FORM 10-KSB

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

|X|        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended December 31, 1996

                                       OR

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

For the transition period from ________ to ___________

Commission file number: 0-26464


                         CSI Computer Specialists, Inc.
             (Exact name of Registrant as specified in its charter)

Delaware                                                         52-1599610
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

2275 Research Boulevard  Suite 430
Rockville, Maryland  20850
(Address of principal executive offices)  (Zip code)

301-921-8860
(Registrant's telephone number including area code)

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

Title of Securities                               Exchanges on which Registered
Class A common                                             NASDAQ Small Cap



Securities  registered pursuant to section 12(g) of the Act:
N/A



           Check  whether the issuer (1) filed all reports  required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 ____
           Check if  disclosure  of  delinquent  filers  pursuant to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.

State issuer's revenues for its most recent fiscal year.  $10,836,000


                         (ISSUERS INVOLVED IN BANKRUPTCY
                     PROCEEDINGS DURING THE PAST FIVE YEARS:

           Check whether the issuer has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the  Securities  Exchange  Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court.
Yes ____ No ____


                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.

Title                                                               Outstanding

Class A                                                                 3966226


                       DOCUMENTS INCORPORATED BY REFERENCE

           List hereunder the following  documents if  incorporated by reference
and the Part of the Form 10-KSB  (e.g.,  Part I, Part II,  etc.)  into which the
document is  incorporated:  (1) Any annual report to security  holders;  (2) Any
proxy or information  statement;  and (3) Any prospectus  filed pursuant to Rule
424(b) or (c) under the Securities Act of 1933. The listed  documents  should be
clearly described for identification  purposes (e.g.,  annual report to security
holders for fiscal year ended December 24, 1990).

none



Transitional Small Business Disclosure Format (check one):
Yes ___; No X____


<PAGE>


Item 1.  Business


      The Company was incorporated pursuant to the laws of the State of Delaware
on February 22, 1994.  The Company is the successor to CSI-Maryland.
CSI-Maryland was incorporated pursuant to the laws of the State of Maryland
in  October  1988  for the  purpose  of  providing  computer  hardware
services,  including  installation and  de-installation  of equipment,  computer
upgrades,  computer  maintenance and repair,  and the sale of computer parts and
equipment.  The Company was organized by CSI-Maryland to enable  CSI-Maryland to
merge  with and into the  Company  on March 31,  1994 in order to  effectuate  a
reincorporation in the State of Delaware.

           The  Company  provides a full range of  computer  hardware  services,
including sales and maintenance of mainframe and midrange computer equipment and
parts, network design and installation,  computer upgrades, and installation and
de-installation  of equipment.  The Company  provides its services to commercial
accounts,  agencies of federal,  state and local governments,  and universities,
hospitals,  and  associations in the  Mid-Atlantic  region of the United States,
including  West  Virginia,  Virginia,  Maryland,  the District of Columbia,  New
Jersey, New York and Pennsylvania.

           In pursuit of the its plans for  geographic  expansion,  the  Company
opened offices in the Philadelphia,  Pennsylvania area in January of 1995 and in
Richmond,  Virginia in December of 1995.  In addition,  as part of the Company's
efforts to expand its  technological  expertise and customer  base,  the Company
completed its acquisition of Capitol  Computer  Systems,  Inc., T/A CCS Systems,
Inc. in December,  1995.  CCS Systems,  Inc. is a Lanham,  Maryland  value added
reseller  specializing  in equipment  sales and computer  hardware  maintenance.
Furthering the expansion efforts,  the Company acquired  Cintronix,  Inc., which
specializes in the sales and service of personal  computers,  in January,  1997,
and Advanced Network Systems,  which provides  network  integration  service and
sales to over three hundred companies and associations in the Washington,  D. C.
metropolitan area, in February, 1997.
General:

           The  Company  provides a full range of  computer  hardware  services,
including sales and maintenance of mainframe and midrange computer equipment and
parts, network design and installation,  computer upgrades, and installation and
de-installation of equipment.  Initially,  the Company's business was limited to
providing  service for computer  mainframes  manufactured  by IBM and peripheral
equipment,  such as printers, disk drives, tape drives and computer controllers.
The Company has  broadened its  peripheral  support to included the provision of
service for products  manufactured  by Memorex,  Storage  Technology and various
other  original  equipment   manufacturers  of  input/output  products.  In  the
following  years, the Company began offering  maintenance  services for personal
computers  and  associated   peripheral  equipment  produced  by  several  major
manufacturers such as IBM, Compaq,  NEC, Epson and  Hewlett-Packard,  as well as
providing  parts and services for computer  mainframes  manufactured  by Digital
Equipment Corporation (DEC), such as DEC/VAX platforms and peripheral equipment.

