<PAGE>

   

                                                The following items were the
                                                subject of a form 12b-25 and
                                                are included herein: 
                                                Items 6, 7, 8, 14(a)(1) and
                                                (2) and Exhibits 23.1 and 27.1

    


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
   
                                    FORM 10-K/A
                             Amendment to Application or
                               Report filed pursuant to 
               Section 12, 13 or 15(d) of the Securities Exchange Act
                                       of 1934
    

                         Commission file number 0-19600

                                     CORE, INC.
               (Exact name of registrant as specified in its charter)
   
                                   Amendment No. 1

The undersigned registrant hereby amends the following items, financial 
statements, exhibits or other portions of its Annual Report for the fiscal 
year ended December 31, 1997 on Form 10-K as set forth in the pages attached 
hereto:

     Item 6.       Selected Financial Data

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

     Item 8.       Financial Statements and Supplementary Data

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

     Exhibit 23.1  Consent of Ernst & Young LLP, Independent Auditors

     Exhibit 27.1  Financial Data Schedule For Year Ended December 31, 1997

The information required by these Items is filed herewith by amendment 
pursuant to Rule 12b-15.

Pursuant to the requirements of the Securities Exchange Act of 1934, the 
registrant has duly caused this amendment to be signed on its behalf by the 
undersigned, thereunto duly authorized.


                                       CORE, INC.

Date: April 8, 1998                    By:  /s/ George C. Carpenter IV
                                            ---------------------------------
                                            George C. Carpenter IV
                                            Chairman of the Board of Directors
                                            and Chief Executive Officer
                                            (Principal Executive Officer)


Date: April 8, 1998                    By:  /s/ William E. Nixon
                                            ---------------------------------
                                             William E. Nixon
                                             Executive Vice President, Chief
                                             Financial Officer, Treasurer and
                                             Clerk (Principal Financial Officer)
    

                                       1


<PAGE>
   
Item 6.  Selected Financial Data.

      The following selected financial data are derived from the consolidated
financial statements of the Company, which have been audited by Ernst & Young
LLP, independent auditors. The earnings per share amounts prior to 1997 have
been restated to comply with Statement of Financial Accounting Standards No.
128, "Earnings Per Share." The data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the consolidated financial statements and related notes, and other
financial information included elsewhere herein.

<TABLE>
<CAPTION>
                                                   Year ended December 31,
                                     ------------------------------------------------
                                       1993     1994      1995     1996      1997
                                     ------------------------------------------------
                                        (In thousands, except per share amounts)
<S>                                   <C>       <C>      <C>       <C>       <C>    
Statement of Operations Data: 
Revenues                              $16,316   $16,746  $20,769   $28,806   $38,507
Cost of services                       10,714    11,305   12,839    17,741    23,330
                                      -----------------------------------------------
     Gross profit                       5,602     5,441    7,930    11,065    15,177

Operating expenses:
   General and administrative           5,096     4,265    4,787     6,285     7,940
   Sales and marketing                  1,787     1,563    1,499     1,744     2,483
   Merger costs                         1,182     1,114      994
   Corporate relocation                   163
   Non-recurring write-off of
      AmHealth acquisition                                           1,920
   Depreciation and amortization        1,067       915      905     1,338     1,955
   Write-off of goodwill                          2,294
                                      -----------------------------------------------
       Total operating expenses         9,295    10,151    8,185    11,287    12,378
                                      -----------------------------------------------

Income (loss) from operations          (3,693)   (4,710)    (255)     (222)    2,799

Other income (expense):
   Interest income                        396       296      240       385       590
   Interest expense                      (108)     (158)     (83)      (35)      (27)
   Other income (expense)                  29      (127)      19        16
                                      -----------------------------------------------
                                          317        11      176       366       563
                                      -----------------------------------------------
Income (loss) before income taxes      (3,376)   (4,699)     (79)      144     3,362
Provision for income taxes                                                       610
                                      -----------------------------------------------
Net income (loss)                     $(3,376)  $(4,699) $   (79)  $   144   $ 2,752
                                     ================================================
Net income (loss) per common share:
   Basic                              $ (0.73)  $ (1.01) $ (0.02)  $  0.03   $  0.38
                                      ===============================================
   Diluted                            $ (0.73)  $ (1.01) $ (0.02)  $  0.02   $  0.35
                                      ===============================================
Weighted average number of common
    shares and equivalents 
    outstanding:
   Basic                                4,611     4,668    4,755     5,713     7,246
                                      ===============================================
   Diluted                              4,611     4,668    4,755     6,473     7,934
                                      ===============================================
</TABLE>

<TABLE>
<CAPTION>

                                                      December 31,
                                      -----------------------------------------------
                                       1993     1994      1995     1996      1997
                                      -----------------------------------------------
                                                      (In thousands)
<S>                                   <C>       <C>      <C>       <C>       <C>    
Balance Sheet Data:
Cash and cash equivalents             $ 1,683   $     -  $ 1,006   $ 4,282   $ 7,945
Working capital                         6,597     4,612    3,152    15,781    11,850
Total assets                           15,972    12,504   11,869    27,844    32,815
Long-term debt and capital lease
 obligations                              223       121      817       344       190
Stockholders' equity                   12,237     7,553    7,648    24,456    27,659
</TABLE>

    
                                       2
<PAGE>
   
Item 7. Management's Discussion and Analysis of Financial Condition and
       Results of Operations.

Overview

      The Company provides managed disability services (which consist of the
Company's WorkAbility program, analytic consulting services, social security
disability benefits advocacy, Medicare coordination of benefits, bill audit
services and job analysis and loss prevention services), specialty physician and
behavioral health review services and health care benefits utilization review
and case management services. These services are provided principally to
self-insured employers, third-party administrators and insurance carriers. The
Company is typically compensated for these services either on a per review
(i.e., per case), hourly, per enrollee or percentage of cost recovery (for
social security advocacy and Medicare benefits services) basis. The managed
disability service line also includes a limited amount of revenue (1% for the
year ended December 31, 1997) from licensing fees attributable to license grants
by the Company of the medical protocol portion of the WorkAbility software
program.

Current Developments

      On April 14, 1997, CORE announced that the Company formed a strategic
alliance with Reed Group, Ltd. to develop a new generation of products designed
to better help employers manage their disability and workers' compensation
costs. Reed Group, based in Denver, publishes disability duration guidelines.
The guidelines entitled The Medical Disability Advisor, Workplace Guidelines for
Disability Durations are marketed in text, software, and license forms and are
currently used by more than 7,000 companies.

      On June 25, 1997, CORE announced that the Company purchased certain of the
assets of Social Security Disability Consultants and Disability Services, Inc.
(collectively, "SSDC"). SSDC, based in Novi, Michigan, is a disability
management services firm with two key areas of business: social security
disability benefits advocacy and Medicare coordination of benefits for Fortune
500 employers and others. The transaction was an asset purchase and has been
accounted for under purchase accounting rules. Consideration included cash
payments, future guaranteed payments and performance based payments.

      On July 31, 1997, the Company purchased the assets and certain liabilities
of Protocol Work Systems, Inc., a small Massachusetts based provider of job
analysis, employee physical abilities testing and other loss prevention services
to the workers' compensation market.

      On March 17, 1998, the Company purchased the operating assets and certain
liabilities of Transcend Case Management, Inc. ("TCM".) TCM, based in Orlando,
Florida, is a provider of workers' compensation case management services.

Results of Operations

      The following table sets forth certain statement of operations data for
the periods indicated expressed as a percentage of revenues:

                                             Year ended December 31,
                                            --------------------------
                                             1995     1996     1997
                                            --------------------------
                                                           
             Revenue                         100.0%  100.0%   100.0%
             Cost of services                 61.8    61.6     60.6
             Gross profit                     38.2    38.4     39.4
             General and administrative                    
             expense                          23.0    21.8     20.6
             Sales and marketing expense       7.2     6.1      6.4
                                                          
    

                                       3
<PAGE>
   
      The following table sets forth the contribution to total revenues of each
of the Company's principal service lines for the periods indicated:

<TABLE>
<CAPTION>

                                                     Year ended December 31,
                                 ---------------------------------------------------
                                       1995             1996            1997
                                 ---------------------------------------------------
                                  Amount  Percent  Amount   Percent  Amount  Percent
                                 ---------------------------------------------------
                                                  (Dollars in thousands)
    
    <S>                           <C>       <C>    <C>       <C>    <C>        <C>
    Managed disability            $ 5,476    26%   $12,532    44%   $21,389     56%
    Specialty physician and
     behavioral health review       8,845    43      9,176    32      9,969     26
    Utilization review and case     
     managemen                      6,448    31      7,098    24      7,149     18
                                  --------------------------------------------------
                                  $20,769   100%   $28,806   100%   $38,507    100%
                                  ==================================================
</TABLE>

Managed disability services include: CORE's WorkAbility services, analytic
consulting, social security disability benefits advocacy, Medicare coordination
of benefits, bill audit services, job analysis and loss prevention services and
license fees.

