item 11 of this Annual
Report is incorporated herein by reference.

                                       35
<PAGE>

                                    PART IV

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

<TABLE>
<CAPTION>
                                                                                       Page
                                                                                      Number
                                                                                      _______
  <S>                                                                                 <C>
  (a)  Index to Consolidated Financial Statements

       Index                                                                            F-1

       Report of Independent Auditors                                                   F-2

       Consolidated Balance Sheets as of December 31, 2000 and 1999                     F-3

       Consolidated Statements of Operations for the years ended
          December 31, 2000, 1999 and 1998                                              F-4

       Consolidated Statements of Shareholders' Equity for the
       years ended December 31, 2000, 1999 and 1998                                     F-5

       Consolidated Statements of Cash Flows for the years ended
       December 31, 2000, 1999 and 1998                                                 F-6

       Notes to Consolidated Financial Statements                                       F-7

</TABLE>

  (b)  Financial Statement Schedules

       All schedules for which provision is made in the applicable accounting
       regulations of the Securities and Exchange Commission are not required
       under The related instruction or are inapplicable and therefore have been
       omitted.

  (c)  Reports on Form 8-K

       The Company did not file any Current Reports on Form 8-K during the
       fiscal quarter ended December 31, 2000.

  (d)  Exhibits

       2.1       Agreement and Plan of Merger by and among The First American
                 Corporation, Rusti Corp. and the Company, dated as of January
                 30, 2001*

       3.1       Certificate of Incorporation of the Company**

       3.2       Bylaws of the Company**

       4.1       Specimen certificate for Common Stock of the Company**

       4.2       See Exhibits 3.1 and 3.2 for provisions of the Certificate
                 of Incorporation 4 and Bylaws of the Company defining rights
                 of holders of Common Stock of the Company

                                       36
<PAGE>

       10.1      Form of Project Commencement Agreement**

       10.2      Form of Software License Agreement**

       10.3      Form of Software Maintenance Agreement**

       10.4      Form of Professional Services Agreement**

       10.5      Form of CreditConnection Lender Agreement (for CreditRevue
                 Licensees)**

       10.6      Form of CreditConnection Lender Agreement (for non-CreditRevue
                 Licensees)**

       10.7      Form of CreditConnection Dealer Subscription Agreement**

       10.8.1    Office Building Lease between Symphony Woods Limited
                 Partnership and the Company dated October 29, 1993**

       10.8.2    Office Building Lease between Symphony Woods Limited
                 Partnership and the Company dated February 10, 1995**

       10.8.3    First Amendment to Lease dated March 29, 1995**

       10.8.4    Second Amendment to Lease dated August 12, 1996**

       10.8.5    135 National Business Parkway Lease between Constellation Real
                 Estate, Inc. and the Company dated April 27, 1998****

       10.8.6    First Amendment of 135 National Business Parkway Lease dated
                 December 23, 1998****

       10.9      Promissory Note dated December 31, 1995 given by the Company
                 to James R. DeFrancesco**

       10.10     Business Loan Agreement between The Columbia Bank and the
                 Company dated June 10, 1994**

       10.11     1996 Credit Management Solutions, Inc. Non-Qualified Stock
                 Option Plan**

       10.12     1996 Credit Management Solutions, Inc. Employee Stock Purchase
                 Plan**

       10.13     1996 Credit Management Solutions, Inc. Long-Term Incentive
                 Plan**

       10.14     Form of Tax Indemnification Agreement**

       10.15     1996 Credit Management Solutions, Inc. Non-Qualified Stock
                 Option Plan**

       10.16     1997 Credit Management Solutions, Inc. Stock Incentive Plan***

       10.17     Employment Agreement between Miles Grody and the Company
                 dated June 27, 2000*****

       10.18     Employment Agreement between Scott Freiman and the Company
                 dated June 27, 2000*****

                                       37
<PAGE>

       10.19     Employment Agreement between Robert Vollono and the Company
                 dated June 27, 2000*****

       10.20     Form of Voting Agreement, dated as of January 30, 2001, by and
                 among The First American Corporation and certain stockholders
                 of the Company*

       10.21     Consulting Agreement between Businessliner, Inc. and the
                 Company dated as of May 20, 2000 (filed herewith)

       10.22     Amendment, dated January 15, 2001, to Consulting Agreement
                 between Businessliner, Inc. and the Company (filed herewith)

       10.23     Employment Agreement between Howard Tischler and the Company
                 effective January 1, 2000 (filed herewith)

       10.24     Form of Amendment to Employment Agreements entered into between
                 the Company and each of Scott Freiman, Miles Grody, Howard
                 Tischler and Robert Vollono (filed herewith)

       23.1      Consent of Independent Auditors

--------------
*      Incorporated by reference to exhibits filed with the Company's Current
       Report on Form 8-K filed on February 1, 2001.

**     Incorporated by reference to exhibits filed with the Company's
       Registration Statement on Form S-1, File No. 333-14007.

***    Incorporated by reference to exhibits filed with the Company's 1997 Proxy
       Statement, File No.  000-21735

****   Incorporated by reference to exhibits filed with the Company's Quarterly
       Report on Form 10-Q for the quarter ended March 31, 2000.

*****  Incorporated by reference to exhibits filed with the Company's Quarterly
       Report on Form 10-Q for the quarter ended June 30, 2000.

                                       38
<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.

Credit Management Solutions, Inc.

By: /s/ Scott L. Freiman                             April 2, 2001
    --------------------------------------
    Scott L. Freiman
    President and Chief Executive Officer
    (Principal Executive Officer)

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.