           The  Company   provides  its   services  to  customers   pursuant  to
maintenance   agreements.   Substantially  all  of  the  Company's   maintenance
agreements are fixed-fee agreements for terms of one or more years.  Pursuant to
such an agreement,  a customer agrees to pay a fixed amount, payable monthly, in
exchange for the Company's agreement to provide all parts (other than expendable
parts) and labor  necessary to maintain or repair the equipment  during the term
of  such   agreement.   The  Company   occasionally   provides   services  on  a
"time-and-materials"  basis  pursuant  to  which  a  customer  agrees  to  pay a
specified rate for each particular service to be performed by the Company and to
purchase any replacement parts used in connection therewith.


<PAGE>



           The Company began actively  selling  computer  equipment in 1993, and
management of the Company  believes that current  market  conditions  afford the
Company strong  potential for growth for the remainder of the 1990s. The Company
sells computer  equipment  pursuant to equipment sales  agreements.  Pursuant to
such  agreements,  customers pay for the computer  equipment which they purchase
from the Company upon  delivery  thereof.  Given the  Company's  large  existing
customer  base, the Company has what  management  believes to be a "niche market
audience"  which will enable the Company to "bundle" its services to include the
sale of equipment to a customer,  the  installation  of such  equipment  and the
maintenance thereof on a continuing basis.

           Management of the Company  believes that the Company has been able to
compete successfully because of the high quality of service the Company provides
and the competitive  pricing it is able to offer to its customers.  As a result,
since its inception, the Company has been able to attract and maintain long-term
relationships  with its  existing  customers  and to expand  its  customer  base
consistently and effectively.

           The industry in which the Company operates has been  characterized by
rapid  and  continuous   technological  advances,   permitting  cost  reduction,
increased  computer  processing  capacities and broadened  equipment  platforms.
Users frequently  upgrade or replace  equipment and also use  multi-manufactured
equipment (mainframes and peripheral equipment which are manufactured by various
manufacturers)  to take  advantage of  technological  innovations.  As a result,
equipment  which is replaced by different or newer models  becomes  available to
the resale or  secondary  market.  This  enables the  Company to  purchase  this
equipment and support additional product lines.

           Based on a survey  conducted by  International  Data  Corporation  in
February 1994 (the "IDC Government Survey"), the combined federal and commercial
market for computer  maintenance  services totals $20.6 billion with a projected
increase of 3.6% over the next three years.

           Given the  Company's  diversification  into  equipment  sales,  which
according  to  information   released  by  the  Computer   Dealers  and  Lessors
Association  is a $21.4 billion  industry,  management  of the Company  believes
that,  because of its large  existing  customer  base,  the  Company is uniquely
positioned to capture a growing segment of the equipment sales market.


Maintenance Services

           The Company provides third-party,  multi-vendor computer hardware and
peripheral equipment  maintenance  services to commercial accounts,  agencies of
federal, state and local governments,  universities, hospitals, associations and
other  organizations  located primarily in the Mid-Atlantic region of the United
States. The equipment currently  maintained and serviced by the Company consists
of a wide range of peripheral subsystems, including terminals, disk drives, tape
drives,  printers and computer  controllers,  and also includes the  mainframes,
midrange   minicomputers  and  personal   computers  on  which  such  peripheral
subsystems  are dependent.  The equipment  serviced or maintained by the Company
varies  from  customer  to  customer  and  ranges  from  providing  service  for
individual  computers  or pieces of  equipment  to  providing  service  for many
computers  and pieces of equipment  located in a customer's  mainframe  computer
room.   Services   provided  by  the  Company  consist  primarily  of  scheduled
preventative   maintenance  and  emergency   remedial   services.   Preventative
maintenance includes inspections,  diagnostic analysis,  cleaning,  adjustments,
and  replacement  of components  and parts.  In addition,  the Company  conducts
inspections  for  certification  of equipment  in  connection  with  determining
whether mainframes and peripheral equipment meet original equipment manufacturer
maintenance standards.


