|SECURITIES
AND
EXCHANGE COMMISSION WASHINGTON, D.C. 20549


FORM 10-Q



(Mark one)
|-----------------------------------------------------------------------------------

| | [X] |  | QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934.
| | --- |  | -----------------------------------------------------------------------------------------

|For the quarterly period
ended September 30, 2000



OR
|-------------------------------------------------------

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

|For the transition
period from _____ to _____


Commission file number
000-21735


CREDIT MANAGEMENT
SOLUTIONS, INC.(exact name of registrant as specified in its charter)
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Delaware(State or other jurisdiction ofincorporation or organization) | 52-1549401
(I.R.S. Employer
Identification No.)
|--------------------------------------------------------------------- | -----------------------------------------------

|135 National
Business Parkway, Annapolis Junction, MD 20701(Address of principal executive offices) | 20701
(Zip Code)
|--------------------------------------------------------------------------------------------------- | ----------------

|Registrants telephone number,
including area code (301) 362-6000


FORMER
NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT.


Indicate
by check whether the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X] No [_]


Indicate
the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date: 7,822,081 shares of the Companys Common Stock, $.01 par
value, were outstanding as of November 10, 2000.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|CREDIT MANAGEMENT
SOLUTIONS, INC.Index to September 30, 2000 Form 10-Q
|----------------------------------------------------------------------

|                                                                               | Page
|------------------------------------------------------------------------------ | ----
|Part I  Financial Information                                                 |     
|Item 1.  Financial Statements                                                  |     
|Consolidated Balance Sheets 
September 30, 2000 (unaudited) and               |     
|December 31, 1999                                                              |     
|Consolidated Statements of
Operations  Three Months Ended September 30,       |     
|2000 (unaudited) and 1999 (unaudited) and Nine Months Ended September 30, 2000 |     
|(unaudited) and 1999 (unaudited)                                               |     
|Consolidated Statements of Cash
Flows  Nine Months Ended                      |     
|September 30, 2000 (unaudited) and 1999 (unaudited)                            |     
|Notes to Consolidated Financial
Statements                                     |     
|Item 2.  Managements Discussion and Analysis of Financial Condition and       |     
|Results of Operations                                                          |     
|Part II  Other Information                                                    |     
|Item 1.  Legal Proceedings                                                     |     
|Item 2.  Changes in Securities                                                 |     
|Item 3.  Defaults upon Senior Securities                                       |     
|Item 4.  Submission of Matters to a Vote of Security Holders                   |     
|Item 5.  Other Information                                                     |     
|Item 6.  Exhibits and Reports on Form 8-K                                      |     
|Signatures                                                                     |     

---

|UNLESS
OTHERWISE INDICATED, REFERENCES IN THIS FORM 10-Q TO THE COMPANY MEANS CREDIT
MANAGEMENT SOLUTIONS, INC. AND ITS SUBSIDIARIES.


CreditRevue® and
CreditConnection® are registered trademarks of Credit Management
Solutions, Inc. All other products, trademarks or service marks mentioned in this
document are trademarks or service marks of Credit Management Solutions, Inc., its
subsidiaries, or other companies with which they are associated or with which thy have a
business relationship.


FORWARD-LOOKING
STATEMENTS


Certain
statements in this report, including statements concerning the Companys strategy,
financial performance and revenue sources, are forward-looking statements based on
current expectations and entail various risks and uncertainties. Readers are cautioned
not to place undue reliance on these forward-looking statements, as the Companys actual
results may differ materially from those anticipated in these forward-looking statements
as a result of many factors including, but not limited to, those set forth under the
heading Certain Factors That May Affect Future Results, Financial Condition and the
Market Price of Securities and elsewhere in this report. Readers are urged to carefully
review and consider the various disclosures made by the Company in this report and in the
Companys other reports filed with the SEC, including the Companys annual report on Form
10-K with respect to the fiscal year ended December 31, 1999, that attempt to advise
interested parties of certain risks and factors that may affect the Companys business.
The following should be read in conjunction with the Companys consolidated financial
statements are notes thereto contained in that filing.



Item I.  FINANCIAL
STATEMENTS



CREDIT MANAGEMENT
SOLUTIONS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                | September 30,2000(Unaudited) | December 31,1999
|--------------------------------------------------------------- | ---------------------------- | ----------------
|Assets                                                          |                              |                 
|Current assets:                                                 |                             
|Cash and cash equivalents                                       |                              | $3,485,722      
|Investments available-for-sale                                  |                              | 2,322,104       
|Accounts receivable, net of allowance of $287,993 and           |                             
|$311,583 in 2000 and 1999, respectively                         |                              | 6,024,597       
|Costs and estimated earnings in excess of                       |                             
|billings on uncompleted contracts                               |                              | 119,997         
|Prepaid expenses and other current assets                       |                              | 306,034         
|                                                               
|Total current assets                                            |                              | 12,258,454      
|Property and equipment:                                         |                             
|Computer equipment and software                                 |                              | 5,663,818       
|Office furniture and equipment                                  |                              | 1,223,036       
|Leasehold improvements                                          |                              | 3,183,459       
|                                                               
|                                                                |                              | 10,070,313      
|Accumulated depreciation and amortization                       |                              | (4,195,564      
|                                                               
|                                                                |                              | 5,874,749       
|Software development costs, net of accumulated amortization     |                             
|of $359,165 in 2000 and 1999                                    |                              | 3,235,166       
|Other non-current assets                                        |                              | 43,592          
|                                                               
|Total assets                                                    |                              | $21,411,961     
|                                                               
|Liabilities and Shareholders Equity                            |                             
|Current liabilities:                                            |                             
|Accounts payable                                                |                              | $3,285,343      
|Accrued payroll and related expenses                            |                              | 1,091,844       
|Billings in excess of costs and estimated                       |                             
|earnings on uncompleted contracts                               |                              | 539,580         
|Deferred revenue                                                |                              | 3,227,702       
|Current portion of deferred tenant allowance                    |                              | 144,866         
|Short-term borrowings                                           |                              | 798,000         
|Current portion of long-term debt and capital lease obligations |                              |                
|                                                               
|Total current liabilities                                       |                              | 9,087,335       
|Deferred tenant allowance, less current portion                 |                              | 1,032,169       
|                                                               
|Total liabilities                                               |                              | 10,119,504      
|Shareholders equity:                                           |                             
|Preferred stock, $.01 par value; 1,000,000 shares authorized;   |                             
|no shares issued or outstanding                                 |                              |                
|Common stock, $.01 par value; 40,000,000 shares authorized;     |                             
|7,822,081 and 7,689,570 shares issued and outstanding at        |                             
|September 30, 2000 and December 31, 1999, respectively          |                              | 78,221          
|Additional paid-in capital                                      |                              | 27,763,822      
|Accumulated deficit                                             |                              | (16,549,586     
|                                                               
|Total shareholders equity                                      |                              | 11,292,457      
|                                                               
|Total liabilities and shareholders equity                      |                              | $21,411,961     
|                                                               

|THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THESEFINANCIAL STATEMENTS.
|-------------------------------------------------------------------------