By: /s/ John J. McDonnell, Jr.                       April 2, 2001
    --------------------------------------
    John J. McDonnell, Jr.
    Chairman of the Board of Directors

By: /s/ Scott L. Freiman                             April 2, 2001
    --------------------------------------
    Scott L. Freiman
    President, Chief Executive Officer and
    Director (Principal Executive Officer)

By: /s/ Robert P. Vollono                            April 2, 2001
    --------------------------------------
    Robert P. Vollono
    Senior Vice President, Treasurer,
    Chief Financial Officer and Director
    (Principal Financial and Accounting Officer)

By: /s/ Stephen X. Graham                            April 2, 2001
    --------------------------------------
    Stephen X. Graham
    Director

By: /s/ James R. DeFrancesco                         April 2, 2001
    --------------------------------------
    James R. DeFrancesco
    Director


                                       39
<PAGE>

                                 EXHIBIT INDEX

       2.1       Agreement and Plan of Merger by and among The First American
                 Corporation, Rusti Corp. and the Company, dated as of January
                 30, 2001*

       3.1       Certificate of Incorporation of the Company**

       3.2       Bylaws of the Company**

       4.1       Specimen certificate for Common Stock of the Company**

       4.2       See Exhibits 3.1 and 3.2 for provisions of the Certificate
                 of Incorporation 4 and Bylaws of the Company defining rights
                 of holders of Common Stock of the Company

       10.1      Form of Project Commencement Agreement**

       10.2      Form of Software License Agreement**

       10.3      Form of Software Maintenance Agreement**

       10.4      Form of Professional Services Agreement**

       10.5      Form of CreditConnection Lender Agreement (for CreditRevue
                 Licensees)**

       10.6      Form of CreditConnection Lender Agreement (for non-CreditRevue
                 Licensees)**

       10.7      Form of CreditConnection Dealer Subscription Agreement**

       10.8.1    Office Building Lease between Symphony Woods Limited
                 Partnership and the Company dated October 29, 1993**

       10.8.2    Office Building Lease between Symphony Woods Limited
                 Partnership and the Company dated February 10, 1995**

       10.8.3    First Amendment to Lease dated March 29, 1995**

       10.8.4    Second Amendment to Lease dated August 12, 1996**

       10.8.5    135 National Business Parkway Lease between Constellation Real
                 Estate, Inc. and the Company dated April 27, 1998****

       10.8.6    First Amendment of 135 National Business Parkway Lease dated
                 December 23, 1998****

       10.9      Promissory Note dated December 31, 1995 given by the Company
                 to James R. DeFrancesco**

       10.10     Business Loan Agreement between The Columbia Bank and the
                 Company dated June 10, 1994**

       10.11     1996 Credit Management Solutions, Inc. Non-Qualified Stock
                 Option Plan**

       10.12     1996 Credit Management Solutions, Inc. Employee Stock Purchase
                 Plan**

       10.13     1996 Credit Management Solutions, Inc. Long-Term Incentive
                 Plan**

       10.14     Form of Tax Indemnification Agreement**

       10.15     1996 Credit Management Solutions, Inc. Non-Qualified Stock
                 Option Plan**

       10.16     1997 Credit Management Solutions, Inc. Stock Incentive Plan***

       10.17     Employment Agreement between Miles Grody and the Company
                 dated June 27, 2000*****

       10.18     Employment Agreement between Scott Freiman and the Company
                 dated June 27, 2000*****

       10.19     Employment Agreement between Robert Vollono and the Company
                 dated June 27, 2000*****

       10.20     Form of Voting Agreement, dated as of January 30, 2001, by and
                 among The First American Corporation and certain stockholders
                 of the Company*

       10.21     Consulting Agreement between Businessliner, Inc. and the
                 Company dated as of May 20, 2000 (filed herewith)

       10.22     Amendment, dated January 15, 2001, to Consulting Agreement
                 between Businessliner, Inc. and the Company (filed herewith)

       10.23     Employment Agreement between Howard Tischler and the Company
                 effective January 1, 2000 (filed herewith)

       10.24     Form of Amendment to Employment Agreements entered into between
                 the Company and each of Scott Freiman, Miles Grody, Howard
                 Tischler and Robert Vollono (filed herewith)

       23.1      Consent of Independent Auditors

--------------
*      Incorporated by reference to exhibits filed with the Company's Current
       Report on Form 8-K filed on February 1, 2001.

**     Incorporated by reference to exhibits filed with the Company's
       Registration Statement on Form S-1, File No. 333-14007.

***    Incorporated by reference to exhibits filed with the Company's 1997 Proxy
       Statement, File No.  000-21735

****   Incorporated by reference to exhibits filed with the Company's Quarterly
       Report on Form 10-Q for the quarter ended March 31, 2000.

*****  Incorporated by reference to exhibits filed with the Company's Quarterly
       Report on Form 10-Q for the quarter ended June 30, 2000.

                                      40

<PAGE>

              CREDIT MANAGEMENT SOLUTIONS, INC. AND SUBSIDIARIES

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Report of Independent Auditors                                          F-2
Consolidated Balance Sheets                                             F-3
Consolidated Statements of Operations                                   F-4
Consolidated Statements of Shareholders' Equity                         F-5
Consolidated Statements of Cash Flows                                   F-6
Notes to Consolidated Financial Statements                              F-7


                                      F-1
<PAGE>

                        Report of Independent Auditors

The Board of Directors and Shareholders
Credit Management Solutions, Inc.

We have audited the accompanying consolidated balance sheets of Credit
Management Solutions, Inc. and subsidiaries as of December 31, 2000 and 1999,
and the related consolidated statements of operations, shareholders' equity and
cash flows for each of the three years in the period ended December 31, 2000.
These financial statements 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 auditing standards generally accepted
in the United States.  Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Credit Management
Solutions, Inc. and subsidiaries at December 31, 2000 and 1999, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.