<PAGE>



           Most of the  computers  maintained  and  serviced  by the Company are
manufactured  by IBM,  although  the Company  also  provides  such  services for
computers manufactured by other companies including Memorex, Storage Technology,
and DEC. The personal computers and peripheral  equipment  currently serviced by
the Company are manufactured by numerous companies. The Company in 1995 expanded
its business to include  sales and service of IBM RISC  System/6000,  IBM AS/400
and IBM ES/9000. In addition, the Company greatly expanded its sales and service
capabilities in the midrange area with the  acquisitions of Cintronix,  Inc. and
Advanced Network Systems in the beginning of 1997.


Maintenance Agreements

           The Company  provides  most of its services  pursuant to  maintenance
agreements  having terms of one or more years.  Pursuant to such  agreements,  a
customer  agrees to pay a fixed  amount,  payable  monthly,  in exchange for the
Company's agreement to provide all parts (other than expendable parts) and labor
necessary to maintain or repair the equipment  subject to the  agreement  during
the term of the  agreement.  Additionally,  the  Company  occasionally  provides
services on a "time-and-materials"  basis pursuant to which a customer agrees to
pay a specified rate for each particular  service to be performed by the Company
and to  purchase  any  replacement  parts  used  in  connection  therewith.  The
Company's  standard  maintenance  agreement provides that upon expiration of the
initial term thereof,  such agreement still continue on a  month-to-month  basis
until such time as either party thereto  terminates the  agreement.  It has been
the Company's  experience that very few of its  maintenance  agreements with its
customers are canceled or  discontinued  upon  expiration of their initial terms
given  that  such  agreements  by their  terms  provide  for  continuation  on a
month-to-month basis unless expressly terminated.

           Most of the  Company's  maintenance  agreements  with agencies of the
federal  government are entered into for terms of three to five years.  However,
since the  procuring  governmental  agencies  are only funded on a  year-to-year
basis,  all such maintenance  agreements  expire each year unless renewed at the
agency's option.  Prospective revenues from such agencies for future periods are
therefore  dependent  upon  the  renewal  of  such  agreements.   Although  such
government  agreements  expire  annually  by their  terms,  the  Company's  past
experience  with such  agreements  expire  annually  until the expiration of the
specified  term  (three  to  five  years)  and  are  thereafter  continued  on a
year-to-year basis.


Subcontracting

           The Company has entered into  subcontracting  agreements with several
of its vendors pursuant to which such vendors perform certain services which the
Company has agreed to provide to customers  pursuant to  maintenance  agreements
with such customers.  In such cases, the Company acts as the "prime  contractor"
for the provisions of computer  maintenance  services and the vendor acts as the
"subcontractor."  The Company  enters into these types of agreements for several
reasons. The Company may elect to enter into subcontracting  agreements when the
equipment that is subject to a maintenance  agreement is extremely  expensive or
is otherwise  difficult  for the Company to obtain or replace.  Similarly,  such
subcontracting  agreements  have  been  advantageous  to the  Company  when  the
services required by a maintenance  agreement have been of a particular level of
engineering  expertise that the Company does not otherwise provide.  The Company
also enters into subcontracting agreements because customers sometimes prefer to
be provided services by one entity,  such as the Company,  which has the ability
to service  all of its  computer  equipment  (notwithstanding  the  manufacturer
thereof or the model),  rather than rely on the  services  which may be provided
individually  by each vendor  with  respect to its own  manufactured  product or
model.  Such  agreements  may be  terminated  by  either  party at any time upon
delivery  of  written  notice 30 days in advance  of such  termination.  Several
companies  offer the services and  expertise  for which the Company  enters into
subcontracting  agreements.  Therefore,  management of the Company believes that
the loss of the  services  of any one  subcontractor  would not have a  material
adverse effect on the Company's business or operation.