Years Ended December 31, 1997 and 1996

      Revenues increased by $9,701,000 (34%) from $28,806,000 in 1996 to 
$38,507,000 in 1997. Growth in managed disability services contributed 
$8,857,000 (91%) of the Company's increase in revenues and now includes 
revenues from the recently completed acquisitions of SSDC and Protocol Work 
Systems. Approximately 50% of the total revenue increase for the year is 
attributable to revenues generated from Bell Atlantic Corporation. CORE 
continued to expand its services provided to Bell Atlantic during 1997, its' 
first full year as a client. Each of the revenue components of managed 
disability services grew during 1997, with the exception of bill audit 
services which recorded signficantly lower revenues as a result of 
renegotiated client contracts. An increase in the volume of referrals 
resulted in increased revenues realized from specialty physician review 
services, growing 9% for the year ended 1997, as compared to the prior year. 
Revenues from utilization review and case management services remained 
relatively constant for the year ended 1997 as compared to the prior year. As 
a result of a decline in enrollment in our clients' indemnity plan based 
group health business, the Company expects utilization review and case 
management revenues to decline in future periods as compared to current year 
levels.

      For 1997, the Company's top five clients represented 43% of revenues
compared to 36% during 1996. Bell Atlantic accounted for approximately 23% of
revenue in 1997 and 13% of revenues for 1996. No other single client represented
more than 10% of total revenues in 1997 or 1996.

      Cost of services for the Company include direct expenses associated with
the delivery of its review and managed care services, including salaries for
professional, clerical and license support staff, the cost of physician reviewer
consultants and telephone expense. Cost of services increased $5,589,000 (32%)
from $17,741,000 in 1996 to $23,330,000 in 1997. The increase is primarily the
result of additional payroll costs associated with business acquisitions
completed in June and July of 1997 and increased staffing levels required to
service new and growing WorkAbility clients and growth in the Company's
specialty physician review services. Additionally, increased amortization
expense has been recorded as software enhancements to our operating systems are
placed into service.

      CORE's gross profit performance for the year ended 1997 improved slightly
to 39% from 38% in 1996. Gross profit performance for each of the Company's 
principal service lines for the years ended 1997 and 1996, respectively are: 
40% and 46% for managed disability services, 38% and 36% for specialty 
physician and behavioral health review servcies and 41% and 39% for 
utilization review and case management services. The decline in gross margins 
realized by our managed dssability service line is largely attributable to 
the lower revenues generated from our bill audit services.

      General and administrative expenses include the cost of executive,
administrative and information services personnel, rent and other overhead
items. General and administrative expenses increased $1,655,000 (26%) from
$6,285,000 in 1996 to $7,940,000 in 1997. Expenses increased due primarily to
higher costs associated with additional staffing in the information services
areas to support the growth of the Company. Higher costs in rent, insurance
costs, equipment rental and other general and administrative expenses relate
primarily to the Company's Silver Spring, Maryland operating center that opened
in July 1996, the expansion of space in the Company's Burlington, Massachusetts
facility in early 1997, and the acquisitions of SSDC and Protocol Work Systems
in June and July 1997, respectively. General and administrative expenses, 
    

                                       4
<PAGE>
   
as a percentage of revenues, decreased from 22% for 1996 to 21% for 1997. This
improvement is generally due to greater economies of scale related to higher
revenues.

      Sales and marketing expenses include, but are not limited to, salaries for
sales and account management personnel and travel expenses. Sales and marketing
expenses also include costs designed to increase revenues, such as participation
in and attendance at industry trade shows and conferences. Sales and marketing
expenses increased $739,000 (42%) from $1,744,000 in 1996 to $2,483,000 in 1997.
The increase is primarily due to increased staffing to support the sales and
product development departments as well as additional travel costs and costs for
participation in tradeshows. During 1997, the Company expanded its sales
organization, organized its now five senior sales consultants into five
geographical regions and has begun to focus its efforts on Fortune 500 company
prospects. Additionally, a sales tracking system was implemented in 1997 to
streamline prospective sales activities, centrally manage the Company's sales
activities and assist in identifying cross-selling opportunities of the
Company's products and services to take advantage of the recent acquisitions of
SSDC and Protocol Work Systems. The Company expects to invest an increased
amount of resources in sales and marketing in future periods.

      Depreciation and amortization expenses increased $617,000 (46%) from
$1,338,000 in 1996 to $1,955,000 in 1997. The increase is largely attributable
to increased depreciation expense on assets purchased for the new operating
center in Silver Spring, Maryland to service the Bell Atlantic Corporation
contract as well as increased amortization expense on the goodwill acquired in
the purchases of SSDC and Protocol Work Systems.

      Other income consists primarily of interest income, which represents
amounts earned by the Company's investments as reduced by interest expense.
Other income increased $196,000 (54%) from $366,000 in 1996 to $562,000 in 1997.
The increase is due to an increase in funds available for investment following a
public offering in August 1996 and a reduction in the use of the Company's line
of credit.

Years Ended December 31, 1996 and 1995

      Revenues increased by $8,037,000 (39%) from $20,769,000 in 1995 to
$28,806,000 in 1996. Approximately $7,056,000 (88%) of the Company's increase in
revenues came from growth in managed disability services. Approximately 47% of
the revenue increase for the year is attributable to revenues generated from
Bell Atlantic Corporation, to whom the Company began providing managed
disability services effective August 1, 1996. Additionally, with the acquisition
of CRS in October 1995, 1996 represented CORE's first full year of servicing the
workers' compensation market with bill audit services. The balance of the
increase in revenues can be largely attributed to the number of referrals
processed in each of the Company's principal service lines which increased over
the prior year.

      For 1996, the Company's top five clients represented 36% of revenues
compared to 30% during 1995. Bell Atlantic accounted for approximately 13% of
revenues for 1996. No other single client represented more than 10% of total
revenues in 1996 or 1995.

      Cost of services increased $4,902,000 (38%) from $12,839,000 in 1995 to
$17,741,000 in 1996. The increase is primarily the result of additional payroll
costs associated with processing a higher volume of referrals and increased
staffing levels required to service new and growing WorkAbility clients. CORE's
gross profit performance for the years ended 1995 and 1996 is unchanged at
approximately 38%, despite the addition of a significant customer during 1996.
Typically, when a major client such as Bell Atlantic Corporation is implemented
the Company expends a significant amount of resources during the implementation,
which can result in lower gross profit margins during the implementation period.
Consequently, the Company's results of operations for any one quarter may not be
indicative of results to be expected for any other quarter or for a particular
fiscal year.

      General and administrative expenses increased $1,497,000 (31%) from
$4,787,000 in 1995 to $6,284,000 in 1996. Expenses increased due primarily to
higher costs associated with additional staffing in the information services
areas to support the growth of the Company. Additionally, rent and other general
and administrative expenses have increased due to the opening of the Silver
Spring, Maryland operating center in July, 1996. General and administrative
expenses, as a percentage of revenues, decreased from 23% for 1995 to 22% for
1996. This improvement is generally due to greater economies of scale related to
higher revenues.

        Sales an marketing expenses increased $245,000 (16%) from $1,499,000 in
1995 to $1,744,000 in 1996. The increase is primarily due to increased travel
expenses in the account management department and increased staffing to 
    

                                       5
<PAGE>
   
support the marketing department. The Company's sales and marketing strategy has
historically focused the efforts of an industry known senior management team and
a smaller sales and marketing staff on fewer but significantly larger sales
prospects. During 1996, the Company maintained this approach, however has added
staffing to increase its distribution sales effort which is aimed at
intermediaries, e.g., insurance companies and TPAs, who provide sales leverage
and access to companies with 1,000-5,000 employees, thereby, broadening the
Company's target market.

      Depreciation and amortization expenses increased $433,000 (48%) from
$905,000 in 1995 to $1,338,000 in 1996. The increase is largely attributable to
increased depreciation expense on assets purchased for the new operating center
in Silver Spring, Maryland to service the Bell Atlantic Corporation contract as
well as increased amortization expense on the goodwill acquired in the purchase
of CRS.

      In connection with the termination of the AmHealth Acquisition Agreement
entered into by the Company with AmHealth, Inc. ("AmHealth") on May 10, 1996 and
terminated on July 24, 1996, the Company incurred a one-time charge to earnings
of $0.9 million for the write-off of transaction costs related to the proposed
AmHealth acquisition. Additionally, in connection with the proposed acquisition,
the Company made a $1.0 million loan to AmHealth (the "AmHealth Loan"). Because
there was substantial doubt about AmHealth's ability to repay the AmHealth Loan,
the Company wrote-off the AmHealth Loan during the year ended December 31, 1996
resulting in an additional non-recurring charge to earnings of $1.0 million.

      Other income consists primarily of interest income, which represents
amounts earned by the Company on investments held, as reduced by interest
expense, which primarily relates to borrowings under lines of credit. During
1996, other income increased $190,000 (108%) from $176,000 in 1995 to $366,000
in 1996 due to an increase in funds available for investment following a public
offering in August 1996 and the Company significantly reducing its use of its
lines of credit.

Financial Condition, Liquidity and Capital Resources

      For the year ended December 31, 1997, the Company's cash and cash
equivalents increased by $3,663,000. For this period, operating activities
provided $3,928,000 primarily due to net income of $2,752,000, depreciation and
amortization of $2,582,000 and an increase in accounts payable of $586,000,
offset by an increase in accounts receivable of $1,927,000. The Company's
investing activities used $254,000 of cash, primarily due to the acquisitions of
SSDC and Protocol Work Systems for $5,435,000 and equipment and furniture
purchases of $1,828,000 as offset by net sales of investments available-for-sale
of $7,216,000. The Company's financing activities used $11,000 for this period
primarily due to proceeds from the exercise of stock options and warrants as
offset by payments on obligations from acquisition.