                                             /s/ Ernst & Young LLP

Baltimore, Maryland
February 23, 2001

                                      F-2
<PAGE>

              CREDIT MANAGEMENT SOLUTIONS, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                December 31,
                                                                        ---------------------------
                                                                            2000           1999
                                                                        ------------   ------------
<S>                                                                     <C>            <C>
ASSETS
Current assets:
   Cash and cash equivalents                                            $  1,588,133   $  3,594,328
   Investments available-for-sale                                          2,529,097      1,316,470
   Accounts receivable, net of allowance of $339,681 and
      $311,583 in 2000 and 1999, respectively                              6,558,672      5,724,256
   Costs and estimated earnings in excess of
      billings on uncompleted contracts                                       25,779          5,891
   Prepaid expenses and other current assets                                 362,720        474,725
                                                                        ------------   ------------
Total current assets                                                      11,064,401     11,115,670

Property and equipment:
   Computer equipment and software                                         5,775,962      4,826,085
   Office furniture and equipment                                          1,223,036      1,458,793
   Leasehold improvements                                                  3,189,184      3,177,925
                                                                        ------------   ------------
                                                                          10,188,182      9,462,803
   Accumulated depreciation and amortization                              (4,651,211)    (3,065,136)
                                                                        ------------   ------------
                                                                           5,536,971      6,397,667
Software development costs                                                 3,625,665      1,932,867
Other assets                                                                  37,463         46,386
                                                                        ------------   ------------
Total assets                                                            $ 20,264,500   $ 19,492,590
                                                                        ============   ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                     $  2,944,574   $  2,163,044
   Accrued payroll and related expenses                                    1,161,131        722,389
   Billings in excess of costs and estimated
      earnings on uncompleted contracts                                      367,319        101,046
   Deferred revenue                                                        3,547,108      2,920,904
   Current portion of deferred tenant allowance                              144,866        144,866
   Short-term borrowings                                                     798,000        798,000
   Current portion of capital lease obligations                                   --         25,402
                                                                        ------------   ------------
Total current liabilities                                                  8,962,998      6,875,651

Deferred tenant allowance, less current portion                              995,952      1,140,818
                                                                        ------------   ------------
Total liabilities                                                          9,958,950      8,016,469

Commitments and contingent liabilities                                            --             --

Shareholders' equity:
   Preferred stock, $.01 par value; 1,000,000 shares authorized;
   no shares issued or outstanding                                                --             --
   Common stock, $.01 par value; 40,000,000 shares authorized;
      7,824,113 and 7,689,570 shares issued and outstanding at
      December 31, 2000 and 1999, respectively                                78,241         76,896
   Additional paid-in capital                                             27,770,711     27,034,049
   Accumulated deficit                                                   (17,543,402)   (15,634,824)
                                                                        ------------   ------------
Total shareholders' equity                                                10,305,550     11,476,121
                                                                        ------------   ------------
Total liabilities and shareholders' equity                              $ 20,264,500   $ 19,492,590
                                                                        ============   ============
</TABLE>

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

                                      F-3
<PAGE>

               CREDIT MANAGEMENT SOLUTIONS, INC AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                               Year  ended December 31,
                                                       ----------------------------------------
                                                           2000         1999           1998
                                                       -----------   -----------   ------------
<S>                                                    <C>           <C>           <C>
Revenues:
  License and software development fees                $12,349,667   $12,872,321   $ 10,186,421
  Maintenance fees                                       6,442,967     5,059,352      4,294,572
  Computer hardware sales                                  972,337     1,248,615        776,790
  Service bureau revenues                                5,408,256     3,594,717      1,644,991
                                                       -----------   -----------   ------------
                                                        25,173,227    22,775,005     16,902,774
Costs of revenues:
  Cost of license and software development fees          7,323,375     6,504,519      6,988,649
  Cost of maintenance fees                               1,402,122       940,091      1,108,367
  Cost of computer hardware sales                        1,201,837     1,528,243        952,662
  Cost of service bureau                                 4,595,746     3,038,483      3,398,453
                                                       -----------   -----------   ------------
                                                        14,523,080    12,011,336     12,448,131
                                                       -----------   -----------   ------------
Gross profit                                            10,650,147    10,763,669      4,454,643

Other operating expenses:
  Selling, general and administrative expenses          12,011,636    12,122,557     12,823,909
  Research and development costs                           758,440     1,458,331      1,964,057
                                                       -----------   -----------   ------------
                                                        12,770,076    13,580,888     14,787,966
                                                       -----------   -----------   ------------
Loss from operations                                    (2,119,929)   (2,817,219)   (10,333,323)

Other income (expense):
  Interest expense                                         (88,671)      (57,426)       (24,965)
  Interest income                                          300,022       319,869        788,257
                                                       -----------   -----------   ------------
                                                           211,351       262,443        763,292
                                                       -----------   -----------   ------------
Net loss                                               $(1,908,578)  $(2,554,776)  $ (9,570,031)
                                                       ===========   ===========   ============
Basic and diluted loss per common share                $     (0.24)  $     (0.33)  $      (1.25)
                                                       ===========   ===========   ============
Weighted-average shares used in computation              7,798,679     7,660,897      7,636,217
                                                       ===========   ===========   ============
</TABLE>