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|CREDIT MANAGEMENT
SOLUTIONS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS
|---------------------------------------------------------------------------------------

|                                             | Three Months Ended,September 30, | Nine Months Ended,September 30,
|-------------------------------------------- | -------------------------------- | -------------------------------
|
|Revenues:                                    |                                  |                                
|License and software development fees        |                                  | $3,269,671                     
|Maintenance fees                             |                                  | 1,624,710                      
|Computer hardware sales                      |                                  | 15,261                         
|Service bureau revenues                      |                                  | 1,520,395                      
|                                            
|                                             |                                  | 6,430,037                      
|                                            
|Costs of revenues:                           |                                 
|Cost of license and software                 |                                 
|development fees                             |                                  | 2,027,350                      
|Cost of maintenance fees                     |                                  | 315,504                        
|Cost of computer hardware sales              |                                  | 119,474                        
|Cost of service bureau                       |                                  | 1,019,253                      
|                                            
|                                             |                                  | 3,481,581                      
|                                            
|Gross Profit                                 |                                  | 2,948,456                      
|                                            
|Other operating expenses:                    |                                 
|Selling, general and administrative expenses |                                  | 2,934,739                      
|Research and development costs               |                                  | 115,873                        
|                                            
|                                             |                                  | 3,050,612                      
|                                            
|Income (loss) from operations                |                                  | (102,156                       
|                                            
|Other income (expense):                      |                                 
|Interest expense                             |                                  | (19,207                        
|Interest income                              |                                  | 78,013                         
|                                            
|                                             |                                  | 58,806                         
|                                            
|Net income (loss)                            |                                  | $(43,350                       
|                                            
|                                            
|Basic and diluted earnings (loss) per        |                                 
|common share                                 |                                  | $(0.01                         
|                                            
|Weighted-average shares used in computation  |                                  | 7,821,665                      
|                                            

|THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THESEFINANCIAL STATEMENTS.
|-------------------------------------------------------------------------

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|CREDIT MANAGEMENT
SOLUTIONS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
|---------------------------------------------------------------------------------------

|                                                           | Nine Months Ended September 30,
|---------------------------------------------------------- | -------------------------------
|
|Operating activities                                       |                                
|Net loss                                                   |                                
|Adjustments:                                               |                                
|Depreciation                                               |                                
|Amortization of software development costs                 |                                
|Amortization of deferred tenant allowance                  |                                
|Loss on disposal of property and equipment                 |                                
|Other lease obligations                                    |                                
|Changes in operating assets and liabilities:               |                                
|Accounts receivable, net                                   |                                
|Prepaid expenses and other current assets                  |                                
|Accounts payable                                           |                                
|Accrued payroll and related expenses                       |                                
|Net billings in excess of costs and estimated gross profit |                                
|on uncompleted contracts                                   |                                
|Deferred revenue                                           |                                
|                                                          
|Net cash (used in) provided by operating activities        |                                
|                                                          
|Investing activities                                       |                                
|Purchase of investments available-for-sale                 |                                
|Sale of investments available-for-sale                     |                                
|Proceeds from sale of property and equipment               |                                
|Purchase of property and equipment                         |                                
|Capitalized software development costs                     |                                
|Increase in other assets                                   |                                
|                                                          
|Net cash (used in) provided by investing activities        |                                
|                                                          
|Financing activities                                       |                                
|Payments under capital lease obligations and               |                                
|short-term borrowings                                      |                                
|Proceeds from credit line                                  |                                
|Proceeds from exercise of stock options                    |                                
|Proceeds from issuance of common stock                     |                                
|                                                          
|Net cash provided by financing activities                  |                                
|                                                          
|Net change in cash and cash equivalents                    |                                
|                                                          
|Cash and cash equivalents at beginning of period           |                                
|                                                          
|Cash and cash equivalents at end of period                 |                                
|                                                          

|THE ACCOMPANYING NOTES
ARE AN INTEGRAL PART OF THESEFINANCIAL STATEMENTS
|------------------------------------------------------------------------

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|CREDIT MANAGEMENT
SOLUTIONS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.  BASIS
OF PRESENTATION


The accompanying unaudited
consolidated financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine months ended September
30, 2000 are not necessarily indicative of the results that may be expected for the year
ended December 31, 2000. For further information, refer to the consolidated financial
statements and footnotes thereof included in the Companys annual report on Form 10-K,
for the year ended December 31, 1999. Certain amounts in the 1999 consolidated financial
statements have been reclassified to conform to the 2000 presentation.



NOTE 2.  COST
AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS


Uncompleted contracts consist of the
following components:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                            | Balance Sheet Caption
|--------------------------- | ---------------------
|
|December 31, 1999:          |                      
|Cost and estimated earnings |                      
|Billings                    |                      
|                           
|                            |                      
|                           
|September 30, 2000:         |                      
|Cost and estimated earnings |                      
|Billings                    |                      
|                           
|                            |                      
|                           

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

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|NOTE 3.  SEGMENT
REPORTING


The Company manages its business by
focusing on distinct products and services. In prior years the Company was organized into
three distinct business lines; Credit Decisioning Systems, e-Commerce and Service Bureau
Alliances. In February 2000, the Company formed two new wholly-owned subsidiaries; Credit
Online Inc. and CMSI Systems Inc. and reorganized its three business lines into these new
subsidiaries during the first quarter of 2000.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                      | Three Months Ended September 30, 2000
|--------------------- | -------------------------------------
|
|Revenues              |                                      
|Segment profit (loss) |                                      

|                      | Three Months Ended September 30, 1999
|--------------------- | -------------------------------------
|
|Revenues              |                                      
|Segment profit (loss) |                                      

|A reconciliation of segment profit
for all segments to net income (loss) is as follows:
|---------------------------------------------------------------------------------------

|                                                           | Three Months Ended September 30,
|---------------------------------------------------------- | --------------------------------
|
|Total segment profit                                       |                                 
|Unallocated corporate, general and administrative expenses |                                 
|Depreciation and amortization                              |                                 
|Net interest income                                        |                                 
|                                                          
|Net income (loss)                                          |                                 
|                                                          

|                      | Nine Months Ended September 30, 2000
|--------------------- | ------------------------------------
|
|Revenues              |                                     
|Segment profit (loss) |                                     

|                      | Nine Months Ended September 30, 1999
|--------------------- | ------------------------------------
|
|Revenues              |                                     
|Segment profit (loss) |                                     

|A reconciliation of segment profit
for all segments to net loss is as follows:
|------------------------------------------------------------------------------

|                                                           | Nine months ended September 30,
|---------------------------------------------------------- | -------------------------------
|
|Total segment profit                                       |                                
|Unallocated corporate, general and administrative expenses |                                
|Depreciation and amortization                              |                                
|Net interest income                                        |                                
|                                                          
|Net Loss                                                   |                                
|                                                          

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

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|ITEM 2.  MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following discussion and
analysis provides information which management believes is relevant to an assessment and
understanding of the Companys interim results of operations and financial condition.
This discussion should be read in conjunction with Managements Discussion and Analysis
of Financial Condition and Results of Operations included in the Companys Annual Report
on Form 10-K for the year ended December 31, 1999. This report contains certain
statements of a forward-looking nature relating to future events or the future financial
performance of the Company. Investors are cautioned that such statements are only
predictions and that actual events or results may differ materially. In evaluating such
statements, investors should carefully consider the various factors identified in this
Report which could cause actual results to differ materially from those indicated by such
forward-looking statements, including the matters set forth in Certain Factors
That May Affect Future Results, Financial Condition and the Market Price of Securities.