Equipment Sales

           The Company  sells  computer  equipment  pursuant to equipment  sales
agreements.  Pursuant  to  such  agreements,  customers  pay  for  the  computer
equipment which they purchase from the Company upon delivery thereof. Generally,
the Company takes an order for equipment  from a customer,  contacts its sources
of equipment to ascertain the availability thereof, provides the customer with a
quoted  price for the same and then  executes  an  agreement  therefor  upon the
customer's   affirmation  of  interest  in  purchasing  the  specified  computer
equipment from the Company. The Company does not, therefore,  currently maintain
an extensive inventory of equipment  specifically to support potential equipment
sales  agreements.  Revenues  derived from the sales of equipment are increasing
and the Company intends to continue to increase its sales of computer  equipment
in the future.  Sales of midrange and personal computer  equipment have expanded
in the last  year,  and the terms are  similar  to those of  previous  mainframe
equipment  and parts.  Due to the ready  availability  of midrange  and personal
computer  equipment  from  Company  vendors,  the Company  does not  maintain an
extensive inventory of this equipment, either.


Sales and Marketing

           The  Company   currently  employs   seventeen   full-time   marketing
representatives.  Eleven  of  such  representatives  directs  their  efforts  to
promoting the Company's sales and services to commercial accounts, universities,
hospitals and associations in West Virginia, Virginia, Maryland, the District of
Columbia, New Jersey, New York and Pennsylvania.  The remaining  representatives
market the Company's  services  primarily to federal  government  agencies.  The
majority  of  the   marketing   leads   pursued  by  the   Company's   marketing
representatives  are generated by existing  customers and referrals from various
vendors. To date, the Company has done very little advertising. In addition, the
Company utilizes the services of several contract marketing representatives, who
provide  marketing  services.  The  Company is in the process of  developing  an
effective  marketing  and  advertising  program,  as well as  hiring  additional
marketing  personnel.  With the  acquisition  of  Cintronix,  Inc.  and Advanced
Network Systems in early 1997, the Company  obtained seven  full-time  marketing
representatives  to  expand  the  promotion  of the  Company's  services  in the
Mid-Atlantic region of the United States.


Principal Suppliers and Subcontractors

           The Company  acquires a  significant  part of the equipment and parts
which it uses in connection  with providing  maintenance  services from IBM. The
Company  also relies on IBM to provide  subcontracting  services  (as  described
above).  See Note 10 to the  Financial  Statements  included  elsewhere  herein.
Payments  made by the  Company to IBM  equaled  in the  aggregate  $221,000  and
$414,000,  respectively,  during the fiscal  years ended  December  31, 1996 and
1995. The Company also  subscribes to a service called  "CDLANET" which provides
the Company with access to an "on-line" nationwide database of equipment offered
for sale by various vendors and distributors.  The Company  frequently  acquires
equipment from several different vendors through this resource.


Customers

           As noted  above,  most of the  Company's  revenues  are derived  from
services performed through maintenance agreements.  The percentage of commercial
customers  serviced by the Company  pursuant to  maintenance  agreements for the
fiscal years ended December 31, 1996 and 1995 equaled approximately 79% and 75%,
respectively,  of all customers  serviced by the Company pursuant to maintenance
agreements compared to approximately 21% and 25%,  respectively,  for the fiscal
years  ended  December  31,  1996 and  1995 for  federal  and  local  government
agencies. Revenues derived from time and materials agreements approximate 5% and
8%,  respectively,  of the Company's  gross  revenues for the fiscal years ended
December  31, 1996 and 1995.  Revenues  generated by parts and  equipment  sales
represented  approximately 30% and 14%, respectively,  of gross revenues for the
fiscal years ended December 31, 1996 and 1995.

           The  Company's  customers  tend to be very  loyal.  It has  been  the
Company's  experience  that  very  few of its  maintenance  agreements  with its
customers are canceled or  discontinued  upon expiration of their initial terms,
given  that  the  terms  of  such  agreements  provide  for  continuation  on  a
month-to-month basis unless expressly  terminated.  As of December 31, 1996, the
Company had maintenance agreements with approximately 140 customers.  Currently,
no one customer represents more than 7% of the total revenue of the Company. The
Company's  commercial  customers  include  American  Management  Systems,  Inc.,
Hechinger Company, IBM, ISI, CDSI, and Medlantic Health Care System, Inc.