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

                                      F-4
<PAGE>

              CREDIT MANAGEMENT SOLUTIONS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                              Common Stock
                                         -----------------------
                                                                   Additional
                                          Number                     Paid-In     Accumulated
                                         of Shares      Amount       Capital       Deficit        Total
                                         ---------    ----------   -----------  ------------   -----------
<S>                                      <C>         <C>           <C>          <C>            <C>
Balance at January 1, 1998               7,615,510    $   76,155   $26,645,247  $ (3,510,017)  $23,211,385
 Issuance of common stock under
   employee stock purchase program          19,572           196       134,653            --       134,849
 Exercise of options to purchase
   common stock                             14,688           146        73,294            --        73,440
 Net loss for 1998                              --            --            --    (9,570,031)   (9,570,031)
                                         ---------    ----------   -----------  ------------   -----------
Balance at December 31, 1998             7,649,770        76,497    26,853,194   (13,080,048)   13,849,643
 Issuance of common stock under
   employee stock purchase program          14,840           149        55,105            --        55,254
 Exercise of options to purchase
   common stock                             24,960           250       125,750            --       126,000
 Net loss for 1999                              --            --            --    (2,554,776)   (2,554,776)
                                         ---------    ----------   -----------  ------------   -----------
Balance at December 31, 1999             7,689,570        76,896    27,034,049   (15,634,824)   11,476,121
 Issuance of common stock under
   employee stock purchase program           6,349            63        29,614            --        29,677
 Exercise of options to purchase
   common stock                            128,194         1,282       707,048            --       708,330
 Net loss for 2000                              --            --            --    (1,908,578)   (1,908,578)
                                         ---------    ----------   -----------  ------------   -----------
Balance at December 31, 2000             7,824,113    $   78,241   $27,770,711  $(17,543,402)  $10,305,550
                                         =========    ==========   ===========  ============   ===========

</TABLE>

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

                                      F-5
<PAGE>

              CREDIT MANAGEMENT SOLUTIONS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                        Year ended December 31,
                                                                ----------------------------------------
                                                                2000              1999              1998
                                                                ----              ----              ----
<S>                                                         <C>               <C>               <C>
Operating activities:
Net loss                                                    $ (1,908,578)     $ (2,554,776)     $ (9,570,031)
Adjustments:
      Depreciation                                             1,729,520         1,800,964         1,199,194
      Amortization of software development costs                      --            60,861           119,721
      Decrease in deferred tenant allowance                     (144,866)         (162,974)               --
      Loss on disposal of property and
         equipment                                                77,189         1,215,473           302,878
         Changes in operating assets and liabilities:
         Accounts receivable, net                               (834,416)         (179,240)       (1,936,275)
         Prepaid expenses and other current assets               112,005          (193,511)          183,334
         Accounts payable                                        781,530        (2,004,177)          102,200
         Accrued payroll and related expenses                    438,742            53,759          (390,547)
         Net billings in excess of costs and
            estimated earnings on uncompleted contracts          246,385          (702,029)          712,537

      Deferred revenue                                           626,204            (1,019)        1,289,584
      Other lease obligations                                         --          (732,126)          732,126
                                                            ------------      ------------      ------------
Net cash provided by (used in) operating activities            1,123,715        (3,398,795)       (7,255,279)

Investing activities:
Purchase of investments available-for-sale                   (13,451,832)       (4,061,527)      (11,166,659)
Sale of investments available-for-sale                        12,239,205         9,227,078         4,684,638
Proceeds from sale of property and equipment                       7,423            55,563           162,672
Purchases of property and equipment                             (953,436)         (576,222)       (4,063,464)
Capitalized software development costs                        (1,692,798)       (1,655,004)         (278,863)
Decrease in other assets                                           8,923             2,974           374,526
                                                            ------------      ------------      ------------
Net cash provided by (used in) investing activities           (3,842,515)        2,992,862       (10,287,150)

Financing activities:
Payments under capital lease obligations and short-term
      borrowings                                                 (25,402)          (69,558)         (144,595)
Proceeds from short-term borrowings                                   --           798,000                --
Proceeds from exercise of stock options                          708,330           126,000            73,440
Proceeds from issuance of common stock                            29,677            55,254           134,849
                                                            ------------      ------------      ------------
Net cash provided by financing activities                        712,605           909,696            63,694
                                                            ------------      ------------      ------------
Net change in cash and cash equivalents                       (2,006,195)          503,763       (17,478,735)
Cash and cash equivalents at beginning of year                 3,594,328         3,090,565        20,569,300
                                                            ------------      ------------      ------------

Cash and cash equivalents at end of year                    $  1,588,133      $  3,594,328      $  3,090,565
                                                            ============      ============      ============
</TABLE>


    The accompanying notes are integral part of these financial statements.

                                      F-6

<PAGE>

              CREDIT MANAGEMENT SOLUTIONS, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Basis of Presentation and Significant Accounting Policies

Basis of Presentation of Financial Statements

Description of Business

Credit Management Solutions, Inc. and subsidiaries (the "Company") develops and
provides software solutions and services for automating the consumer and small
business credit analysis, decisioning and funding process. The Company's
customers are primarily banks and other financial institutions located
throughout the United States.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, CreditOnline, Inc. (formerly known as
CreditConnection, Inc.) and CMSI Systems, Inc. The CreditOnline subsidiary
operates an automated service bureau which electronically assembles and
transmits between merchants and credit grantors credit applications of the
merchants' customers. CMSI Systems, Inc. operates the Company's software license
and related services business. All material intercompany accounts and
transactions have been eliminated upon consolidation.

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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

Significant Accounting Policies

Cash Equivalents

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. The cost of these
investments is equivalent to fair value.

Investments

Available-for-sale securities are carried at fair value, as measured on quoted
exchanges, with unrealized security holding gains and losses recognized in
comprehensive income. Realized gains and losses and declines in value judged to
be other than temporary on available-for-sale securities are included in
interest income.

At December 31, 2000, available-for-sale securities consisted of municipal,
corporate and government agency obligations, the cost of which approximates fair
value. The Company has not had significant realized or unrealized gains or
losses on its investments during the periods presented. These investments are
classified as current as all maturities are less than one year.

Property and Equipment

Property and equipment is stated at cost and depreciated using the straight-line
method based on estimated useful lives of between three and seven years.

                                      F-7
<PAGE>

Included in computer equipment and software are direct costs of computer
software developed for internal use. Costs incurred are capitalized and
amortized over periods not exceeding three years.

Amortization of leasehold improvements is provided using the straight-line
method over the lesser of the life of the improvement or the remaining term of
the lease. Assets held under capital leases are stated at the lesser of the
present value of future minimum payments using the Company's incremental
borrowing rate at the inception of the lease or the fair value of the property
at the inception of the lease. The assets recorded under capital leases are
amortized over the lesser of the lease term or the estimated useful life of the
assets in a manner consistent with the Company's depreciation policy for owned
assets.