      The Company leases its facilities and certain office equipment. Lease
commitments, which relate substantially to space rental, for the years ended
December 31, 1998 and December 31, 1999 are approximately $1.8 million and $1.5
million, respectively. All obligations held by the Company under lease
commitments expire on various dates through April 2002 and total $5.2 million as
of December 31, 1997.

      The Company has net operating loss carryforwards for income tax purposes
of approximately $5 million as of December 31, 1997, which can be used to reduce
future obligations for federal and state income taxes. The amount of net
operating loss carryforwards that can be utilized in any future year are limited
due to "equity structure shifts" in 1995 involving "5% shareholders" (as these
terms are defined in Section 382 of the Internal Revenue Code), which resulted
in a more than 50 percentage point change in ownership. The utilization of these
net operating loss carryforwards may be subject to further limitation provided
by the Internal Revenue Code of 1986 and similar state provisions. See Note 9 of
Notes to Consolidated Financial Statements of the Company.

      The Company plans to finance its operations and working capital
requirements with the proceeds of the August 1996 offering, earnings from
operations, investments on hand and other sources of available funds. The
Company presently believes that these resources will be sufficient to meet its
liquidity and funding requirements through at least the year 1998.
    

                                       6
<PAGE>
   
      The Company's primary computer application platforms were originally
designed to process and store dates in a four-character year format. The Company
believes this substantially reduces the magnitude of the effort required to
address the Year 2000 issue. CORE's major systems are effectively Year 2000
compliant and will require minor modifications. The Company has completed an
assessment of all internal applications and licensed operating systems, software
tools and utilities. Additionally, the Company has evaluated third party data
feeds, primarily to/from client's information systems and will have to modify or
replace portions of its software so that its computer systems will function
properly with respect to dates in the Year 2000 and thereafter.

      The Year 2000 project is estimated to be completed no later than December
31, 1998, which is prior to any anticipated impact on its operating systems. The
Company believes that with modifications to existing software and conversions to
new software the Year 2000 Issue will not pose significant operational problems
for its computer systems. The Company has initiated formal communications with
all of its significant suppliers and large customers to determine the extent to
which the Company's interface systems are vulnerable to those third parties'
failure to remediate their own Year 2000 Issues. There is no guarantee that the
systems of other companies on which the Company's systems rely will be timely
converted and would not have an adverse effect on the Company's systems.

      The costs of the Year 2000 project and the date on which the Company
believes it will complete the Year 2000 modifications are based on management's
best estimates, which were derived utilizing numerous assumptions of future
events, including the continued availability of certain resources and other
factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes, and similar
uncertainties.

Item 8. Financial Statements and Supplementary Data.

      The financial statements and supplementary data of CORE called for by this
item appear under the caption Index to Financial Statements (page F-1 hereof).
Such information is included elsewhere herein.
    

                                       7

<PAGE>

                                      PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULE, AND REPORTS ON FORM 8-K.

      (a) FINANCIAL STATEMENTS, FINANCIAL STATEMENTS SCHEDULE AND EXHIBITS.

   

       1. FINANCIAL STATEMENTS. The information called for by this item appears
          under the caption Index to Financial Statements (page F-1 hereof). 
          Such information is incorporated by reference herein.

       2. FINANCIAL STATEMENTS SCHEDULE. The information called for by this 
          item appears under the caption Index to Financial Statements (page 
          F-1 hereof). Such information is incorporated by reference herein.
          
    

      3. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------

<S>    <C>
2.1    Second Agreement and Plan or Reorganization by and between Core
       Management, Inc., Registrant and PRA Sub, Inc. dated as of December 19,
       1994. Filed as Appendix I to Prospectus and Joint Proxy Statement in
       Amendment No. 5 to Registrant's Registration Statement on Form S-4
       (Registration No. 33-73906), filed February 14, 1995, and incorporated
       herein by reference.
      
2.2    Capital Stock Purchase Agreement, by and between Registrant, Cost Review
       Services, Inc., Larry Bertrand Wallace and Leigh B. Goodwin, dated
       October 2, 1995 (without exhibits). Filed as exhibit 2.1 to Registrant's
       Current Report on Form 8-K, filed October 16, 1995, and incorporated
       herein by reference.
      
2.3    Asset Purchase Agreement dated June 14, 1997, by and among CORE, INC.,
       SSDC Corp., Social Security Disability Consultants Limited Partnership,
       Disability Services, Inc., DSI Medicare Consultants, Inc., R. Gary
       Dolenga and Phylis M. Dolenga, including Amendment No. 1 to Asset
       Purchase Agreement, dated June 25, 1997, and Exhibit A - Performance
       Criteria (excluding other Exhibits and Schedules). Filed as exhibit 2.1
       to Registrant's Current Report on Form 8-K, filed July 15, 1997, and
       incorporated herein by reference.

   
2.4    Asset Purchase Agreement dated March 17, 1998, by and among CORE,
       INC., TCM Services, Inc., Transcend Case Management, Inc. and Transcend
       Services, Inc. (excluding exhibits and schedules). Filed as exhibit 
       2.4 to Registrant's Annual Report on Form 10-K, filed April 1, 1998, 
       and incorporated herein by reference.
    
      
3.1    Restated Articles of Organization of the Registrant, dated November 22,
       1991, as further amended by Articles of Amendment, dated March 24, 1995,
       July 28, 1995 and October 28, 1996. Filed as exhibit no. 4.1 to
       Registrant's Quarterly Report on Form 10-Q, filed November 13, 1996, and
       incorporated herein by reference.
      
3.2    By-Laws of the Registrant, as amended. Filed as exhibit no. 3.2 to
       Registrant's Annual Report on Form 10-K, filed March 30, 1993, and
       incorporated herein by reference.
      
4.1    Specimen Common Stock certificate. Filed as exhibit no. 4.1 to
       Registrant's Annual Report on Form 10-K, filed April 1, 1996, and
       incorporated herein by reference.
      
10.1   Software License Agreement, dated August 26, 1986, between Chrysler
       Corporation ("Chrysler") and The Health Data Institute ("HDI"). Filed as
       exhibit no. 10.59 to the Registrant's Registration Statement on Form S-4
       (Registration No. 33-73906), filed January 10, 1994, and incorporated
       herein by reference.
      
10.2   Amendment No. 1 to Software License Agreement, dated December 23,
       1987, between Chrysler and HDI. Filed as exhibit no. 10.60 to the
       Registrant's Registration Statement on Form S-4 (Registration No.
       33-73906), filed January 10, 1994, and incorporated herein by reference.
</TABLE>

                                       8

<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------

<S>    <C>
10.3   Services Agreement, dated as of August 1, 1996, between CORE, INC.
       and Bell Atlantic Corporation (without schedules and appendices).
       
10.4   Registrant's Amended and Restated 1986 Stock Option Plan. Filed as
       exhibit no. 10.11 to the Registrant's Registration Statement on Form S-1
       (Registration No. 33-43418), filed October 18, 1991, and incorporated
       herein by reference.
       
10.5   Amendment to Amended and Restated 1986 Stock Option Plan. Filed as
       exhibit no. 19.1 to the Registrant's Quarterly Report on Form 10-Q, filed
       November 16, 1992, and incorporated herein by reference.
       
10.6   Registrant's Amended and Restated 1991 Stock Option Plan. Filed as
       exhibit no. 4.3 to the Registrant's Registration Statement on Form S-8
       (Registration No. 333-15261), filed October 31, 1996, and incorporated
       herein by reference.
       
10.7   Form of Stock Option Agreement, dated as of May 17, 1993, between
       Registrant and William E. Nixon. Filed as exhibit no. 10.5 to 
       Registrant's Quarterly Report on Form 10-Q, filed June 30, 1993, and 
       incorporated herein by reference.
       
10.8   Form of Stock Option Agreement, granted January 16, 1994, to non-employee
       directors. Filed as exhibit no. 10.45 to the Registrant's Annual Report
       on Form 10-K, filed March 31, 1994, and incorporated herein by reference.
      
10.9   Form of Stock Option Agreement, granted March 23, 1995, to non-employee
       directors for services in 1994 and through March 23, 1995, including
       schedule of optionees. Filed as Exhibit No. 10.1 to Registrant's
       Quarterly Report on Form 10-Q, filed November 14, 1995, and incorporated
       herein by reference.

10.10  Form of Stock Option Agreement for 19,500 shares to vest quarterly over
       three years granted March 24, 1995, to non-employee directors, including
       schedule of optionees. Filed as Exhibit No. 10.2 to Registrant's
       Quarterly Report on Form 10-Q, filed November 14, 1995, and incorporated
       herein by reference.

10.11  Form of Stock Option Agreement for 4,875 shares, granted March 24, 1995
       to non-employee directors, including schedule of optionees. Filed as
       Exhibit No. 10.3 to Registrant's Quarterly Report on Form 10-Q, filed
       November 14, 1995, and incorporated herein by reference.