Business Strategy

           The  objective  of the  Company is to increase  both its  maintenance
customer  base and  equipment  sales.  Management  of the Company  believes that
increasing  the  Company's  customer  base will be  achieved by  broadening  the
Company's  business  to include  sales and  servicing  of  additional  mainframe
computers  such as AMDAHL,  IBM  RISC/6000,  IBM AS/400,  and IBM  ES/9000,  and
expanding its business to provide sales and service outside of the  Mid-Atlantic
Region  into  other  geographical  locations.  Management  of the  Company  also
believes  that it will be able to increase  its sales of parts and  equipment by
establishing  the  Company  as what is  known  as a "Value  Added  Reseller"  of
computer  equipment  produced by various  manufacturers,  and providing  network
design and integration services to new and existing customers.  Designation as a
"Value  Added  Reseller"  enables  the  Company  to acquire  computer  equipment
directly from manufacturers at discounts based upon the volume of its purchases.
Cintronix,  Inc.,  the company  acquired by the Company in January,  1997,  is a
MicroAge  franchisee,  and as such greatly increases the Company's  expansion in
this area.


Acquisitions

           The Company intends to pursue its growth and acquisition  strategy on
both a national and regional level. On a national level,  the Company intends to
acquire and develop  businesses  in major  population  areas where it is not now
represented.  The Company also intends to acquire businesses and create regional
clusters of sales and service  representatives to increase its geographic market
area,  to  improve  its  service  to  customers  and  to  gain  greater   market
penetration.  Management of the Company believes that the businesses so acquired
will be able to draw on the operational and management expertise of the Company.
In addition to the  foregoing,  management of the Company will seek and evaluate
acquisition  opportunities whereby related synergistic products can be acquired.
It  is  anticipated  that  such  opportunities  would  include  acquisitions  of
distributors   and   vendors  of   products   which  the   Company's   marketing
representatives can sell to the Company's existing customer base and continue to
service thereafter. The Company intends to target companies for acquisition that
are  profitable  and  well-positioned  in their  local  markets  and  have  will
established  customer  bases.  The Company  intends to acquire  such  additional
companies  using a combination  of cash,  equity  securities  (such as common or
preferred  stock) and debt  instruments.  Pursuant to the terms of its agreement
with the  Underwriter,  the  Company's  ability to issue  equity  securities  in
connection  with such  acquisitions  may be subject,  until July,  1997,  to the
Underwriter's  prior  written  consent.  To the extent that the  Company  issues
equity  securities in connection with  acquisitions,  the equity interest of its
then current stockholders will be diluted.


<PAGE>



           The  Company  could  be  subject  to  liabilities   arising  from  an
acquisition in the event the Company assumes  unknown or contingent  liabilities
or in the event such  liabilities  are imposed on the Company under  theories of
successor liability.  Prior to making  acquisitions,  the Company will conduct a
due diligence investigation of acquisition candidates.  In addition, the Company
may seek to avoid assuming or incurring  liabilities by purchasing only selected
assets and  assuming  selected  liabilities  of an  acquisition  candidate.  The
Company may also seek to obtain  indemnification from selling parties.  However,
if the Company  became  subject to such a liability of sufficient  magnitude and
was  unable to  enforce  its  rights of  indemnification  against  the  acquired
companies  or selling  parties,  such  liability  could have a material  adverse
effect on the Company's financial condition and results of operations.

           Management  intends to integrate the companies it has acquired or may
acquire in the future on a  national  and  regional  level,  to bring  controls,
economies  of scale  and  standardized  policies  and  procedures  to all of its
offices,  and to centralize  finance,  cash  management,  inventory  management,
accounting, insurance, marketing, purchasing and human resources functions.

Item 2.  Properties

          The Company's headquarters are located in Rockville, Maryland
(the "Rockville facility").  In addition to the Rockville facility, the
Company  maintains  its National  Support  Center in  Beltsville,  Maryland (the
"Beltsville  facility"),  a sales and marketing office in Towson, Maryland ("the
Towson facility"),  office and warehouse space in Warminster,  Pennsylvania (the
"Pennsylvania  facility") and office and warehouse  space in Richmond,  Virginia
(the "Virginia facility").  In addition,  the CCS Systems,  Inc., a wholly-owned
subsidiary  of the  Company,  maintains  its offices and service  facilities  in
Lanham, Maryland (the "Lanham facility").