Software Development Costs

Costs related to conceptual formulation and design of software products are
expensed as incurred. Costs incurred subsequent to the establishment of
technological feasibility, but prior to the product being available for general
release to customers, are capitalized and amortized over estimated productive
lives, generally three years. Amortization is recorded at the greater of the
amount computed using the ratio that current gross revenues for a product bear
to the total of current and anticipated future gross revenues for that product,
or the straight-line method.

The Company evaluates its investment in product development as events or changes
in circumstances may arise, for the purpose of determining whether the carrying
amount of such assets may exceed the net realizable value of the products. In
the event that capitalized costs of a product exceed the estimated net
realizable value of the product, such excess amount is expensed.

Deferred Tenant Allowances

Payments made by landlords to the Company as incentives under operating leases
are recorded as liabilities and recognized as reductions in rental expense
ratably over the terms of the leases.

Revenue Recognition

Revenues from long-term software license contracts for the customization and
modification of the Company's software products are recognized using the
percentage-of-completion method, measured generally on a cost incurred basis.
Costs consist primarily of direct labor and applicable overhead. Contracts in
progress are reviewed periodically as the work progresses, and revenues and
earnings are adjusted in current accounting periods based on revisions in
contract value and estimates to complete. Losses on contracts are provided for
in the period they are first determined.

The Company recognizes revenue from software maintenance contracts pro rata over
the term of the agreements, generally one-year. Revenues from sales of hardware
and software are recognized at time of shipment and when collection of the
receivable is probable. Payments received in advance of revenue recognition for
these services and product sales are included in deferred revenue. Service
bureau revenues are transaction-based revenues that are recognized when the
transaction is completed and collection is probable.

Advertising Costs

All advertising costs are expensed when incurred. Costs, which are included in
selling, general and administrative expense, for the year ended December 31,
2000, 1999 and 1998 are $308,206, $282,262 and $384,863, respectively.

Income Taxes

The Company uses the liability method in accounting for income taxes. Under this
method, deferred income tax assets and liabilities are determined based on
differences between financial reporting and tax

                                      F-8
<PAGE>

bases of assets and liabilities and are measured using the enacted tax rates and
laws that will be in effect when the differences are expected to reverse.

Reclassifications

Certain amounts in the 1999 and 1998 consolidated financial statements have been
reclassified to conform to the 2000 presentation.

Adoption of Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 was later amended by the
Financial Accounting Standards Board in 1999 and 2000 upon the issuance of SFAS
No. 137 and SFAS No. 138. These standards, which the Company adopted on January
1, 2001, provide a comprehensive and consistent method for the recognition and
measurement of derivatives and hedging activities. The adoption of SFAS No. 133
and its amendments did not have any impact on the consolidated financial
statements.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements." The
Company adopted the provisions of SAB No. 101 in its consolidated financial
statements in 2000. The adoption of this pronouncement did not have any impact
on the Company's revenue recognition policies, consolidated financial position
or results of operations.

2.   Income Taxes

The significant items comprising the Company's net deferred tax assets are as
follows:

                                                             December 31
                                                      -------------------------
                                                         2000          1999
                                                         ----          ----
Deferred tax assets:
  Net operating loss carry forwards                   $ 8,452,812   $ 7,381,967
  Accrued expenses                                        133,436       123,038
  Provision for bad debts                                 135,872       124,633
  Revenue recognition                                     136,617            --
                                                      -----------   -----------
Total deferred tax assets                               8,858,737     7,629,638
Deferred tax liabilities:
  Software development costs                            1,450,266       773,147
  Revenue recognition                                          --        (2,356)
  Depreciation                                            203,401       390,484
                                                      -----------   -----------
Total deferred tax liabilities                          1,653,677     1,161,275

Net future income tax benefit                           7,205,070     6,468,363
Valuation allowance for deferred tax assets            (7,205,070)   (6,468,363)
                                                      -----------   -----------
Net deferred tax assets                               $        --   $        --
                                                      ===========   ===========

A reconciliation of income tax expense computed at the U.S. Federal statutory
rate of 34% to the recorded amount of income tax expense is as follows:

<TABLE>
<CAPTION>
                                                                       Year ended December 31
                                                            --------------------------------------------
                                                                2000            1999            1998
                                                            -----------     -----------     ------------
<S>                                                         <C>             <C>              <C>
Tax expense at U.S. statutory rate                          $  (648,917)    $  (868,624)     $(3,253,811)
State income taxes                                             (114,515)       (153,287)        (574,202)
Effect of permanent differences                                  26,725          38,164           24,235
Effect of change in valuation allowance for deferred
   tax assets                                                   736,707         983,747        3,803,778
                                                            -----------     -----------      -----------
Total                                                       $        --     $        --      $        --
                                                            ===========     ===========      ===========
</TABLE>

At December 31, 2000 the Company had net operating loss carry forwards of
$21,132,030 which begin to expire in 2011. Income tax regulations contain
provisions which may limit the net operating loss carryforwards available to be
used in any given year if certain events occur, including significant changes in
ownership.

                                      F-9
<PAGE>

3.   Loss Per Share

The following table summarizes the computations of basic and diluted loss per
common share:

<TABLE>
<CAPTION>
                                                     Year ended December 31
                                                --------------------------------
                                                2000          1999          1998
                                                ----          ----          ----
<S>                                          <C>           <C>           <C>
Numerator:
 Net loss                                    $(1,908,578)  $(2,554,776)  $(9,570,031)
                                             ===========   ===========   ===========
Denominator:
 Weighted-average shares                       7,798,679     7,660,897     7,636,217
                                             ===========   ===========   ===========
Basic and diluted loss per common share      $     (0.24)  $     (0.33)  $     (1.25)
                                             ===========   ===========   ===========
</TABLE>

Diluted loss per share is equal to basic loss per share in all years presented
because if potentially dilutive securities were included in the computation, the
result would be anti-dilutive. These potentially dilutive securities consist of
stock options as described in Note 10.