10.12  Form of Stock Option Agreement, granted April 27, 1995, to executive
       officers, including schedule of executive officer optionees. Filed as
       Exhibit No. 10.4 to Registrant's Quarterly Report on Form 10-Q, filed
       November 14, 1995, and incorporated herein by reference.

10.13  Form of Stock Option Agreement, granted April 27, 1995, for
       consulting and other services, including schedule of optionees. Filed as
       Exhibit No. 10.5 to Registrant's Quarterly Report on Form 10-Q, filed
       November 14, 1995, and incorporated herein by reference.

10.14  Form of Stock Option Agreement for 12,375 shares of Registrant's common
       stock granted November 8, 1995 to four non-employee directors. Filed as
       exhibit no. 10.58 to the Registrant's Annual Report on Form 10-K, filed
       April 1, 1996, and incorporated herein by reference.

10.15  Incentive Stock Option Agreement, dated December 8, 1995, between
       Registrant and Fredric L. Sattler. Filed as exhibit no. 10.50 to the
       Registrant's Annual Report on Form 10-K, filed April 1, 1996, and
       incorporated herein by reference.

10.16  Form of Stock Option Agreement, granted March 29, 1996, to officers,
       including schedule of officer optionees. Filed as exhibit no. 10.31 to
       Registrant's Registration Statement on Form S-1 (Registration No.
       333-03639), filed May 13, 1996, and incorporated herein by reference.
</TABLE>

                                       9

<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------

<S>    <C>
10.17  Form of Stock Option Agreement, granted March 29, 1996, for
       consulting services, including schedule of optionees. Filed as exhibit
       no. 10.32 to Registrant's Registration Statement on Form S-1
       (Registration No. 333-03639), filed May 13, 1996, and incorporated herein
       by reference.

10.18  Core Management, Inc. Employee Stock Option Plan. Filed as exhibit
       no. 10.65 to the Company's Registration Statement on Form S-4
       (Registration No. 33-73906), filed January 10, 1994, and incorporated
       herein by reference.

10.19  Forms of Stock Option Agreement under Core Management, Inc. Employee
       Stock Option Plan. Filed as exhibit no. 10.66 to the Registrant's
       Registration Statement on Form S-4 (Registration No. 33-73906), filed
       January 10, 1994, and incorporated herein by reference.

10.20  Form of Non-Employee Director Stock Option Agreement of Core
       Management, Inc. Filed as exhibit no. 10.67 to the Company's Registration
       Statement on Form S-4 (Registration No. 33-73906), filed January 10,
       1994, and incorporated herein by reference.

10.21  Registration Rights Agreement, dated February 23, 1994, between CMI and
       Silicon Valley Bank. Filed as exhibit no. 10.81 to Amendment No. 1 to the
       Registrant's Registration Statement on Form S-4 (Registration No.
       33-73906), filed June 8, 1994, and incorporated herein by reference.

   
10.22  Registration Rights Agreement, dated March 17, 1998, between CORE,
       INC. and Transcend Services, Inc. Filed as exhibit 10.22 to 
       Registrant's Annual Report on Form 10-K, filed April 1, 1998, and 
       incorporated herein by reference.
    

10.23  Option Agreement, dated June 14, 1997, by and between CORE, INC. and
       R. Gary Dolenga. Filed as exhibit 99.1 to Registrant's current Report on
       Form 8-K, filed July 15, 1997, and incorporated herein by reference.

10.24  CORE, INC. 1997 Stock Option Plan, including forms of stock option
       agreements. Filed as exhibit no. 10.1 to Registrant's Quarterly Report on
       Form 10-Q, filed November 14, 1997, and incorporated herein by reference.

10.25  Employment Agreement, dated November 19, 1993, between the
       Registrant and William E. Nixon. Filed as exhibit no. 10.49 to
       Registrant's Registration Statement on Form S-4 (Registration No.
       33-73906), filed January 10, 1994, and incorporated herein by reference.

10.26  Employment Agreement, dated December 1, 1995, between Registrant and
       Fredric L. Sattler. Filed as exhibit no. 10.49 to the Registrant's Annual
       Report on Form 10-K, filed April 1, 1996, and incorporated herein by
       reference.

10.27  Employment Agreement, dated June 25, 1997, by and between SSDC Corp.
       and R. Gary Dolenga. Filed as exhibit 99.2 to Registrant's Current Report
       on Form 8-K, filed July 15, 1997, and incorporated herein by reference.

10.28  401(k) Plan. Filed as exhibit no. 10.34 to the Registrant's
       Registration Statement on Form S-1 (Registration No. 33-43418), filed
       October 18, 1991, and incorporated herein by reference.

10.29  Form of Indemnification Agreement. Filed as exhibit no. 10.35 to the
       Registrant's Registration Statement on Form S-1 (Registration No.
       33-43418), filed October 18, 1991, and incorporated herein by reference.

10.30  Office Lease, dated December 30, 1992, between Registrant and Copley
       Place Associates Nominee Corporation (without exhibits). Filed as exhibit
       no. 19.5 to Registrant's Annual Report on Form 10-K, filed March 30,
       1993, and incorporated herein by reference.

10.31  First Amendment to Office Lease, dated June 3, 1993, between the
       Registrant and Copley Place Associates Nominee Corporation. Filed as
       exhibit no. 10.2 to Registrant's Quarterly Report on Form 10-Q, filed
       November 10, 1993, and incorporated herein by reference.

10.32  Agreement of Sublease, dated April 1, 1993, between Eastman Kodak
       Company and Core-California. Filed as exhibit no. 10.53 to the
       Registrant's Registration Statement on Form S-4 (Registration No.
       33-73906), filed January 10, 1994, and incorporated herein by reference.
</TABLE>
                                       10
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------

<S>    <C>
10.33  Second Amendment to Agreement of Sublease, dated May 17, 1995,
       between Eastern Kodak Company and Core-California. Filed as exhibit no.
       10.45 to Registrant's Annual Report on Form 10-K, filed April 1, 1996,
       and incorporated herein by reference.

10.34  Lease, dated January 1, 1991, between Core-California and One
       Wheeler Road Associates. Filed as exhibit no. 10.55 to the Registrant's
       Registration Statement on Form S-4 (Registration No. 33-73906), filed
       January 10, 1994, and incorporated herein by reference.

10.35  First Amendment to Lease, dated November 28, 1995, between
       Core-California and One Wheeler Road Associates (without Exhibit). Filed
       as exhibit no. 10.47 to Registrant's Annual Report on Form 10-K, filed
       April 1, 1996, and incorporated herein by reference.

10.36  Office Building Lease, dated September 21, 1995, by and between
       McDonnell Douglas Realty Company and Registrant, including Exhibits and
       including Addendum to Lease Agreement. Filed as exhibit no. 10.48 to
       Registrant's Annual Report on Form 10-K, filed April 1, 1996, and
       incorporated herein by reference.

10.37  Sublease, dated May 23, 1996, between AT&T Corp., as Sublandlord,
       and Registrant, as Subtenant, for premises in Silver Spring, Maryland
       (without Exhibits). Filed as exhibit no. 10.63 to Registrant's Amendment
       No. 3 to Registration Statement on Form S-1 (Registration No. 333-03639),
       filed July 25, 1996, and incorporated herein by reference.

   
21.1   Subsidiaries of the Registrant. Filed as exhibit 21.1 to Registrant's 
       Annual Report on Form 10-K, filed April 1, 1998, and incorporated 
       herein by reference.

23.1*  Consent of Ernst & Young LLP, independent auditors

27.1*  Financial Data Schedule for year ended December 31, 1997.

27.2   Financial Data Schedule for years ended December 31, 1995 and 1996 and 
       for quarters ended March, June and September of 1996. Filed as exhibit 
       27.2 to Registrant's Annual Report on Form 10-K, filed April 1, 1998, 
       and incorporated herein by reference.

27.3   Financial Data Schedule for quarters ended March, June and September 
       of 1997. Filed as exhibit 27.3 to Registrant's Annual Report on Form 
       10-K, filed April 1, 1998, and incorporated herein by reference.
    
</TABLE>

------------------------------------
* Filed herewith


(b)    REPORTS ON FORM 8-K.

       There were no reports on Form 8-K filed during the last quarter of 1997.


                                       11



<PAGE>



                                     CORE, INC.

                           INDEX TO FINANCIAL STATEMENTS


CORE, INC. AUDITED FINANCIAL STATEMENTS
<TABLE>
<S>                                                                         <C>
Report of Independent Auditors                                               F-2

Consolidated Balance Sheets - December 31, 1996 and 1997                     F-3

Consolidated Statements of Operations - Years ended December 31, 1995, 
 1996 and 1997                                                               F-5

Consolidated  Statements of  Stockholders'  Equity - Years ended  
 December 31, 1995, 1996 and 1997                                            F-6

Consolidated Statements of Cash Flows - Years ended December 31, 1995, 
 1996 and 1997                                                               F-7

Notes to Consolidated Financial Statements                                   F-8

FINANCIAL STATEMENTS SCHEDULE

Schedule II - Valuation and Qualifying Accounts                             F-17
</TABLE>

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


                                      F-1
<PAGE>
   
                         REPORT OF INDEPENDENT AUDITORS

BOARD OF DIRECTORS AND STOCKHOLDERS 
CORE, INC.