           The Rockville  facility is leased by the Company  pursuant to a lease
having a term of ten years, which term expires on October 1, 2002. The Rockville
facility  consists  of 3,300  square  feet and is used by the Company as general
office space. The monthly rental payment for such space is approximately  $5,165
and is subject to annual increases.

           The Beltsville  facility is leased by the Company pursuant to a lease
having a term of five years,  which term is  scheduled to expire on February 27,
1997, subject to the Company's option to renew such lease for an additional term
of five  years.  The  monthly  rental  payment  for such space is $10,691 and is
subject to annual  increases.  The  Beltsville  facility  currently  consists of
31,000 square feet and is used by the Company to house the  Company's  technical
support staff,  in-house training instructors and logistical personnel for parts
support,  and for the  storage  and  warehousing  of the  bulk of the  Company's
equipment, parts and supply inventories.

           The Towson facility is used by marketing personnel of the Company and
is leased by the Company on a  month-to-month  basis. The monthly rental payment
for such space is $995.

           The  Pennsylvania  facility  is leased by the  Company  pursuant to a
lease having a term of three years, which term is scheduled to expire on January
30, 1998, subject to automatic annual renewals in the absence by either party to
terminate the lease. The Pennsylvania  facility consists of approximately  6,000
square feet and is used by the Company for storage and warehousing of equipment,
parts and supplies for accounts in its service area, as well as office space for
the computer  engineers  assigned to that area.  The monthly  rental payment for
such space is $4,937 per month.

           The  Virginia  facility is leased by the Company  pursuant to a lease
having a term of five years,  which term is  scheduled to expire on December 31,
2000. The Virginia facility  consists of approximately  5,900 square feet and is
used by the Company for storage and warehousing of equipment, parts and supplies
for  accounts  in its service  area,  as well as office  space for the  computer
engineers  assigned to that area.  The monthly  rental payment for such space is
$4,316 and is subject to annual increases.

           The Lanham  facility is leased by CCS Systems,  Inc., a  wholly-owned
subsidiary  of the  Company,  pursuant  to a lease  having  a term  expiring  in
December,  1998. The Lanham facility consists of approximately 8,000 square feet
and is used for storage and  warehousing  of  equipment,  parts and supplies for
service  of CCS  Systems,  Inc.'s  customers,  as well  as  housing  the  sales,
administrative and service personnel of the company.  The monthly rental payment
for such space is $5,668 and is subject to annual increases.

           In  addition to the  foregoing  facilities,  the Company  maintains a
local parts storage facility in Falls Church,  Virginia to provide local support
to area  accounts.  The  monthly  rental  for the  storage  center is $198.  The
facility is leased  pursuant to a  month-to-month  lease.  In the event that the
lease is  terminated  or not  otherwise  renewed,  management  believes that the
Company would be able to lease adequate space elsewhere upon terms comparable to
or as favorable as those in the current lease.

           The Company  does not intend to invest in real estate or interests in
real estate,  real estate  mortgages,  or  securities of or interests in persons
primarily engaged in real estate activities for the foreseeable future.

Item 3.  Legal Proceedings

none

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

No matters were  submitted  during the fourth quarter of the fiscal year covered
by this  report to a vote of  security  holders,  through  the  solicitation  of
proxies or otherwise.


Item 5.  Market for Common Equity and Related Stockholder Matters

NASDAQ Small Cap
1st Quarter 1995     High       N/A       Low       N/A
2nd Quarter 1995     High      N/A        Low       N/A
3rd Quarter 1995     High      7 5/8      Low       5
4th Quarter 1995     High      6 5/8      Low       4 3/8
1st Quarter 1996     High       7 1/8     Low       4 5/8
2nd Quarter 1996     High      6 1/4      Low       5
3rd Quarter 1996     High      5 7/8      Low       2 3/4
4th Quarter 1996     High      3 5/8      Low       1 1/8  300  None
***


Item 6.  Management's Discussion and Analysis of Financial Condition and Results
of Operation


GENERAL

           The  Company  provides a full range of  computer  hardware  services,
including sales and maintenance of mainframe and midrange computer equipment and
parts, network design and installation,  computer upgrades, and installation and
de-installation  of  equipment.   These  services  are  provided  to  commercial
customers,  agencies  of  federal,  state and local  governments,  universities,
associations and hospitals  primarily in the  Mid-Atlantic  region of the United
States, including West Virginia,  Virginia,  Maryland, the District of Columbia,
New Jersey, New York and Pennsylvania.