OVERVIEW


The Company was incorporated in 1987
to commercialize an automated credit processing system developed by James R. DeFrancesco,
the Companys co-founder, and Scott L. Freiman, the Companys President, Chief
Executive Officer and co-founder while they were employed by American Financial
Corporation (AFC), an automobile finance servicing company owned by Mr.
DeFrancesco. AFC was acquired in October 1987 by Perpetual Savings Bank, FSB. Mr.
DeFrancesco and Mr. Freiman retained ownership of AFCs credit processing software
which formed the basis for the Company CreditRevue. The Company CreditRevue was initially released in 1988. Since
its initial release, the Company has continually enhanced CreditRevue in response to the
needs of its customers.  Subsequent to the introduction of CreditRevue, the Company introduced a number
of related products and services including: CreditConnection Dun & Bradstreet OneScore,
Credit Revue Service Bureau, CreditOnline network and eValuate.
The Companys CreditConnection products became commercially available in July 1996. The
Dun & Bradstreet OneScore product was commercially released in October 1997. The
CreditRevue Service Bureau was introduced in January 1998. The Companys original service bureau
strategy was to enter into marketing alliances with established service bureau providers
whereby such providers would re-market CreditRevue Service Bureau to their clients on a
transaction fee basis. The Company is changing its service bureau strategy to focus on an application
service provider (ASP) or other service bureau model built around its eValuate
product and an enhanced CreditRevue product offering. New licenses for the original
CreditRevue Service Bureau are no longer being offered. Dun & Bradstreet Portfolio
Monitoring was introduced in June 1998 and the CreditOnline network, was announced in
February 1999. In March 1999, the Company announced the introduction of CreditRevue
Maestro, an automated analysis engine for evaluating and decisioning consumer and small
business credit applications. During 1999, the CreditRevue Maestro product was renamed
eValuate. The Company currently expects eValuate to be released in the fourth quarter of
2000.


In February 2000, the Company
announced the formation of two new wholly-owned subsidiaries: Credit Online, Inc. and
CMSI Systems, Inc. Credit Online, Inc., focusing on the Companys e-commerce
strategy, intends to expand and enrich the Companys offerings in online lending for
the automotive industry. Credit Online, Inc. also may leverage investments made in
infrastructure to expand into additional vertical markets in the business-to-business
Internet credit arena. CMSI Systems, Inc. intends to continue to provide the Companys
line of licensed credit management software solutions, including CreditRevue.


License fees for CreditRevue are
recognized based on a percentage-of-completion method, measured generally on a
cost-incurred basis. The Company typically charges a nonrefundable fee of 25% of the
preliminary estimate of the total license fee to develop an analysis of the customers
credit operations and a plan for the configuration and implementation of CreditRevue
according to the customers requirements. Costs consist primarily of direct labor,
temporary contract labor and office space. Contracts in progress are reviewed
periodically, and revenues and earnings are adjusted based on revisions in contract value
and estimated time to completion. The Company recognizes revenue for maintenance fees pro
rata over the term of the related agreement, which is generally one year. Maintenance
fees received in advance of revenue recognition are included in deferred revenue. In
addition, as a convenience to its customers, the Company offers third-party computer
hardware through various reseller arrangements. However, neither third-party hardware nor
third-party software sales are a focus of the Companys overall marketing strategy.
For the nine months ended September 30, 2000, revenues from third-party hardware and
software sales accounted for 1.0% and 5.5% of total revenues, respectively. Revenues from
resales of third-party computer hardware and software are recognized at the time of
shipment and installation.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------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|Certain of the Companys products
and services, including CreditConnection, CreditRevue Service Bureau and Dun & Bradstreets
OneScore and the CreditOnline network are charged on a per transaction basis. As a
result, the Company anticipates that transaction-based revenue will represent an
increasing proportion of the Companys revenue. The Companys sales and marketing efforts
will no longer be exclusively targeted at generating license-based revenue but will be
increasingly focused on generating transaction-based revenue from prospective customers.
The Companys anticipated future growth is based, in large part, on the success of these
products and services and the transition to a transaction-based revenue stream.
Accordingly, the failure by the Company to generate demand for the CreditConnection
service, Dun & Bradstreets OneScore, Dun & Bradstreets Portfolio Monitoring, CreditOnline
network, eValuate, the occurrence of any significant technological problems, such as a
system failure incurred prior to the implementation of a back-up computer system, any
inadequacy of the Companys business interruption insurance to cover costs associated
with system failure or business interruptions, or the failure of the Company to
successfully manage the transition to a transaction-based revenue stream would have a
material adverse effect on the Companys business, results of operations and financial
condition.


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


As of September 30, 2000, the
Company had 19 employees in its sales and marketing organization. The Company intends to
hire additional sales and marketing personnel in the future to help the Company expand
its market presence. Competition for such personnel is intense, and there can be no
assurance that the Company can retain its existing sales personnel or that it can
attract, assimilate or retain additional highly qualified sales persons in the future. If
the Company is unable to hire such personnel on a timely basis, the Companys business,
results of operations and financial condition could be materially and adversely affected.


RESULTS OF OPERATIONS


Total Revenues. Total revenues
increased 22.2% from $5.3 million in the three months ended September 30, 1999 to $6.4
million in the three months ended September 30, 2000. The primary factors affecting
revenue growth in the quarter relate to increases in maintenance and service bureau
revenues. The Companys revenues are derived from four sources: license and software
development fees, maintenance fees, computer hardware sales and service bureau revenues.


Total revenues increased 4.2% from
$17.5 million in the nine months ended September 30, 1999 to $18.3 million in the nine
months ended September 30, 2000. Year to year revenue performance was affected by lower
revenues in the first quarter due in large part to delays in buying decisions resulting
from Year 2000.


License and Software Development
Fees. CreditRevue accounted for virtually all of the Companys license and software
development fee revenue through September 30, 2000. License and software development fees remained level at
$3.3 million in the three months ended September 30, 1999 and 2000.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|License and software development
fees decreased 14.2% from $10.6 million for the nine months ended September 30, 1999 to
$9.1 million for the nine months ended September 30, 2000, primarily due to Year 2000
related spending freezes implemented by many of the Companys prospective customers.


Maintenance Fees.  Maintenance fees
include fees from software maintenance agreements. Maintenance fees increased 51.1% from
$1.1 million in the three months ended September 30, 1999 to $1.6 million in the three
months ended September 30, 2000. The growth in these revenues during the periods
presented was the result of increased maintenance fees associated with the increased
number of licenses of CreditRevue outstanding during such periods. New system
implementations coupled with increases of professional services license enhancements
resulted in increased base licenses subject to maintenance fees.