4.   Impairment Charge

The Company recorded an impairment charge of $1.2 million on a pre-tax basis
($0.16 per share) during the fourth quarter of 1999. This charge resulted from
the impairment of computer software developed by third parties to integrate
some of the Company's internal systems. During the fourth quarter of 1999, due
to concerns about the software's functionality, the Company abandoned the
integration project and recorded a charge for the carrying amount of the assets
it will no longer utilize. The impairment charge has been classified in the
consolidated statement of operations as selling, general and administrative
expenses.

5.   Supplemental Disclosures of Non-Cash Investing and Financing Activities

Interest paid during the years ended December 31, 2000, 1999, and 1998 was
$88,671, $57,426 and $24,965, respectively. The Company paid no amounts related
to income taxes during the three years ended December 31, 2000.

6.   Costs and Estimated Earnings on Uncompleted Contracts

Uncompleted contracts consist of the following components:

<TABLE>
<CAPTION>
                                             Balance Sheet Caption
                                      -----------------------------------
                                          Costs and         Billings in
                                      estimated earnings  excess of costs
                                         in excess of      and estimated
                                           billings          earnings          Total
                                      ------------------  ---------------   ------------
<S>                                   <C>                 <C>               <C>
December 31, 1999
      Costs and estimated earnings        $  169,923        $  261,742       $  431,665
      Billings                               164,032           362,788          526,820
                                          ----------        ----------       ----------
                                          $    5,891        $ (101,046)      $  (95,155)
                                          ==========        ==========       ==========
December 31, 2000
      Costs and estimated earnings        $  209,940        $1,760,763       $1,970,703
      Billings                               184,161         2,128,082        2,312,243
                                          ----------        ----------       ----------
                                          $   25,779        $ (367,319)      $ (341,540)
                                          ==========        ==========       ==========
</TABLE>

All receivables from contracts in-progress are expected to be collected within
twelve months.



                                      F-10
<PAGE>

7.   Bank Line of Credit

The Company has a revolving line of credit with a bank which allows for
aggregate borrowings of $1.5 million through the expiration date of April 1,
2001. Borrowings under the line of credit are secured by the Company's accounts
receivable and property and equipment, and bear interest at the bank's prime
rate plus one percent (9.50% at December 31, 2000). Under the terms of the loan
agreement, the Company is required to comply with certain covenants including a
restriction on assuming additional indebtedness without the prior written
consent of the bank. As of December 31, 2000, the Company was in compliance with
all covenants. As of December 31, 2000, the Company had $798,000 outstanding
under this line of credit.

8.   Capital Lease Obligations

The Company leases equipment under capital leases. Property and equipment
includes the following amounts for leases that have been capitalized at
December 31, 1999:

<TABLE>

<S>                                                     <C>
Computer equipment                                      $ 122,295
Office furniture and equipment                            135,905
                                                        ---------
Less: accumulated amortization                            258,200
                                                         (142,933)
                                                        ---------
                                                        $ 115,267
                                                        =========
</TABLE>

Amortization of leased assets is included in depreciation expense.

At December 31, 2000, no amounts are due under capital lease obligation, and no
assets are capitalized under capital leases.

9.   Other Lease Obligations

During 1998, the Company relocated its corporate headquarters, and at December
31, 1998 remained obligated under operating leases for unutilized space at its
former headquarters. Accordingly, in 1998 the Company estimated the present
value of its future minimum obligations and recorded $1,062,425 of rent expense.

During 1999, the Company sublet portions of the unutilized space and terminated
the leases on the remaining space. As a result of the 1999 agreements, the
present value of the future minimum lease payments was reduced by $831,660.
This amount was recorded as a reduction of rent expense in 1999.

10.  Stock Options

The Company records compensation expense for all stock-based compensation plans
using the intrinsic value method prescribed by APB Opinion 25, Accounting for
Stock Issued to Employees ("APB No. 25"). Under APB No. 25, if the exercise
price of the Company's employee stock options equals the quoted value of the
underlying stock on the date of grant, no compensation expense is generally
recognized. Financial Accounting Standards Board Statement No. 123, Accounting
for Stock-Based Compensation ("Statement No. 123"), encourages companies to
recognize expense for stock-based awards based on their estimated value on the
date of grant. Statement No. 123 requires the disclosure of pro forma income and
earnings per share data in the notes to the financial statements if the fair
value method is not elected. The Company supplementally discloses in these
financial statements the pro forma information as if the fair value method had
been adopted.

                                      F-11
<PAGE>

In 1997, the Company adopted the 1997 Stock Incentive Plan (the "1997 Plan").
The 1997 Plan provides for the granting of either non-qualified or qualified
options to purchase an aggregate of up to 3,400,000 shares of common stock,
subject to adjustment, to employees of the Company and others. Each year, the
1997 Plan allows for a one percent increase in the number of shares available to
be granted. At December 31, 2000, the Company had 3,503,000 shares of common
stock available for grant. The 1997 Plan includes a discretionary option grant
program, a salary investment option grant program, a stock issuance program, an
automatic option grant program and a director fee option grant program.

In 1999, the Company issued options outside the 1997 Plan to purchase 375,000
shares of common stock, pursuant to certain officer employment agreements. At
December 31, 2000, these options remained outstanding.