           The Company's  principal business is providing  computer  maintenance
and  repair  services,  which are  provided  under  both  fixed fee and time and
materials  arrangements.  Under the fixed fee arrangement,  which is the primary
method of  service,  a  customer  pays a fixed  monthly  fee for the term of the
agreement,  generally one to two years, for which the Company provides the parts
and labor for both scheduled preventative maintenance and emergency repairs. The
Company  records the revenue from fixed fee  contracts  ratably over the term of
the contract,  while the costs the Company incurs to provide the maintenance and
emergency  repairs  are  charged  to  expense  as  incurred.   Accordingly,  the
profitability  of the Company's  maintenance and repair services can and will be
affected  by period to period  fluctuations  in the number and  severity  of the
emergency repairs required by its customers, which the Company cannot predict or
control.  Additionally,  in certain  circumstances  the  Company  will choose to
provide the contracted-for services by subcontracting with others,  particularly
when the equipment covered by the agreement is extremely expensive, difficult to
repair  or  replace,  or  requires  unique  engineering  expertise  that  is not
applicable  to equipment  utilized by a  significant  number of  customers.  The
Company obtains such subcontracting services through short-term agreements,  and
its  profit   margin  will   generally  be  lower  than  if  the  work  was  not
subcontracted.  Accordingly,  operating  results  may  fluctuate  from period to
period  as the  result of  changes  in the  level  and  nature of  subcontracted
services.

           The sale of  computer  equipment  accounts  for a  rapidly  expanding
portion of the Company's business, and, as a result, revenues therefrom have and
will  continue to  fluctuate  from period to period.  The extent of such changes
will  decrease  as the  sales in this area  stabilize.  In  addition,  mainframe
equipment  sales are  entered  into more  commonly to secure  contracts  for the
maintenance  thereof than for the profit on the equipment  sale itself,  and the
margins on the sale of equipment are subject to market conditions. Consequently,
operating  profits as a percentage of gross sales are subject to fluctuation due
to the volume of equipment  sales.  Other areas of expansion are in the areas of
servicing laser printers,  providing help desk support  services,  and expanding
the  Company's  technical  capabilities  to maintain the more current  mainframe
technology. Sales of midrange and personal computer equipment will expand due to
the  acquisitions  completed in early 1997, and these sales are normally subject
to seasonal fluctuations.


RESULTS OF OPERATIONS

           Revenues for the fiscal year ended  December 31, 1996 increased by 58
percent to  $10,835,678  compared to revenues of $6,844,722  for the fiscal year
ended  December 31, 1995.  This  increase in annual net revenues  resulted  from
sales growth in both maintenance  services and equipment sales, notably with the
increased  revenues  generated by CCS Systems,  Inc., a wholly-owned  subsidiary
acquired in December,  1995.  Maintenance revenues increased  principally due to
growth in the Company's and its subsidiary's book of fixed fee agreements,  both
in number and dollar  amount of the  agreements.  Maintenance  revenues for 1996
increased  by 29 percent to  $7,536,634  compared  to  maintenance  revenues  of
$5,861,543 for 1995. Maintenance services accounted for approximately 70 percent
of the Company's  revenues for 1996  compared to 86 percent for 1995.  Equipment
and parts sales  increased  235 percent to  $3,299,044  for 1996  compared  with
$983,179  for 1995,  comprising  30  percent  of sales in 1996 and 14 percent of
sales in 1995.