Maintenance fees increased 28.5%
from $3.7 million for the nine months ended September 30, 1999 to $4.7 million for the
nine months ended September 30, 2000. In addition to a growing installed base of
CreditRevue systems, maintenance agreements include annual increases for increases in the
Consumer Price Index (CPI). The Company increased its standard maintenance fees to 18%
from 15% of the license fee for CreditRevue systems installed after 1998. Maintenance
fees related to third-party software are included in this category and with the increased
number of installed CreditRevue systems, maintenance on the required third-party software
is also increasing. The increased system base, increases in the consumer price index and
increases to annual maintenance fees, all contributed to this growth in maintenance fee
revenue on a year to year basis.


Computer Hardware Sales.  Computer
hardware sales revenues decreased 22.5% from $19,700 in the three months ended September
30, 1999 to $15,300 in the three months ended September 30, 2000. Computer hardware sales
revenue consists of revenues received from resales of third-party hardware in connection
with the license and installation of the Companys software. The fluctuation in such
revenues during these periods is the result of customer purchase preferences for computer
hardware systems. In certain instances, CreditRevue customers have volume discount
arrangements with hardware resellers making them eligible for discounts greater than
those offered by the Company.


Computer hardware sales for the nine
months ended September 30, 2000 decreased 83.3% to $0.2 million as compared to $1.1
million for the nine months ended September 30, 1999. Because hardware sales typically
occur in conjunction with the sale and implementation of new CreditRevue systems, the
higher number of CreditRevue sales during the first six months of 1999 had a direct
impact on the higher level of hardware sales during that period.


Service Bureau Fees.  Service Bureau
revenues originate from several sources including: CreditConnection transaction and
interface fees, Credit Online network fees, Dun & Bradstreet OneScore and Portfolio
Management transaction and implementation fees and CreditRevue Service Bureau. Total
service bureau revenues increased 74.4% from $0.9 million for the three months ended
September 30, 1999, as compared to $1.5 million for the three months ended September 30,
2000. The CreditConnection service and Credit Online network generated $1.3 million of
revenue in the quarter ended September 30, 2000 compared to $0.5 million for the period
ended September 30, 1999, an increase of 156.6%. Revenue increases are the result of
increases in the number of dealers and lenders enrolled in the CreditConnection service
and the resulting growth in transaction volume. At September 30, 2000, there were
approximately 298 dealers enrolled in the service compared to approximately 220 dealers
at September 30, 1999.


Dun & Bradstreet OneScore was
commercially released in the fourth quarter of 1997. Portfolio Monitoring and CreditRevue
Service Bureau were commercially released in the first quarter of 1999. These products
account for an aggregate revenue of $0.2 million in the quarter ended September 30, 2000,
which represents a decrease of 38.9% compared to the $0.4 million recorded in the quarter
ended September 30, 1999. The decrease in 2000 over 1999 relates to the winding down of
the CreditRevue Service Bureau business.


Service bureau revenues increased
97.3% from $2.1 million for the nine months ended September 30, 1999 to $4.2 million for
the nine months ended September 30, 2000. Of the total $4.2 million in 2000,
CreditConnection-related revenues accounted for $3.1 million, up 156.6% from the $1.3
million reported for the first nine months of 1999. The growth in CreditConnection revenue
is related to the increased number of dealers and lenders active on the system at
September 30, 2000. The balance of service bureau fees for the first nine months of 2000,
totaling $1.1 million, represents revenues related to the CreditRevue service bureau and
the Dun & Bradstreet OneScore and Portfolio monitoring services. These other service
bureau revenues increased 38.8% from $0.8 million to $1.1 million for the nine months
ended September 30, 1999 and 2000, respectively. Approximately $0.6 million of other
service bureau revenues in 2000 are attributable to one-time revenues associated with the
winding-down of the CreditRevue Service Bureau business.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|Cost of License and Software
Development Fees.  Cost of license and software development fees consists primarily of
salaries and benefits for in-house programmers, the cost of temporary contract labor and
costs for office space. Cost of license and software development fees increased 51.1%
from $1.3 million in the three months ended September 30, 1999 to $2.0 million in the
three months ended September 30, 2000. As a percentage of license fee and software
development revenue, cost of license and software development fees were 40.7% and 62.0%
in the three months ended September 30, 1999 and 2000, respectively. The increase in cost
of license and software fees as a percentage of license and software development fees
relates to the fluctuation in the Companys quarterly revenues and the costs associated
with in-house programmers and temporary contract labor. Revenue fluctuations result in
corresponding fluctuations in the extent to which the Company employs temporary
contractors and may also result in increases or decreases in-house programmer staffing as
revenues increase or decrease. Of the $0.7 million increase in costs, $0.3 is the result
of increased costs for temporary contractors. The remaining $0.4 million increase relates
to office rent reserves that were recorded in 1998 for abandoned office space and
reversed in 1999 when the space was subsequently subleased. The reversal of these loss
reserves in 1999 is responsible for the increase when comparing 2000 to 1999.


The cost of license and software
development fees increased 10.3% from $4.9 million for the nine months ended September
30, 1999 to $5.5 million for the nine months ended September 30, 2000. As a percentage of
license and software development revenue, the cost of license and software development
fees were 46.6% and 60.0% for the nine months ended September 30, 1999 and 2000,
respectively. The use of temporary contractors is primarily responsible for the increase
in costs as a percentage of revenue. In order to help ensure that required skills and
knowledge are available to implement new systems, the Company retains a core pool of
skilled programmers and analysts with expertise in implementing CreditRevue systems.
In periods of rapid revenue growth the employee pool is supplemented with temporary
contractors. The costs of temporary contractors exceeds the cost of permanent employees
and in those instances where temporary contractors must be employed to meet project
deadlines, costs as a percent of revenue will increase.


Costs of Maintenance Fees.  Cost of
maintenance fees consists primarily of personnel and related costs for customer
maintenance and support. Cost of maintenance fees increased 121.1% from $0.1 million in
the three months ended September 30, 1999 to $0.3 million in the three months ended
September 30, 2000. As a percentage of maintenance fee revenue, cost of maintenance fees
was 13.3% and 19.4% in the three months ended September 30, 1999 and 2000, respectively.
The dollar increase in the cost of maintenance fees reflects increased costs associated
with maintenance for third-party software for which the Company is a reseller. As the
number of CreditRevue systems in use increases, the base of installed third-party
software is likewise increasing. Compared to third quarter 1999, there were a greater
number of third-party software systems under contract. The costs associated with
maintenance for these third-party software products resulted in increased costs of
maintenance for the current year.


Cost of maintenance fees increased
45.2% from $0.7 million for the nine months ended September 30, 1999 to $1.0 million for
the nine months ended September 30, 2000. This increase in costs related directly to the
increase in revenues and the increase in third-party software maintenance costs. Cost of
maintenance as a percentage of maintenance revenues were 19.3% and 21.8% for the nine
months ended September 30, 1999 and 2000, respectively.