We have audited the accompanying consolidated balance sheets of CORE, INC. as of
December 31, 1996 and 1997, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1997. Our audits also included the financial
statements schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of CORE,
INC. at December 31, 1996 and 1997, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statements schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.

                                                            ERNST & YOUNG LLP


Boston, Massachusetts
February 19, 1998, except for
  Note 15 as to which the date
  is March 17, 1998

                                      F-2

    
<PAGE>
   
                                   CORE, INC.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                      DECEMBER 31,
                                              -------------------------
                                                   1996       1997
                                              -------------------------
<S>                                          <C>             <C>
Assets                                          
Current assets:                                 
 Cash and cash equivalents                      $4,281,994   $7,944,595
 Cash pledged as collateral                        192,000   
 Investments available-for-sale                  8,435,531    1,188,037
 Accounts receivable, net of allowance for                   
  doubtful accounts of $221,925 in 1996                      
  and $151,633 in 1997                           4,545,738    6,473,037
 Notes receivable from officers                    106,926      106,388
 Prepaid expenses and other current assets         891,932      815,100
                                              -------------------------
Total current assets                            18,454,121   16,527,157
                                                             
Property and equipment, net                      6,445,420    6,444,803
Deposits and other assets                          699,901      494,208
Goodwill, net of accumulated amortization of                 
  $87,400 in 1996 and $340,705 in 1997           2,035,604    8,818,159
Intangibles, net of accumulated amortization                 
  of $401,307 in 1996 and $579,295 in 1997         208,693      530,705
                                              -------------------------
                                               
Total assets                                   $27,843,739  $32,815,032
                                              -------------------------
                                              -------------------------
</TABLE>

See accompanying notes.

                                      F-3

    
<PAGE>
   

                                     CORE, INC.
                      CONSOLIDATED BALANCE SHEETS - CONTINUED

<TABLE>
<CAPTION>
                                                     December 31,
                                                 1996         1997
                                             -------------------------
<S>                                        <C>          <C>
LIABILITIES AND STOCKHOLDERS' EQUITY 
Current liabilities:
  Accounts payable                          $   743,143  $   833,898
  Accrued expenses                              698,362    1,201,283
  Accrued payroll                               465,520      650,230
  Accrued vacation                              543,597      645,262
  Deferred income taxes                          68,316       74,816
  Notes payable                                  58,099       64,900
  Obligation from acquisition                              1,125,000
  Current portion of obligations to       
   former shareholders                           50,000       50,000
  Current portion of capital lease        
   obligations                                   46,498       31,651
                                            --------------------------
Total current liabilities                     2,673,535    4,677,040

Long-term obligations to former
  shareholders, net of current portion           50,000
Note payable                                    256,690      185,049
Capital lease obligations, net of current
  portion                                        37,275        4,695
Deferred rent, net of current portion           220,539      146,592
Deferred income taxes                           149,500      143,000

Commitments and contingencies

Stockholders' equity:
Preferred stock, no par value, authorized
  500,000 shares; no shares outstanding
Common stock, $0.10 par value per share;
  authorized 30,000,000 shares; issued
  and outstanding 7,172,711 and 7,303,079
  at December 31, 1996 and 1997,
  respectively                                  717,271      730,308
Additional paid-in capital                   34,465,146   34,909,579
Deferred compensation                           (38,640)     (13,392)
Cumulative unrealized gain on investments
  available-for-sale                             31,983
Accumulated deficit                         (10,719,560)  (7,967,839)
                                            -------------------------
Total stockholders' equity                   24,456,200   27,658,656
                                            -------------------------

Total liabilities and stockholders' equity  $27,843,739  $32,815,032
                                            -------------------------
                                            -------------------------
</TABLE>

See accompanying notes.


                                       F-4
    
<PAGE>
   
                                     CORE, INC.
                       CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                    Year ended December 31,
                                             ----------------------------------
                                                1995        1996        1997
                                             ----------------------------------

<S>                                        <C>         <C>         <C>
Revenues                                    $20,768,521 $28,805,590 $38,506,563
Cost of services                             12,838,971  17,740,901  23,330,004
                                             ----------------------------------
Gross profit                                  7,929,550  11,064,689  15,176,559

Operating expenses:
   General and administrative                 4,787,238   6,284,651   7,940,005
   Sales and marketing                        1,499,120   1,744,386   2,482,561
   Restructuring costs                          557,515
   Merger costs and expenses                    436,104
   Depreciation and amortization                904,900   1,338,122   1,954,810
   Non-recurring write-off of AmHealth
     acquisition                                          1,919,871
                                             ----------------------------------
     Total operating expenses                 8,184,877  11,287,030  12,377,376
                                             ----------------------------------

Income (loss) from operations                  (255,327)   (222,341)  2,799,183

Other income (expense):
   Interest income                              239,590     385,394     589,853
   Interest expense                             (83,410)    (35,512)    (27,315)
   Realized gain on sale of investments
    available-for-sale                            9,123      16,003
   Other income                                  10,851         481
                                             ----------------------------------
                                                176,154     366,366     562,538
                                             ----------------------------------
Income (loss) before income taxes               (79,173)    144,025   3,361,721
   Provision for income taxes                                           610,000
                                             ----------------------------------
Net income (loss)                              $(79,173)   $144,025  $2,751,721
                                             ----------------------------------
                                             ----------------------------------

Net income (loss) per common share:
   Basic                                         $(0.02)      $0.03       $0.38
                                             ----------------------------------
                                             ----------------------------------
   Diluted                                       $(0.02)      $0.02       $0.35
                                             ----------------------------------
                                             ----------------------------------
Weighted average number of common shares 
  and equivalents outstanding:
   Basic                                      4,755,000   5,713,000   7,246,000
                                             ----------------------------------
                                             ----------------------------------
   Diluted                                    4,755,000   6,473,000   7,934,000
                                             ----------------------------------
                                             ----------------------------------
</TABLE>

See accompanying notes.


                                      F-5
    
<PAGE>
   


                                   CORE, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                           ADDITIONAL                     UNREALIZED                      TOTAL    
                                    COMMON      STOCK       PAID-IN          DEFERRED     GAIN (LOSS)  ACCUMULATED     STOCKHOLDERS'
                                    SHARES      AMOUNT      CAPITAL        COMPENSATION  INVESTMENTS     DEFICIT          EQUITY
                     ---------------------------------------------------------------------------------------------------------------
<S>                                 <C>        <C>          <C>            <C>            <C>         <C>              <C>         
BALANCE AT DECEMBER 31, 1994        4,739,943  $  473,994   $ 17,902,519                  $ (39,408)  $(10,784,412)    $  7,552,693
Exercise of stock options              54,460       5,446         85,628                                                     91,074
Deferred compensation
  related to stock options issued                                 64,400   $  (64,400)
Amortization of deferred
  compensation                                                                 13,280                                        13,280
Change in  unrealized gain
  (loss) on investments
  available-for-sale                                                                         70,383                          70,383
Net loss                                                                                                   (79,173)         (79,173)
------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995        4,794,403     479,440     18,052,547      (51,120)       30,975    (10,863,585)       7,648,257
Exercise of stock options             129,508      12,951        349,416                                                    362,367
Issuance of common stock from
  public offering  (net of
  offering costs)                   2,248,800     224,880     16,063,183                                                 16,288,063
Amortization of deferred
  compensation                                                                 12,480                                        12,480
Change in unrealized gain
  (loss) on investments
  available-for-sale                                                                          1,008                           1,008
Net income                                                                                                 144,025          144,025
------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT  DECEMBER 31, 1996       7,172,711     717,271     34,465,146      (38,640)       31,983    (10,719,560)      24,456,200
Exercise of stock options             130,368      13,037        462,986                                                    476,023
Amortization of deferred
  compensation costs                                                            6,695                                         6,695
Reduction of deferred
  compensation costs due to
  extinguishment of
  unvested options                                               (18,553)      18,553
Change in unrealized gain
  (loss) on investments
  available-for sale                                                                        (31,983)                        (31,983)
Net income                                                                                               2,751,721        2,751,721
------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997        7,303,079  $  730,308   $ 34,909,579   $  (13,392)    $      --   $ (7,967,839)    $ 27,658,656
====================================================================================================================================
</TABLE>

See accompanying notes.