A summary of the Company's stock options activity and related information is as
follows:

<TABLE>
<CAPTION>
                                                     2000                       1999                      1998
                                            ----------------------     ----------------------     ---------------------
                                                         Weighted-                  Weighted-                  Weighted
                                                          Average                    Average                    Average
                                                         Exercise                   Exercise                   Exercise
                                              Options      Price         Options      Price         Options      Price
                                            -----------  ---------     -----------  ---------     -----------  --------
<S>                                         <C>          <C>           <C>          <C>           <C>          <C>
Options outstanding--
  beginning of year                          3,494,458     $5.59        3,669,648     $6.33        2,691,844     $5.79
Granted                                        370,072      3.93          841,350      4.67        1,201,880      7.33
Exercised                                     (128,194)     5.53          (24,960)     5.05          (14,688)     7.70
Forfeited                                     (346,774)     6.11         (991,580)     7.54         (209,388)     5.00
                                            ----------     -----       ----------     -----       ----------     -----
Options outstanding--
end of year                                  3,389,562     $5.36        3,494,458     $5.59        3,669,648     $6.33
                                            ----------     -----       ----------     -----       ----------     -----
Exercisable at end of year                   2,207,019     $5.40        1,847,688     $5.45        1,583,228     $5.32
                                            ----------     -----       ----------     -----       ----------     -----
</TABLE>

During all years presented, the Company issued options to purchase common stock
with exercise prices at or above the market value of the Company's common stock
at the date of grant. The following table summarizes the weighted-average
exercise price and fair values of options granted during the years ended
December 31:

<TABLE>
<CAPTION>
                                        Number of     Weighted Average     Weighted Average
                                        Shares        Exercise Price       Fair Value
                                        ---------     ----------------     ----------------
<S>                                     <C>           <C>                  <C>
1999
Market price equal to exercise
price on date of grant                    587,560     $           4.18     $           3.24

Market price less than
exercise price on date of grant           253,790     $           6.11     $           2.74

1998
Market price equal to exercise
price on date of grant                    451,880     $           6.84     $           4.33

Market price less than
exercise price on date of grant           750,000     $           7.60     $           2.41

</TABLE>

Options granted during 2000 had a fair value of $3.24

                                      F-12
<PAGE>

              CREDIT MANAGEMENT SOLUTIONS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

10.  Stock Options (continued)

Exercise prices for options outstanding as of December 31, 2000 ranged from
$1.13 to $18.50 as follows:

<TABLE>
<CAPTION>
                                                                                     Weighted-
                                                                    Weighted-         average
                                                 Weighted-           average       exercise price
                                                  average       exercise price of        of
   Exercise          Options      Options    remaining life in       options          options
     Price         Outstanding  Exercisable        years           exercisable      outstanding
   --------        -----------  -----------  -----------------  -----------------  --------------
<S>                <C>          <C>          <C>                <C>                <C>
$1.13 to $5.38      2,976,200    1,975,521         6.63              $ 4.95            $ 4.76
$5.50 to $8.00        159,442       64,317         8.06              $ 7.79            $ 7.20
$8.25 to $9.60        131,820      103,678         6.08              $ 9.56            $ 9.54
$9.75 to $18.50       122,100       63,503         7.64              $11.74            $10.94
</TABLE>

All options granted under the Plan are subject to vesting provisions at the
discretion of the Board of Directors. Options granted to date vest in varying
percentages through 2004.

Pro forma net loss and loss per share information required by Statement No. 123
has been determined as if the Company had accounted for its employee stock
options under the fair value method. The fair value of options granted in 2000,
1999 and 1998 was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted average assumptions: risk-free
interest rate of 5.8% in 2000 and 1999 and 5.5% in 1998; dividend yield of 0% in
2000, 1999 and 1998; volatility factor of the expected market price of the
Company's common stock of 1.07, 1.00 and 0.81 in 2000, 1999 and 1998,
respectively; and a weighted-average expected life of the options of seven years
in 2000, eight years in 1999, and five years in 1998.

Because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models methods
prescribed by Statement No. 123 do not necessarily provide a single measure of
the fair value of its employee stock options.

For the purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The Company's
pro forma information follows:

                                     2000           1999           1998
                                     ----           ----           ----
Pro forma net loss               $(3,844,119)   $(3,984,340)   $(10,737,437)
Pro forma loss per share
(basic and diluted)              $     (0.49)   $     (0.52)   $      (1.41)

                                      F-13
<PAGE>

              CREDIT MANAGEMENT SOLUTIONS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

11.  Profit Sharing Plan

The Company maintains a 401(k) profit sharing plan which covers all employees
with at least six months of service. In addition, the Company may make a
discretionary contribution based on each eligible participant's compensation.
Participant contributions vest immediately and employer contributions vest over
a six year period. During 1999 and 1998, the Company matched 20% per annum of
the first $1,000 contributed to the plan by each employee. In January 2000, the
Company began matching 50% of the first 4% of annual contributions by
participating employees up to a maximum annual contribution per participating
employee of $5,250. Contributions for the years ended December 31, 2000, 1999
and 1998 were $133,614, $29,745 and $33,189, respectively.


                                     F-14
<PAGE>

               CREDIT MANAGEMENT SOLUTIONS, INC. AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

12.  Operating Leases

The Company leases certain office space and equipment under non-cancelable
operating lease agreements which expire through 2008. The Company also subleases
office space that was vacated in 1998. Future minimum lease payments at December
31, 2000 for leases and subleases with initial terms of one year or more consist
of the following:

                                    As Lessee             As Sublessor
                                   -----------            ------------
2001                               $ 1,558,913            $    223,758
2002                                 1,467,620
2003                                 1,441,524
2004                                 1,427,271
2005                                 1,459,331
Thereafter                           4,383,552
                                   -----------            ------------
Total minimum lease payments       $11,738,211            $    223,758
                                   ===========            ============


Rent expense under all operating leases for the year ended December 31, 2000,
1999 and 1998 was $1,821,287, $809,236 and $2,359,666, respectively. Rent
expense is net of $211,315 and $200,102 received under sublease agreements for
the years ended December 31, 2000 and 1999, respectively.