Cost of Computer Hardware Sales.
  Cost of computer hardware sales consists of the Companys cost of computer hardware
resold to the Companys customers that are licensing CreditRevue and salaries and
benefits for systems integration employees. Cost of computer hardware sales increased
13.3% from $0.1 million in the three months ended September 30, 1999 to $0.1 million in
the three months ended September 30, 2000. As a percentage of computer hardware sales
revenue, cost of computer hardware sales was 782.9% and 535.5% in the three months ended
September 30, 1999 and 2000, respectively. The increase in the cost of computer hardware
sales as a percent of revenue is the result of decreased hardware margins resulting from
decreased hardware sales, while fixed expenses, primarily personnel-related in nature,
remained relatively constant during the same period.
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|Cost of computer hardware sales
decreased 69.6% from $1.3 million for the nine months ended September 30, 1999 to $0.4
million for the nine months ended September 30, 2000. As a percentage of hardware
revenues, costs were 122.5% and 222.9% for the nine months ended September 30, 1999 and
2000, respectively. During the period that costs decreased 69.6%, corresponding revenues
decreased 83.3%. Costs of computer hardware sales exceeded associated revenues because
the Company has certain fixed costs for salaries and benefits for the systems integration
staff required to support hardware sales activities.


Cost of Service Bureau Revenues.
  Cost of service bureau fees consists primarily of personnel costs associated with the
operation and support of the service bureau. Other costs of service bureau revenues
include equipment rental expenses, communications network costs from third-parties and
hardware and software pass-through expenses. Service bureau costs increased 59.0% from
$0.7 million for the three months ended September 30, 1999 to $1.0 million for the three
months ended September 30, 2000. Cost of service bureau revenues as a percent of service
bureau revenues were 73.5% and 67.0% for the three months ended September 30, 1999 and
2000, respectively. While service bureau costs increased 59.0%, corresponding service
bureau revenues increased 74.4%.


Cost of service bureau revenues
increased 49.4% from $2.1 million for the nine months ended September 30 1999 to $3.2
million for the nine months ended September 30, 2000. As a percentage of revenues, costs
of service bureau were 99.9% and 75.5% for the nine months ended September 30, 1999 and
2000, respectively. While costs increased 49.4%, corresponding revenues increased 97.3%.
The increase in costs relates to increased labor costs related to one-time software
deliveries for the CreditRevue service bureau and fees associated with alliance partner
revenue sharing arrangements for the Credit Connection service.


Selling, General and Administrative
Expenses.  Selling, general and administrative expenses increased 10.3% from $2.7 million
in the three months ended September 30, 1999 to $2.9 million in the three months ended
September 30, 2000. Of this $0.2 million increase, approximately $0.2 million relates to
office rental expense. During 1999, the Company successfully subleased previously
abandoned office space for which approximately $0.3 of loss reserves had been established
in 1998. The reversal of these loss reserves in 1999 is responsible for the increase when
comparing 2000 to 1999.


Selling general and administrative
expenses increased 5.7% from $8.1 million for the nine months ended September 30, 1999 to
$8.6 million for the nine months ended September 30, 2000. As a percentage of total
revenues, selling, general and administrative expenses were 46.2% and 46.9% for the nine
months ended September 30, 1999 and 2000, respectively. The increase in selling, general
and administrative expenses of $0.5 million on a period to period basis relates to the
reversal in 1999 of loss reserves on office space abandoned in 1998 of approximately $0.6
million. Excluding the reversal of the loss reserve, selling, general and administrative
expenses on a year-to-year basis would reflect a decrease of approximately $0.1 million,
resulting primarily from reduced labor related expenses.


Research and Development Costs.
  Research and development costs consist primarily of salaries and benefits for in-house
programmers. These costs decreased $0.2 million during the three months ended September
30, 2000 as compared to the three months ended September 30, 1999. Overall research and
development staffing at September 30, 2000 was 25 compared to 28 at September 30, 1999.
The Company is continuing to capitalize certain development costs associated with the
eValuate product until commercial release, which is expected to occur in the fourth
quarter of 2000. During the three months ended September 30, 2000, approximately $0.4
million of expenses related to the development of eValuate were capitalized which
compares to approximately $0.4 million which was capitalized during the third quarter of
1999. See Note 1 to Notes to Consolidated Financial Statements in the Companys Annual
Report on Form 10-K for the year ended December 31, 1999.
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|Research and development costs
decreased 37.0%, from $1.0 million for the nine months ended September 30, 1999 to $0.7
million for the nine months ended September 30, 2000. This decrease is attributable
primarily to slightly higher levels of capitalized software development expenses during
2000.


Interest Income (Expense).  Net
interest income for the three months ended September 30, 2000 of $59,000 was relatively
even with net interest income for the three months ended September 30, 1999 of $54,000.


Net interest income decreased 34.3%
from $0.2 million for the nine months ended September 30, 1999 to $0.1 million for the
nine months ended September 30, 2000. Lower average invested cash balances and increased
average outstanding borrowings against the Companys working capital line of credit are
responsible for the decline in net interest income.


LIQUIDITY AND CAPITAL
RESOURCES


The Company has primarily funded its
working capital needs, operating losses and investments in property and equipment from
the net proceeds from the Companys initial public offering completed in December 1996.
During the nine months ended September 30, 1999, the Company consumed net cash in
operating activities of $2.4 million. During the nine months ended September 30, 2000,
the Company generated $2.3 million of cash in operating activities. The improvement in
cash flow from operations results primarily from decreases in working capital
investments. The working capital components effecting the greatest change during the
quarter were accounts payable and accrued expenses, which consumed $3.7 million less in
2000, and net billings in excess of costs and estimated gross profit on uncompleted
contracts, which reflected a net improvement of $1.3 million in 2000 compared to 1999.


The Companys cash used in investing
activities consists principally of investments in property and equipment and capitalized
software expenses. During the nine months ended September 30, 1999 and 2000, the Company
invested a total of $0.5 and $0.8 million in property and equipment, respectively. These
investments were directly attributable to the Companys growth in operations. The Company
does not have any material commitments for the purchase of property and equipment at
September 30, 2000. During the nine months ended September 30, 1999 and 2000, the Company
invested a total of $1.5 and $1.3 million in capitalized software expenses, respectively.


The Company has historically relied
principally on its bank line of credit and proceeds from its initial public offering
completed in December 1996 for its financing needs. The Company received $22.6 million of
net proceeds from its initial public offering. The Company maintains a secured bank line
of credit in the amount of $1.5 million, of which the balance outstanding at September
30, 2000 was approximately $0.8 million. The line of credit bears interest at the banks
prime rate per annum (9.5% at September 30, 2000). Further, the banks line of credit
requires the banks written consent prior to, among other things, the payment of cash
dividends, the Companys engagement in a substantially different business activity, or
the purchase by the Company of any interest in another enterprise or entity.


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


Impact of Year 2000.