                                      F-6
    
<PAGE>
   


                                   CORE, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                     --------------------------------------------------
                                                            1995              1996             1997
                                                     --------------------------------------------------
<S>                                                  <C>                 <C>               <C>         
OPERATING ACTIVITIES: 
Net income (loss)                                    $    (79,173)       $    144,025      $  2,751,721
Adjustments to reconcile net income (loss) to                                           
  net cash provided by                                                                  
  (used in) operating  activities:                                                      
    Depreciation                                          837,316           1,189,488         1,651,110
    Amortization                                          148,836             374,799           931,206
    Realized gain on sale of investments                                                
     available-for-sale                                    (9,123)            (16,003)  
    Compensation expense related to issuance                                            
     of stock options                                      13,280              12,480             6,695
    Decrease in obligations to former shareholders                           (261,225)                  
    Changes in operating assets and liabilities:                                        
     (Increase) decrease in accounts receivable           272,644          (1,558,382)       (1,927,299)
     (Increase) decrease in prepaid                                                     
      expenses and other assets                           164,571          (1,000,060)          (71,408)
     Increase (decrease) in cash overdraft               (301,367)                      
     Increase (decrease) in accounts                                                    
      payable and accrued expenses                       (607,675)             31,140           585,849
                                                     ---------------------------------------------------
Net cash provided by (used in) operating                                                
  activities                                              439,309          (1,083,738)        3,927,874
                                                                                        
INVESTING ACTIVITIES:                                                                   
  Net additions to property and equipment              (1,278,720)         (4,589,839)       (1,828,321)
  Disposals of property and equipment                       4,688                       
  Net additions to intangible assets                                         (176,119)         (391,307)
  Decrease in cash pledged as collateral                  464,884             106,000           192,000
  (Increase) decrease in deposits                         (19,056)            (69,268)           42,162
  (Increase) decrease in notes receivable                                               
   from officers                                          (23,507)            (71,419)              538
  Payments for acquisitions, net of cash                                                
   acquired                                            (1,510,024)                           (5,434,612)
  Payments on non-compete obligations to                                                
   former shareholders                                    (50,000)                              (50,000)
  Purchases of investments available-for-sale          (3,985,892)        (23,612,768)      (44,647,453)
  Sales of investments available-for-sale               8,392,306          16,725,858        51,862,964
                                                     ---------------------------------------------------
Net cash provided by (used in) investing                                                
  activities                                            1,994,679         (11,687,555)         (254,029)
                                                                                        
FINANCING ACTIVITIES:                                                                   
  Net repayments under revolving line of                                                
   credit                                              (1,200,000)                      
  Payments on officer's notes                            (200,000)                      
  Payments on obligation from acquisition                                                      (375,000)
  Payments on obligations to former                                                     
   shareholders                                                              (682,390)
  Issuance of notes payable                               179,997             328,518   
  Payments on notes payable                              (208,085)           (169,723)          (64,840)
  Payments on capital lease obligations                   (91,167)            (79,355)          (47,427)
  Proceeds from issuance of common stock,                                               
   net of offering costs                                                   16,288,063
  Issuance of common stock upon exercise of                                             
   stock options and warrants                              91,074             362,367           476,023
                                                     ---------------------------------------------------
Net cash provided by (used in) financing                                                 
  activities                                           (1,428,181)         16,047,480           (11,244)
                                                     ---------------------------------------------------
Net increase in cash and cash equivalents               1,005,807           3,276,187         3,662,601
                                                                                         
Cash and cash equivalents at beginning of year                              1,005,807         4,281,994
                                                     ---------------------------------------------------
                                                     ---------------------------------------------------
Cash and cash equivalents at end of year             $  1,005,807        $  4,281,994      $  7,944,595
                                                     ---------------------------------------------------
                                                     ---------------------------------------------------
                                                                                         
Supplemental disclosure of cash flow information:                                        
  Interest paid                                      $     83,322        $     55,697      $     23,492
                                                     ---------------------------------------------------
                                                     ---------------------------------------------------
  Income taxes paid                                                                        $    221,393
                                                     ---------------------------------------------------
                                                     ---------------------------------------------------

Noncash investing activities:                                                            
  Capital lease obligation incurred                  $     25,266                        
                                                     ---------------------------------------------------
                                                     ---------------------------------------------------
</TABLE>

See accompanying notes.


                                      F-7
    
<PAGE>
   


                                   CORE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

1.  ORGANIZATION AND PURPOSE

CORE, INC. ("CORE" or the "Company") is a national provider of disability and
workers' compensation management services, physician-intensive health care cost
containment and health care utilization management services and programs to
large employers, commercial health and accident insurance companies, third-party
administrators of health insurance programs, self-insured employers and other
groups.

2.  ACQUISITION

On June 25, 1997, a wholly-owned subsidiary of the Company purchased certain
assets and liabilities of Social Security Disability Consultants and Disability
Services, Inc. (collectively, "SSDC") for an initial cash payment of $5,000,000,
additional obligations payable of $1,500,000 (payable in quarterly installments
through June 1998) and additional performance related cash payments of up to
$920,000. SSDC provides disability management services with two key areas of
business: social security disability benefits advocacy and Medicare coordination
of benefits. The acquisition was accounted for as a purchase and accordingly,
the purchase price was allocated to the net assets acquired based on their
estimated fair market values. The excess of the purchase price over the
estimated fair market value of the net assets acquired amounted to approximately
$6,700,000 which has been accounted for as goodwill and is being amortized on a
straight-line basis over 20 years.

The additional performance related payments are payable in cash and will be
computed based on agreed upon pre-tax net income targets from September 1997
through June 1999. Additional performance based payments of $137,500 were made
as of December 31, 1997 and were accounted for as an adjustment to goodwill.

The consolidated financial statements include the operating results of SSDC from
the date of acquisition. The following pro forma information has been prepared
as if the acquisition had occurred on January 1, 1996. The pro forma financial
data set forth below includes certain adjustments for the amortization of
intangibles arising from the transaction, the reduction of interest income from
the use of short-term investments to fund the acquisition and the provision for
income taxes as a result of the income recognized by SSDC.

<TABLE>
<CAPTION>
                                              Year ended December 31,
                                             1996               1997
                                       ---------------------------------
<S>                                    <C>                 <C>
Revenues                                  $36,990,000       $41,900,000
Income before extraordinary item          $ 3,624,000       $ 3,598,000
Net income                                $ 3,624,000       $ 4,947,000
Earnings per common share: 
   Income before extraordinary item:
      Basic                                     $0.60             $0.50
      Diluted                                   $0.54             $0.45
   Net income:                                 
      Basic                                     $0.60             $0.68
      Diluted                                   $0.54             $0.62
</TABLE>

The pro forma financial information is presented for informational purposes only
and is not necessarily indicative of what the actual consolidated results of
operations might have been had the transaction occurred on the date indicated.


                                      F-8
    
<PAGE>
   


                                   CORE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

3.  ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany transactions have
been eliminated in consolidation.

RISKS AND UNCERTAINTIES
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to concentrations
of credit risk, principally consist of cash and cash equivalents, investments
available-for-sale, and trade receivables.

The Company considers all highly liquid investments with a maturity of three
months or less at the date of purchase to be cash equivalents. Investments
available-for-sale represent the investment of excess cash in commercial paper,
corporate bonds and United States Government securities.

The Company provides its services to companies throughout the United States in
various industries, including, but not limited to the healthcare industry.
Management does not believe significant credit risk exists at December 31, 1997
as a result of the large and diverse nature of the Company's customer base. The
Company maintains allowances for potential credit losses, and these losses have
consistently been within management's expectations.

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

FAIR VALUE OF FINANCIAL INSTRUMENTS 

Cash, accounts receivable, notes receivable, accounts payable, accrued 
expenses and notes payable are reflected in the financial statements at fair 
value because of the short-term maturity of those instruments.

INVESTMENTS
Investments are accounted for in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Under the SFAS 115, debt securities that the
Company has both the positive intent and ability to hold to maturity are
classified as held-to-maturity securities and are carried at amortized cost.
Debt securities that the Company does not have the positive intent or ability to
hold to maturity and equity securities are classified as available-for-sale and
are carried at fair market value. Increases or decreases in fair market value of
available-for-sale securities judged to be other than temporary are recorded as
a component of other income. Temporary declines are reported as a separate
component of stockholders' equity.

PRECONTRACT COSTS
Precontract costs incurred for a specific contract are deferred if the costs can
be directly associated with the contract and the recoverability from the gross
profits on the revenue generated by the contract is probable. The anticipated
gross profit must be sufficient to absorb deferred precontract costs as well as
future period costs. Precontract costs are amortized on a straight-line basis
over the contract period, generally not longer than three years.

PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major additions and betterments are
capitalized while repairs and maintenance expenditures which do not improve or
extend the life of the respective assets are expensed when incurred.


                                      F-9
    
<PAGE>
   


                                   CORE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

3.  ACCOUNTING POLICIES (CONTINUED)

DEPRECIATION AND AMORTIZATION
Property and equipment are depreciated using the straight-line method. The
estimated useful lives of the related assets are as follows:

<TABLE>
<S>                                       <C>
       Computer and office equipment       3-7 years
       Software and software development
       costs                               3-5 years
       Furniture and fixtures              7 years
       Leasehold improvements              Shorter of lease term or estimated
                                             useful life
</TABLE>

SOFTWARE DEVELOPMENT COSTS
Certain costs of software, developed for internal use, are capitalized
subsequent to the favorable assessment of technological feasibility. Costs
incurred for maintenance and customer support are charged to expense as
incurred. The Company capitalized software development costs of $664,430 and
$718,589 during the years ended December 31, 1996 and 1997, respectively.
Software development costs are amortized using the straight-line method.
Amortization in the amount of $110,165 and $262,956 is included in cost of
services for the years ended December 31, 1996 and 1997, respectively.

GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangibles, which include the cost of license agreements and
customer contracts, are being amortized over fifteen to twenty-seven years, on a
straight-line basis. Recoverability of all intangible assets, including goodwill
arising from business acquisitions, is reviewed annually or sooner if events or
changes in circumstances indicate that the carrying amount may exceed fair
value.

REVENUE RECOGNITION
Revenue is recognized on a capitated (fixed per employee per month), hourly or
per case basis, in accordance with the specific terms of each contract.
Typically, revenue is recognized during the contract period as services are
provided. Licensing fees are primarily based on use by the customer and are
recognized as revenue when they are earned. Deferred revenue represents amounts
received on contracts in advance of services being performed.