13.  Segment Reporting

During 2000, the Company organized its operations into two wholly owned
subsidiaries, CreditOnline, Inc. and CMSI Systems, Inc. CreditOnline, Inc.
operates an automated service bureau which electronically assembles and
transmits between merchants and credit grantors credit applications of the
merchants' customers. CMSI Systems, Inc. operates the Company's software license
and related services business. Previously, the Company was organized into three
distinct business lines, Credit Decisioning Systems (CDS), E-Commerce and
Service Bureau Alliances (SBA). Segment information for the prior periods has
been reclassified to conform to the operating segments adopted in 2000.

The Company evaluates performance and allocates resources based on income from
operations before depreciation and amortization, and corporate general and
administrative expenses. Assets are not

                                      F-15
<PAGE>

               CREDIT MANAGEMENT SOLUTIONS, INC. AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

apportioned by segment and are not reviewed by management in assessing segment
performance. The accounting policies used by the reportable segments are the
same as those used by the Company and described in Note 1 to the consolidated
financial statements. There are no intercompany sales or transfers. The
subsidiaries are managed separately by presidents who are most familiar with the
segment's operations. The following table sets forth information on the
Company's reportable segments:

<TABLE>
<CAPTION>
                                           Year Ended December 31, 2000
                                  ----------------------------------------------
                                  CMSI Systems        Credit Online        Total
                                  ------------        -------------        -----
<S>                               <C>                 <C>                <C>
Revenues                          $20,620,270         $ 4,552,957        $25,173,227
Segment profits (loss)              8,323,786          (2,910,267)       $ 5,413,519
</TABLE>

<TABLE>
<CAPTION>
                                           Year Ended December 31, 1999
                                  ----------------------------------------------
                                  CMSI Systems        Credit Online        Total
                                  ------------        -------------        -----
<S>                               <C>                 <C>               <C>
Revenues                          $20,639,624         $ 2,135,381       $22,775,005
Segment profits (loss)              7,691,608          (2,312,258)      $ 5,379,350
</TABLE>

<TABLE>
<CAPTION>
                                           Year Ended December 31, 1998
                                  ----------------------------------------------
                                  CMSI Systems        Credit Online        Total
                                  ------------        -------------        -----
<S>                               <C>                 <C>               <C>
Revenues                          $15,627,754         $ 1,275,020       $16,902,774
Segment profits (loss)              3,622,615          (3,718,657)      $   (96,042)
</TABLE>

A reconciliation of segment profit (loss) for all segments to net loss for the
years ended December 31, 2000, 1999 and 1998 is as follows:

<TABLE>
<CAPTION>
                                            2000          1999         1998
                                            ----          ----         ----
<S>                                     <C>            <C>          <C>
Total segment profit (loss)             $ 5,413,519    $ 5,379,350  $   (96,042)
Corporate, general and administrative    (5,948,794)    (6,497,718)  (8,918,366)
Depreciation and amortization            (1,584,654)    (1,698,851)  (1,318,915)
Net interest income                         211,351        262,443      763,292
                                         -----------   -----------  -----------
Net loss                                 $(1,908,578)  $(2,554,776) $(9,570,031)
                                         ===========   ===========  ===========
</TABLE>

Substantially all of the revenues and assets of the Company's reportable
segments are attributed to or located in the United States.

For the years ended December 31, 2000, and 1998 one customer accounted for 12.4%
of total revenues. For the year ended December 31, 1999, no customer accounted
for 10% of total revenues.

14.  Quarterly Financial Data (unaudited)
     (data in thousands, except per share data)

The following is a summary of the quarterly results of operations for the years
ended December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                      2000                                              1999
                                    -----------------------------------------        ---------------------------------------
                                       Q4         Q3         Q2         Q1              Q4         Q3        Q2        Q1
                                    --------   --------   --------   --------        --------   --------  --------  --------
<S>                                 <C>        <C>        <C>        <C>             <C>        <C>       <C>       <C>
Total revenues                      $  6,901   $  6,430   $  6,645   $  5,197        $  5,241   $  5,261  $  6,141  $  6,132
Gross profit                           2,482      2,948      2,814      2,406           2,361      3,030     2,807     2,566
                                    --------   --------   --------   --------        --------   --------  --------  --------
Net profit (loss)                   $   (994)  $    (43)  $   (396)  $   (476)       $ (2,024)  $     61  $     54  $   (646)
                                    --------   --------   --------   --------        --------   --------  --------  --------
Income (loss) per share             $  (0.13)  $  (0.01)  $  (0.05)  $  (0.06)       $  (0.26)  $   0.01  $   0.01  $  (0.08)
                                    --------   --------   --------   --------        --------   --------  --------  --------
</TABLE>

                                     F-16


<PAGE>

15.  Subsequent Event

On January 30, 2001, the Company entered into an Agreement and Plan of Merger
with The First American Corporation, a California corporation ("First
American"), and Rusti Corp., a wholly-owned subsidiary of First American. If the
merger contemplated by the Agreement is completed, the Company's stockholders
will receive, for each share of common stock held by them, the right to receive
such fraction of a share of First American common stock equal to the quotient
(rounded to the nearest ten-thousandth decimal place) resulting from the
division of $6.25 by the average closing price per share of First American
common stock as reported on the New York Stock Exchange for the ten trading days
ended on the third trading day prior to the special meeting of the Company's
stockholders to be held for the purpose of voting upon the merger. However, if
the average closing price is greater than $30 per share, such average closing
price shall be deemed to be $30 per share, and if the average closing price is
less than $22 per share, the average closing price shall be deemed to be $22 per
share. Consummation of the merger is subject to various conditions, including,
among other things, receipt of the necessary approvals of the stockholders of
the Company, performance of covenants and agreements of the parties and other
customary terms. The merger is intended to constitute a reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended. The transaction
is expected to be completed in the second quarter of 2001.

                                      F-17