The Year 2000 issue is a result of
computer programs which store or process date-related information using only two digits
to represent the year. These programs may not be able to properly distinguish between a
year in the 1900s and a year in the 2000s. Failure of these programs to distinguish
between the two centuries could cause the programs to yield erroneous results or even to
fail.
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|The Company recognizes the
significance of the year 2000 issue and has implemented a formal year 2000 program to
minimize the impact of the year 2000 on the Company and its customers.


As of September 30, 2000, the
analysis, remediation, testing and implementation had been substantially completed for
(i) the Companys customers credit decisions systems, (ii) the software and systems
comprising the Companys e-commerce systems, (iii) the Companys service bureau
customers systems, and (iv) the Companys internal products and systems. The Company has
not experienced any material disruption to its business associated with the Year 2000
issue. To the Companys knowledge, none of the Companys customers has experienced any
material disruption to its business which has been associated with the Year 2000 issue in
connection with the Companys products.


For the Year 2000 and beyond, the
Company continues to code according to its Year 2000 coding standards. In addition,
because system clocks are now in the Year 2000, all testing necessarily includes testing
of dates in the Year 2000.


CERTAIN FACTORS THAT MAY
AFFECT FUTURE RESULTS, FINANCIAL CONDITION AND THE MARKET PRICE OF SECURITIES.



In addition to the other information
in this report, the following factors should be carefully considered in evaluating the
Company and its business. The risks and uncertainties described below are not the only
ones facing the Company and there may be additional risks that the Company does not
presently know of or that it currently deems immaterial. All of these risks and
uncertainties could cause actual results to differ materially from the results discussed
in the forward-looking statements contained in this report. If any of the following risks
actually occur, the Companys business, financial condition, cash flow or results of
operations could be materially adversely affected. In such case, the trading price of the
Companys common stock could decline.


Uncertainty of Future Results of
Operations; Fluctuations in Quarterly Results of Operations.  Prior growth rates in the
Companys revenue and net income should not be considered indicative of future results of
operations. Future results of operations will depend upon many factors, including market
acceptance of the Companys CreditConnection service, the demand for the Companys
licensed software products and related services, the successful distribution and
implementation of the Companys products and services, the successful transition from
predominantly license fee-based revenue to predominantly transaction fee-based revenue,
the timing of new product and service development and introductions and software
enhancements by the Company or its competitors, the level of product, service and price
competition, the length of the Companys sales cycle, the size and timing of individual
transactions, the delay or deferral of customer implementations, the Companys success in
expanding its customer support organization, direct sales force and indirect distribution
channels, the nature and timing of significant marketing programs, the mix of products
and services sold, the timing of new hires, the ability of the Company to timely develop
and successfully market new products and services and control costs, competitive
conditions in the industry and general economic conditions. In addition, the decision to
implement the Companys products or services typically involves a significant commitment
of customer resources and is subject to the budget cycles of the Companys customers.
Licenses of CreditRevue generally reflect a relatively high amount of revenue per order.
The loss or delay of individual orders, therefore, would have a significant impact on the
Companys revenue and quarterly results of operations. The timing of revenue is difficult
to predict because of the length and variability of the Companys sales cycle, which has
ranged to date from two to 18 months from initial customer contact to the execution of a
license agreement. In addition, since a substantial portion of the Companys revenue is
recognized on a percentage-of-completion basis, the timing of revenue recognition for its
licenses may be materially and adversely affected by delays or deferrals of customer
implementations. Such delays or deferrals may also increase expenses associated with such
implementations which would materially and adversely affect related operating margins.
The Companys operating expenses are based in part on planned product and service
introductions and anticipated revenue trends and, because a high percentage of these
expenses are relatively fixed, a delay in the recognition of revenue from a limited
number of transactions could cause significant variations in operating results from
quarter-to-quarter and could result in operating losses. To the extent such expenses
precede, or are not subsequently followed by, increased revenues, the Companys results
of operations would be materially and adversely affected. As a result of these and other
factors, revenues for any quarter are subject to significant variation, and the Company
believes that period-to-period comparisons of its results of operations are not
necessarily meaningful and should not be relied upon as indications of future
performance. There can be no assurance that the Company will be profitable in any future
quarter or that such fluctuations in results of operations will not result in volatility
in the price of the Companys Common Stock. Due to all of the foregoing factors, it is
likely that in some future quarter the Companys results of operations will be below the
expectations of public market analysts and investors. In such event, the market price of
the Companys Common Stock will be materially and adversely affected.
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|Dependence on CreditRevue Product
Line.  License fees, maintenance fees and third-party computer hardware sales associated
with licenses and installations of CreditRevue accounted for the majority of the
Companys revenues through September 30, 2000. Although the Company has introduced its
CreditConnection service, the Company expects that revenues generated from licenses and
installations of CreditRevue will continue to account for a significant portion of the
Companys revenues for the foreseeable future. The life cycles of the Companys products
and services are difficult to predict due to the effect of new product and service
introductions or software enhancements by the Company or its competitors, market
acceptance of new and enhanced versions of the Companys products and services, and
competition in the Companys marketplace. A decline in the demand for CreditRevue,
whether as a result of competition, technological change, price reductions or otherwise,
would have a material adverse effect on the Companys business, results of operations and
financial condition.


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


Market Acceptance of CreditOnline
and CreditConnection; Transition to Transaction-Based Revenue.  The Companys
CreditConnection service was commercially introduced in 1996, the Companys CreditOnline
network was introduced in February 1999, and the Companys CreditRevue Service Bureau
service was commercially introduced in January 1998. The CreditConnection service,
CreditOnline network and CreditRevue Service Bureau product (which may be introduced in
new ASP or other formats, based on the eValuate and CreditRevue software in development)
are projected to account for a significant portion of the Companys revenues in the
future. As a result, demand and market acceptance for these services are subject to a
high level of uncertainty, and the Company will be heavily dependent on their market
acceptance. There can be no assurance that these products and services will be
commercially successful. The failure of the Company to generate demand for the
CreditConnection service, CreditOnline network or CreditRevue Service Bureau product, or
the occurrence of any significant technological problems with such products or services,
would have a material adverse effect on the Companys business, results of operations and
financial condition. Historically, virtually all of the Companys revenues have been
derived from license fees, maintenance fees and hardware sales associated with licenses
and installations of CreditRevue. Under the terms of its license agreements, a majority
of the Companys revenues are realized during the configuration and installation of
CreditRevue. However, the Company anticipates that a significant portion of the Companys
future revenues will be derived from per-usage transaction-based fees and subscription
fees charged to credit originators and financial institutions for transactions originated
through the CreditConnection service, CreditOnline network and CreditRevue Service Bureau
product. There can be no assurance that the Company will successfully manage the
transition of a significant portion of its revenues from license-based revenue to
transaction-based revenue. The failure of the Company to successfully manage the
transition to a transaction-based revenue stream would have a material adverse effect on
the Companys business, results of operations and financial condition.
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|Reliance on Certain Relationships.
  The Company has established relationships with a number of companies that it believes are
important to its sales, marketing and support activities, as well as to its product,
service and software development efforts. The Company has relationships with automated
scorecard companies, hardware vendors and credit bureaus. There can be no assurance that
these companies, most of which have significantly greater financial and marketing
resources than the Company, will not develop or market products and services which will
compete with the Companys products and services in the future. Furthermore, since many
of these relationships are informal in nature, they are terminable by either party at
will. Other relationships are terminable by either party after a relatively short notice
period. There can be no assurance that these companies will not otherwise discontinue
their relationships with or support of the Company. The failure by the Company to
maintain its existing relationships or to establish new relationships in the future,
because of a divergence of interests, acquisition of one or more of these third parties
or other reasons, could have a material adverse effect on the Companys business, results
of operations and financial condition.