The majority of the contracts with clients permit cancellation upon 60 to 90
days notice.

INCOME TAXES 

The Company provides for income taxes under the liability method. Under this 
method, deferred income taxes are recognized for the future tax consequences 
of differences between the tax and financial accounting of assets and 
liabilities at each year-end. Deferred income taxes are based on enacted tax 
laws and statutory tax rates applicable to the periods in which the 
differences are expected to effect taxable income. Valuation allowances are 
established when necessary to reduce deferred tax assets to the amounts 
expected to be realized.

INCOME (LOSS) PER COMMON SHARE
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings per Share." Statement No. 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share exclude any dilutive
effects of options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share. All earnings per share amounts for all periods have been presented, and
where appropriate, restated to conform to the Statement No. 128 requirements.

RECLASSIFICATIONS
Certain reclassifications of 1995 and 1996 amounts have been made to permit
comparison.

ACCOUNTING PRONOUNCEMENTS 
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" 
and SFAS No. 131, "Disclosures About Segments of an Enterprise and Related 
Information." SFAS Nos. 130 and 131 are effective for fiscal years beginning 
after December 15, 1997. The Company believes that the adoption of SFAS No. 
130 will not have a material impact on the Company's consolidated financial 
statements.  The Company's management is currently evaluating the 
applicability of SFAS No. 131 on the presentation of its financial 
statements.

                                      F-10
    
<PAGE>
   


                                   CORE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

4.  INVESTMENTS

At December 31, 1996 and 1997, the Company had no securities that qualified as
trading or held-to-maturity. The following is a summary of available-for-sale
securities at December 31, 1996 and 1997:

<TABLE>
<CAPTION>
                                                GROSS      GROSS
                                   AMORTIZED  UNREALIZED  UNREALIZED  ESTIMATED
                                     COST       GAIN       LOSS       FAIR VALUE
                                  ----------------------------------------------
<S>                              <C>          <C>        <C>        <C>
     December 31, 1996:
     U.S. Treasury Securities     $2,001,299   $    479    $   208   $2,001,570
     Mortgage-backed Securities    5,401,714     36,579      4,332    5,433,961
     Municipal Bonds               1,000,535                   535    1,000,000
                                  ----------------------------------------------
     Due after One year through
      five years                  $8,403,548   $ 37,058    $ 5,075   $8,435,531
                                  ----------------------------------------------
                                  ----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
                                                GROSS       GROSS
                                   AMORTIZED  UNREALIZED  UNREALIZED  ESTIMATED
                                     COST       GAIN        LOSS      FAIR VALUE
                                  ----------------------------------------------
<S>                              <C>         <C>         <C>         <C>
     December 31, 1997:
     Mortgage-backed Securities   $1,188,037                         $1,188,037
                                  ----------------------------------------------
     Due after three months
       through one year           $1,188,037                         $1,188,037
                                  ----------------------------------------------
                                  ----------------------------------------------
</TABLE>

For the years ended December 31, 1996 and 1997, the Company sold
available-for-sale securities with a fair value on the date of sale of
$16,725,858 and $51,862,964, respectively. The cost of available-for-sale
investments that were sold was based on specific identification in determining
realized gains and losses. Realized gains of $16,003 on these sales have been
recognized in the financial statements for the year ended December 31, 1996.
There were no realized gains and losses on sales during 1997. The net unrealized
gains on available-for-sale securities of $31,983 for the year ended December
31, 1996 have been included as a separate component of stockholders' equity as
of December 31, 1996.

5.  PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31:

<TABLE>
<CAPTION>
                                                             1996       1997
                                                          ----------------------
<S>                                                      <C>         <C>
            Computer and office equipment                 $5,465,545 $6,315,821
            Software and software developement costs       2,333,247  3,157,620
            Furniture and fixtures                         1,830,141  1,979,795
            Leasehold improvements                         1,864,375  1,963,954
                                                          ----------------------
                                                          11,493,308 13,417,190
            Accumulated depreciation                      (5,047,888)(6,972,387)
                                                          ----------------------
            Property and equipment, net                   $6,445,420 $6,444,803
                                                          ----------------------
                                                          ----------------------
</TABLE>


                                      F-11
    
<PAGE>
   


                                   CORE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

6.  IMPAIRMENT LOSSES ON LONG LIVED ASSETS

In accordance with Statement of Financial Accounting Standards No. 121, 
"Accounting for the Impairment of Long-Lived Assets and of Long-Lived Assets 
to be Disposed Of" ("SFAS 121"), the Company records impairment losses on 
long-lived assets used in operations when indicators of impairment are 
present and the undiscounted cash flows estimated to be generated by those 
assets are less than the assets' carrying amount. During 1997, events and 
circumstances indicated that $2,000,000 of assets related to the bill audit 
services division might be impaired. However, the Company's estimate of 
undiscounted cash flows indicated that such carrying amounts were expected to 
be recovered. Nonetheless, it is reasonably possible that the estimate of 
undiscounted cash flows may change in the near term should there be an 
accelerated revenue decline from these sources or the loss of a major 
customer, resulting in a future requirement to reduce the carrying value of 
those assets to fair value.

7.  ADVANCES UNDER LETTER OF CREDIT

In May 1995, the Company entered into an arrangement with a bank whereby the
bank would issue letters of credit amounting to $283,000 on behalf of the
Company. Letters of credit outstanding at December 31, 1996 of $192,000 were
maintained as security under a furniture lease agreement. These letters of
credit expired during 1997.

8.  STOCK OPTION PLANS

The Company has elected to follow Accounting Principals Board Opinion No. 25, 
"Accounting for Stock Issued to Employees" ("APB 25") and related 
Interpretations in accounting for its employee stock options because, as 
discussed below, the alternative fair value accounting provided for under 
FASB Statement No. 123, "Accounting for Stock-Based Compensation," requires 
use of option valuation models that were not developed for use in valuing 
employee stock options. Under APB 25, because the exercise price of the 
Company's employee stock options equals the market price of the underlying 
stock on the date of grant, no compensation expense is recognized.  On March 
28, 1997, options for the purchase of 586,189 shares with exercise prices 
ranging between $7.46 and $12.25 were re-priced to $6.25.  The repricing of 
these options did not affect the financial statements under APB 25, however, 
the affect of the repricing has been reflected in the SFAS 123 pro forma 
disclosures set forth below.

Pro forma information regarding net income and earnings per share is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted average assumptions for 1995,
1996 and 1997, respectively: risk-free interest rates of 6.09%, 6.18% and 6.12%;
volatility factors of the expected market price of the Company's common stock of
106%, 99%, and 93%; and a weighted average expected life of the option of 5
years.


The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

For purposes of pro-forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information for the years ended December 31 1995, 1996 and 1997 is as
follows:

<TABLE>
<CAPTION>
                                         1995          1996         1997
                                    ---------------------------------------
<S>                                <C>            <C>           <C>
      Pro forma net loss             $(1,534,000)  $(2,589,000)  $(199,000)
                                    ---------------------------------------
                                    ---------------------------------------
      Pro forma net loss per share         $(.32)  $      (.45)      $(.03)
                                    ---------------------------------------
                                    ---------------------------------------
</TABLE>

The Company has reserved 1,937,500 shares of common stock for issuance under
stock option plans established in 1986, 1991 and 1997. The Company has also
granted 967,760 non-plan stock options of which 110,944, 223,904 and 308,758
have been exercised as of December 31, 1995, 1996 and 1997, respectively. During
1997, 7,812 of these non-plan stock options were cancelled. Other than the
651,190 non-plan stock options outstanding at December 31, 1997, no shares have
been reserved for non-plan stock options.


                                      F-12
    
<PAGE>
   


                                   CORE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

8.  STOCK OPTION PLANS (CONTINUED)

Plan and non-plan stock options activity and related information for the years
ended December 31, is as follows:

<TABLE>
<CAPTION>
                                                      DECEMBER 31,
                                           -----------------------------------------
                                                1995            1996          1997
                                           -----------------------------------------
      <S>                                  <C>           <C>           <C>      
      Outstanding at beginning of year          377,038     1,267,853     1,395,693
      Granted                                 1,004,509       429,589       795,126
      Canceled                                  (59,234)     (172,241)      (52,368)
      Exercised                                 (54,460)     (129,508)     (130,368)
                                           -----------------------------------------
      Outstanding at end of year              1,267,853     1,395,693     2,008,083
                                           -----------------------------------------
                                           -----------------------------------------
      Price range of outstanding options   $2.50-$12.08  $2.50-$13.38  $2.94-$11.13
                                           -----------------------------------------
                                           -----------------------------------------
      Price range of options exercised      $0.11-$4.80   $2.50-$9.38   $2.50-$8.75 
                                           -----------------------------------------
                                           -----------------------------------------
      Exercisable at end of year                594,925       811,132     1,004,625
                                           -----------------------------------------
                                           -----------------------------------------
      Available for grant at end of year          -----       175,338       369,768
                                           -----------------------------------------
                                           -----------------------------------------
</TABLE>

The weighted average exercise prices for 1995, 1996, and 1997 are as follows:

<TABLE>
<CAPTION>
                                                DECEMBER 31,
                                       ---------------------------
                                         1995      1996     1997
                                       ---------------------------
<S>                                    <C>       <C>       <C>
Granted                                   $4.50   $11.10    $8.90
Canceled                                  $8.00    $7.90    $6.92
Exercised                                 $1.70    $3.40    $3.92
Outstanding at end of year                $4.50    $6.25    $6.29
Exercisable at end of year                $4.20    $5.50    $5.15
</TABLE>

The weighted average fair value of options granted during the years ended
December 31, 1995, 1996 and 1997 are $2.60, $8.80 and $6.80, respectively. Stock
options will expire on various dates through May 2003. The weighted average
remaining contractual life of options outstanding at December 31, 1997 is 3.5
years.