In addition, the Company has formed
strategic alliances with Automatic Data Processing (ADP) and Universal Computer Systems
(UCS) for remarketing CreditConnection and with Dun & Bradstreet for the marketing of
OneScore. There can be no assurance that these relationships will be successful.
Moreover, there can be no assurance that these companies will actively remarket
CreditConnection or OneScore. The failure by the Company to leverage and maintain its
existing relationships ADP, UCS and Dun & Bradstreet, or to establish new relationships in
the future, because of a divergence of interests, acquisition of one or more of these
third parties or other reasons, could have a material adverse effect on the Companys
business, results of operations and financial condition.


Dependence on Large License Fee
Contracts and Customer Concentration.  A relatively small number of customers have
accounted for a significant percentage of the Companys revenues. License fees for
CreditRevue are based on a percentage-of-completion method on a cost-incurred basis with
the final installment being paid in full upon acceptance of the Companys software. The
Company receives continuing revenues on CreditRevue from annual maintenance agreements
which commence upon acceptance of the software by the customer. Maintenance agreements
are renewable annually by the customer, and the license agreements are generally
co-terminous with the maintenance agreements. Although the Company has experienced a high
degree of customer loyalty, the Company cannot predict how many maintenance agreements
will be renewed or the number of years of renewal. Revenues generated by the Companys 10
largest customers accounted for 55.1% and 55.4% of total revenues in 1999 and 1998,
respectively. None of the Companys customers individually accounted for 10% or more of
total revenues in 1999 and one customer accounted for 10% of revenues in 1998. The
Company expects that a limited number of customers will continue to account for a
significant percentage of revenue for the foreseeable future. The loss of any major
customer or any reduction or delay in orders by any such customer, delay or deferral in
configurations or enhancements by such customers or the failure of the Company to
successfully market its products or services to new customers, could have a material
adverse effect on the Companys business, results of operations and financial condition.


Dependence on Consumer Retail
Lending Industry; Cyclical Nature of Consumer Lending.  The Companys business is
currently concentrated in the consumer lending industry and is expected to be so
concentrated for the foreseeable future, thereby making the Company susceptible to a
downturn in the consumer lending industry. For example, a decrease in consumer lending
could result in a smaller overall market for the Companys products and services.
Furthermore, banks in the United States are continuing to consolidate, decreasing the
overall potential number of customers for the Companys products and services. In
addition, demand for consumer loans has been historically cyclical, in large part based
on general economic conditions and cycles in overall consumer indebtedness levels.
Changes in general economic conditions that adversely affect the demand for consumer
loans, the willingness of financial institutions to provide funds for such loans, changes
in interest rates and the overall consumer indebtedness level, as well as other factors
affecting the consumer lending industry, could have a material adverse effect on the
Companys business, results of operations and financial condition.
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|Management of Changing Business.  The
Company has experienced significant changes in its business, such as a reduction in the
Companys staff and an expansion in the Companys customer base and the development of
new products, services and enhancements to its software. Such changes have placed and may
continue to place a significant strain upon the Companys management, systems and
resources. As of September 30, 2000, the Company had 181 employees down from 186
employees at September 30, 1999. The Companys ability to compete effectively and to
manage future changes will require the Company to continue to improve its financial and
management controls, reporting systems and procedures and budgeting and forecasting
capabilities on a timely basis and expand its sales and marketing work force, and train
and manage its employee work force. There can be no assurance that the Company will be
able to manage such changes successfully. The Companys failure to do so could have a
material adverse effect upon the Companys business, results of operations and financial
condition.


Dependence on Key Personnel.  The
Companys future performance depends in significant part upon the continued service of
its key technical, sales and senior management personnel, particularly, Scott L. Freiman,
President and Chief Executive Officer. The Company has obtained for key-person life
insurance on the life of Mr. Freiman. The loss of the services of one or more of the
Companys executive officers could have a material adverse effect on the Companys
business, results of operations and financial condition. The Company retains its key
employees through the use of equity incentive programs, including stock option plans,
employee stock purchase plans, and competitive compensation packages. In addition to
entering into an employment agreement with Mr. Freiman, the Company entered into
employment agreements with Mr. Miles Grody, the Companys Senior Vice President and
President and Chief Executive Officer of the Companys CMSI Systems subsidiary, Mr.
Howard Tischler, the Companys Senior Vice President and President and Chief Executive
Officer of the Companys Credit Online subsidiary and Mr. Robert Vollono, the Companys
Senior Vice President and Chief Financial Officer. The Companys future success also
depends on its continuing ability to attract and retain highly qualified technical,
customer support, sales and managerial personnel. In particular, the Company has
encountered difficulties in hiring sufficient numbers of programmers and technical
personnel. Competition for qualified personnel is intense, and there can be no assurance
that the Company will be able to retain its key technical, sales and managerial employees
or that it can attract, assimilate or retain other highly qualified technical, sales and
managerial personnel in the future.


Rapid Technological Change; Risk
Associated with New Products, Services or Enhancements.  The credit processing software
products and services industry in which the Company competes is characterized by rapid
technological change, frequent introductions of new products and services, changes in
customer demands and evolving industry standards. The introduction or announcement of new
products, services or enhancements by the Company or one or more of its competitors
embodying new technologies or changes in industry standards or customer requirements
could render the Companys existing products or services obsolete or unmarketable.
Accordingly, the life cycles of the Companys products are difficult to estimate. The
Companys future results of operations will depend, in part, upon its ability to enhance
its products and services and to develop and introduce new products and services on a
timely and cost-effective basis that will keep pace with technological developments and
evolving industry standards, as well as address the increasingly sophisticated needs of
the Companys customers. There can be no assurance that these new products and services
will gain market acceptance or that the Company will be successful in developing and
marketing new products or services that respond to technological change, evolving
industry standards and changing customer requirements, that the Company will not
experience difficulties that could delay or prevent the successful development,
introduction and marketing of these products or services, or that its new products or
services will adequately meet the requirements of the marketplace and achieve any
significant degree of market acceptance. In addition, a majority of the Companys current
products operates in the UNIX operating system. Although the Companys software is
designed to work with other operating environments, a requirement to port to a different
operating system could be costly and time consuming and could have a material adverse
effect on the Companys business, results of operations and financial condition. Failure
of the Company to develop and introduce, for technological or other reasons, new products
and services in a timely and cost-effective manner could have a material adverse effect
on the Companys business, results of operations and financial condition. Furthermore,
the introduction or announcement of new product or service offerings or enhancements by
the Company or the Companys competitors may cause customers to defer or forgo purchases
of the Companys products or services, which could have a material adverse effect on the
Companys business, results of operations and financial condition.
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|System Interruption and Security
Risks; Potential Liability; Possible Lack of Adequate Insurance; and System Inadequacy.
  The Companys operations are dependent, in part, on its ability to protect its system
from interruption by damage from fire, earthquake, power loss, telecommunication failure,
unauthorized entry or other events beyond the Companys control. The Companys computer
equipment constituting its central computer system, including its processing operations,
is located at a single site. The Company is currently in the process of acquiring and
implementing a back-up, off-site processing system capable of fully supporting its
operations in the event of system failure. The Company relocated operations to new leased
facilities in Annapolis Junction, MD in late 1998. The new facilities, which include a
state of the art data center, is primary production center for the Companys data
processing needs. Prior to full implementation of the back up facility, the Companys
operations are subject to substantial risks, including temporary interruptions resulting
from damage caused by any one or more of the foregoing factors or due to other causes
including computer viruses, hackers or similar disruptive problems. While the Company
maintains $1.6 million of property insurance coverage, business interruption insurance
coverage, $2.0 million of errors and omissions insurance coverage and $10.0 million of
umbrella insurance coverage, such insurance may not be adequate to compensate the Company
for all losses that may occur or to provide for costs associated with system failure or
business interruption. Any damage or failure that causes interruptions in the Companys
operations could have a material adverse effect on the Companys business, results of
operations and financial condition.


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


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


Future Capital Needs; Uncertainty of
Additional Financing.  The Company currently anticipates that its available cash resources
combined with anticipated funds from operations will be sufficient to meet its presently
anticipated working capital and capital expenditure requirements through 2001.
Thereafter, the Company may need to raise additional funds.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|The Company may need to raise
additional funds sooner in order to fund more rapid expansion, to develop new or enhanced
products and services, to respond to competitive pressures or to acquire complementary
businesses or technologies. If additional funds are raised through the issuance of equity
securities, the percentage ownership of the stockholders of the Company will be reduced,
stockholders may experience additional dilution, or such equity securities may have
rights, preferences or privileges senior to those of the holders of the Companys Common
Stock. There can be no assurance that additional financing will be available when needed
on terms favorable to the Company or at all. If adequate funds are not available or are
not available on acceptable terms, the Company may be unable to develop or enhance its
products and services, take advantage of future opportunities or respond to competitive
pressures, which could have a material adverse effect on the Companys business, results
of operations and financial condition.


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


Control by Existing Stockholders.
  Assuming no exercise of outstanding options, James R. DeFrancesco, the Companys
co-founder and Scott L. Freiman, the Companys President and Chief Executive Officer
collectively beneficially own approximately 55% of the outstanding shares of Common
Stock. As a result, these stockholders will be able to exercise control over matters
requiring stockholder approval, including the election of directors, and the approval of
mergers, consolidations and sales of all or substantially all of the assets of the
Company. This may prevent or discourage tender offers for the Companys Common Stock
unless the terms are approved by such stockholders.


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


Effect of Certain Charter
Provisions; Anti-takeover Effects of Certificate of Incorporation, Bylaws and Delaware
Law.  The Companys Board of Directors has the authority to issue up to 1,000,000 shares
of Preferred Stock and to determine the price, rights, preferences, privileges and
restrictions, including voting rights of those shares without any further vote or action
by the stockholders. The Preferred Stock could be issued with voting, liquidation,
dividend and other rights superior to those of the Common Stock. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by the rights
of the holders of any Preferred Stock that may be issued in the future. The issuance of
Preferred Stock could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company. Further, certain
provisions of the Companys Certificate of Incorporation, including provisions that
create a classified Board of Directors, and certain provisions of the Companys Bylaws
and of Delaware law could delay or make more difficult a merger, tender offer or proxy
contest involving the Company.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|PART II OTHER
INFORMATION



ITEM 1.  LEGAL
PROCEEDINGS


The
Company is not a party to any material legal proceedings.



ITEM 2.  CHANGES IN
SECURITIES


None.



ITEM 3.  DEFAULTS
UPON SENIOR SECURITIES


None.



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


None.



ITEM 5.  OTHER INFORMATION


None.



ITEM 6.  EXHIBITS AND
REPORTS ON FORM 8-K


(a)  
EXHIBITS.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.1 |  | Certificate
of Incorporation*
| | --- |  | -----------------------------

| | 3.2 |  | Bylaws
of the Company*
| | --- |  | ----------------------

| | 4.1 |  | Specimen
certificate for Common Stock of the Company*
| | --- |  | -----------------------------------------------------

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

| | 10.1 |  | Form
of Project Commencement Agreement*
| | ---- |  | ---------------------------------------

| | 10.2 |  | Form
of Software License Agreement*
| | ---- |  | -----------------------------------

| | 10.3 |  | Form
of Software Maintenance Agreement*
| | ---- |  | ---------------------------------------

| | 10.4 |  | Form
of Professional Services Agreement*
| | ---- |  | ----------------------------------------

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

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

| | 10.7 |  | Form
of CreditConnection Dealer Subscription Agreement*
| | ---- |  | -------------------------------------------------------

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

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

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

---

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

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

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

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

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

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

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

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

| | 10.14 |  | Form
of Tax Indemnification Agreement*
| | ----- |  | --------------------------------------

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

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

| | 10.17 |  | Employment
Agreement between Miles Grody and the Company
| | ----- |  | --------------------------------------------------------

| | 10.18 |  | Employment
Agreement between Scott Freiman and the Company
| | ----- |  | ----------------------------------------------------------

| | 10.19 |  | Employment
Agreement between Robert Vollono and the Company
| | ----- |  | -----------------------------------------------------------

| | 27 |  | Financial
Data Schedule
| | -- |  | -----------------------

|(b)
REPORTS ON FORM 8-K.


No
reports on Form 8-K were filed during the quarter for which this report is filed.
|---------------------------------------------------------------------------------------------------------------

|* |  | Incorporated
by reference to the Exhibits filed with the Companys Registration Statement on Form S-1,
File NO. 333-14007.
|- |  | --------------------------------------------------------------------------------------------------------------------------

|** |  | Incorporated
by reference to the Companys 1997 Proxy Statement, file no. 000-21735
|-- |  | -----------------------------------------------------------------------------------

---

|SIGNATURES


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

| |  | CREDIT
MANAGEMENT SOLUTIONS, INC.
                           (Registrant)
| |  | -------------------------------------------------------------------------

|Date: November 14, 2000 |  | By: /s/ Scott L. Freiman
Scott L. FreimanPresident, Chief Executive Officerand Director(Principal Executive Officer)
|----------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------

|Date: November 14, 2000 |  | By: /s/ Robert P. Vollono
Robert P. VollonoSenior Vice President, Treasurer, ChiefFinancial Officer and Director (PrincipalFinancial and Accounting Officer)
|----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------