9.  INCOME TAXES

The provision for income taxes is comprised of the following:

<TABLE>
<CAPTION>
                                               YEAR ENDED DECEMBER 31,
                                           --------------------------------
                                              1995      1996       1997
                                           --------------------------------
<S>                                       <C>        <C>        <C>
       Currently payable:
        Federal                            $          $          $ 490,000
        State                                                      120,000
                                           --------------------------------
                                           $          $          $ 610,000
                                           --------------------------------
                                           --------------------------------
</TABLE>


                                      F-13

    
<PAGE>
   


                                   CORE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

9.  INCOME TAXES  (CONTINUED)

The approximate effect of temporary differences and carryforwards that give rise
to deferred tax assets and liabilities as of December 31 is as follows:


<TABLE>
<CAPTION>
                                                          1996        1997
                                                     ------------------------
<S>                                                 <C>         <C>
       Deferred tax assets:
        Bad debt reserve                             $   87,000  $    62,000
        Expense accruals                                282,000      320,000
        Net operating loss carryforwards              2,305,000    1,050,000
        Valuation allowance                          (2,574,000)  (1,391,000)
                                                    ------------------------
                                                        100,000      41,000

       Deferred tax liabilities:
        Change in accounting method from cash 
          to accrual                                 (  150,000)  (  95,000)
        Depreciation                                 (  168,000)  ( 164,000)
                                                    ------------------------
                                                     (  318,000)  ( 259,000)
                                                    ------------------------
       Net deferred tax liability                   $(  218,000) $( 218,000)
                                                    ------------------------
                                                    ------------------------
</TABLE>

The valuation allowance primarily relates to deferred tax assets for federal and
state net operating loss carryforwards of approximately $2.6 million and $2.8
million, respectively. These unutilized net operating loss ("NOL")
carryforwards, which expire through 2010, will be carried forward for reduction
of future federal and state income taxes payable. The amount of net operating
loss carryforwards that can be utilized in any future year are limited due to
"equity structure shifts" in 1995 involving "5% shareholders" (as these terms
are defined in Section 382 of the Internal Revenue Code), which resulted in a
more than 50 percentage point change in ownership. The utilization of these NOL
carryforwards may be subject to further limitation provided by the Internal
Revenue Service Code of 1986 and similar state provisions. No benefit for these
carryforwards has been recognized in the financial statements. The change in the
valuation allowance from 1996 to 1997 is primarily due to the utilization of net
operating loss carryforwards which reduced income tax expense for the current
year.

State excise taxes have been included in general and administrative expenses in
the consolidated statements of operations.

The following is a summary of the items that cause the Company's effective tax
expense to differ from the statutory tax expense:

<TABLE>
<CAPTION>
                                                    Year ended December 31,
                                              ----------------------------------
                                                 1995      1996       1997
                                              ----------------------------------
<S>                                          <C>          <C>       <C>
   Statutory federal tax (benefit)            $ (27,000)   $ 49,000  $1,143,000
   State income taxes, net of federal benefit    (3,000)    (16,000)    202,000
   Effect of nondeductible reorganization
     costs                                      404,000
   Other                                       (126,000)     86,000     243,000
   Utilization of net operating loss carry    
     forwards                                  (248,000)   (119,000)   (978,000)
                                              ----------------------------------
   Effective tax expense                      $    ----    $   ----  $  610,000
                                              ----------------------------------
                                              ----------------------------------
</TABLE>


                                      F-14
    
<PAGE>
   


                                   CORE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

10. LEASES

The Company leases its facilities and certain office equipment under
non-cancelable operating leases, which expire at various dates through April
2002.

The terms of the lease agreements at the Boston, Massachusetts location,
scheduled to expire in May 2000, and the Irvine, California location, scheduled
to expire in September 2000 include base rent increases over the terms of the
leases and options to renew for one five-year term at the then prevailing rental
rate. The total amount of the base rent payments is being charged to expense on
the straight-line method over the term of the lease. The Company has recorded a
deferred credit to reflect the excess of rent expense over cash payments since
inception of the lease.

The Company received free rent concessions under terms of lease agreements at
the Boston, Burlington, Massachusetts and Los Angeles, California locations.
Total lease payments under these agreements are amortized on a straight-line
basis over the terms of the related leases. The excess of the expense incurred
over the cash paid is included as deferred rent in the accompanying balance
sheets.

At December 31, 1997, future minimum annual rental commitments under all of the
lease agreements described above are as follows:

<TABLE>
<S>                                              <C>
                   1998                           $1,764,365
                   1999                            1,508,814
                   2000                            1,366,731
                   2001                              473,845
                   2002                               57,254
                                                 ------------
                                                  $5,171,009
                                                 ------------
                                                 ------------
</TABLE>

Total rent expense amounted to $1,199,153, $1,432,851 and 1,848,220 for the
years ended December 31, 1995, 1996 and 1997, respectively.

11.  COMMITMENTS AND CONTINGENCIES

Certain of the Company's service agreement contracts have provisions which allow
clients to audit the Company's performance under the contracts.

The funding for CORE's WorkAbility software was provided by Chrysler Corporation
in exchange for a perpetual license to use such software and repayment of 140%
of the development costs (approximately $2.8 million). The agreement states that
repayment of such development costs is contingent upon CORE's collection of
certain licensing fees. During 1995, licensing fees of $37,000 were collected.
No such licensing fees were collected in 1996 and 1997. Royalties of $7,720 are
accrued and payable to Chrysler at December 31, 1997. No payments of royalties
were made during 1995, 1996 and 1997.

The Company has several 401(k) profit sharing plans covering all employees
meeting certain service requirements. The Plans provide for discretionary
contributions by the Company. Matching contributions for the years ended
December 31, 1995, 1996 and 1997 were $54,017, $131,948 and $136,112,
respectively, and are included in general and administrative expenses in the
accompanying statements of operations.


                                      F-15

    

<PAGE>
   


                                   CORE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

12.  EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per
share:


<TABLE>
<CAPTION>
                                       1995           1996          1997
                                  --------------------------------------------
<S>                                <C>            <C>           <C>
Numerator:
 Net income (loss)                    $  (79,173)   $  144,025    $  2,751,721
                                  --------------------------------------------
                                  --------------------------------------------

Denominator:
  Denominator for basic earnings                      
    per share, weighted-average
    shares                             4,755,000     5,713,000       7,246,000 
  Effect of dilutive stock                              
    options and warrants                               760,000         688,000 
                                  --------------------------------------------
  Denominator for diluted
    earnings per share,             
    adjusted weighted-average
    shares and assumed 
    conversions                        4,755,000     6,473,000       7,934,000
                                  --------------------------------------------
                                  --------------------------------------------

Basic earnings (loss) per share           $(0.02)       $.0.03           $0.38
                                  --------------------------------------------
                                  --------------------------------------------
Diluted earnings (loss) per share         $(0.02)        $0.02           $0.35
                                  --------------------------------------------
                                  --------------------------------------------
</TABLE>

13.  RELATED PARTIES

The notes receivable from officers are due in February and April 1998 and accrue
interest at current market rates.

14.  SIGNIFICANT CLIENTS

The Company has a contract with a major client, which accounted for
approximately 13% and 23% of total revenues for the years ended December 31,
1996 and 1997, respectively. No other client represented 10% or more of revenue
during the years 1995, 1996 and 1997.

15.  SUBSEQUENT EVENT

On March 17, 1998, a wholly-owned subsidiary of the Company purchased the
operating assets and certain liabilities of Transcend Case Management, Inc.
(TCM.") TCM provides workers' compensation field case management services. The
purchase price will be paid in CORE stock equal to a valuation based upon future
performance of TCM.


                                      F-16

    
<PAGE>
   


                                   CORE, INC.

                        VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                   Balance at   Charged to              Balance 
                                   Beginning    Costs and  Deductions- at End of
      Description                  of Period    Expenses   Describe      Period
--------------------------------------------------------------------------------
<S>                               <C>          <C>        <C>         <C>
1997
Allowance for doubtful accounts    $221,925      $ -      $70,292(b)   $151,633
1996
Allowance for doubtful accounts    $170,337   $52,026(a)  $   438(b)   $221,925
1995
Allowance for doubtful accounts    $181,629   $14,375     $25,667(b)   $170,337
</TABLE>

(a) The allowance for doubtful accounts was increased by a reserve against
receivables which related to revenues recorded during the current year and thus,
charged directly against revenues during the current year.

(b) The allowance for doubtful accounts was reduced by the actual write-off of
receivables which had been reserved for in previous years and deemed
uncollectible.


                                      F-17