           The  Company's  cost of  sales as a  percentage  of  revenues  was 68
percent in 1996  compared  to 63 percent in 1995.  An  increase  in the costs of
maintenance  services as a percentage of maintenance service income was combined
with the higher level of equipment  sales,  on which profit margins  percentages
are  traditionally  lower.  The increased costs of maintenance  service resulted
primarily  from  increased  costs of emergency  replacement  parts and increased
reliance on subcontracted  services.  Subcontractor  costs could decrease as the
necessary  expertise  is  developed  in-house to service  the newer  technology;
however,  as the Company  signs  contracts on even more recent  technology,  the
services of subcontractors may still be required. Additionally, gross margins in
fiscal  1996  have  been  adversely   affected  by  the  costs  associated  with
stabilizing  the Company's  Philadelphia  and Richmond  operations.  The Company
expects that the costs of  maintenance  services as a percentage of  maintenance
service income to increase in future  quarters as the Company expands the mix of
hardware  which  will be  maintained  under  contracts  and until  the  Richmond
operation  is  self-sufficient,  but hopes to  partially  offset  these costs by
reducing  subcontract  expense as the Company  develops the additional  in-house
expertise, and by increasing both the book of fixed fee agreements and the parts
and equipment sales.

           Selling,  general and administrative  expenses as a percentage of net
revenues were 32 percent and 30 percent,  respectively, for 1996 and 1995. These
costs  increased 71 percent to $3,487,760  for 1996  compared to $2,040,683  for
1995, the increase  primarily  attributable to hiring  additional  marketing and
office  personnel  to  support  the  increased  revenue  base,  as  well  as the
administrative  costs of the  Philadelphia  and  Richmond  offices.  The Company
expects  short-term  fluctuations in this percentage in the future as it adds to
its technical  support,  marketing staff and other  administrative  personnel in
order to expand its customer base and increase equipment sales.

           The Company's operating profit for the fiscal year ended December 31,
1996 decreased 108 percent to a loss of $41,469 compared to a profit of $490,659
for 1995.  The decrease in operating  profit was primarily  attributable  to the
overall increase in costs of sales as discussed above compared with the increase
in revenues, as well as the increase selling and administrative costs related to
building up the sales staff.

           Net interest income increased to 163 percent to $206,460, compared to
$78,406 for 1995,  primarily as a result of investment earnings on the remaining
proceeds of the Company's initial public offering in July, 1995, for a full year
in 1996 as opposed  to a partial  year in 1995.  The  Company  expects  that net
interest income will decrease as the proceeds from the Company's  initial public
offering  continue to be utilized as  projected  in the  Company's  registration
statement.

           Net income  decreased 70 percent to $106,491  for 1996 from  $349,565
for the prior  year,  primarily  as a result of the higher  costs of sales,  the
increased selling and administrative costs outlined above, and the stabilization
of  the  Philadelphia  and  Richmond   offices.   The  Company  notes  that  the
Philadelphia  office is now generating  net income for the Company,  and expects
that the  Richmond  operation's  revenues  will cover its  expenses  in the near
future.  However,  internal  expansion into other new geographic  regions can be
expected  to  adversely  affect  overall  results  until the  newly  established
operation  obtains  maintenance  contracts  sufficient  to cover  minimum  fixed
operating  costs.  Expansion  may also be  accomplished  by the  acquisition  of
existing operations, in which case operating results may not be affected by such
start-up  losses,  but may instead reflect the impact of the amortization of any
goodwill paid in the acquisition.

           The  consistency  of the  Company's  results of  operations  has been
significantly affected in the last year by the costs of the geographic expansion
and changes in the computer market.  The Company believes that in the future its
results of operations could continue to be impacted by factors such as increased
competition  in  a  mainframe  market  that  has  been  shrinking  due  to  site
consolidations  and conversions to mid-range network  installations  (which is a
more competitive  market).  Results could also be affected by the start-up costs
related to expansion of operations to equipment  not  previously  serviced or to
geographic areas not previously  supported.  The Company's plans to offset these
factors  include  expansion of the  mid-range  network  support and  maintenance
division of operations,  and offering  services  connected with the  conversions
themselves that would help assure continuity of the maintenance contracts.  Part
of this plan is evidenced by the Company's  acquisitions of Cintronix,  Inc., in
January of 1997 and Advanced  Network  Systems in February,  1997.  In addition,
expansion of the maintenance  services to include the newer mainframe technology
and laser  printers,  as well as  expansion  of  software  support and help desk
services will provide for continued growth of the Company.



<PAGE>




LIQUIDITY AND CAPITAL RESOURCES

           Working capital,  which consists  principally of cash and investments
in government  securities  for terms of three months or less,  was $3,915,578 at
December 31, 1996,  compared to  $4,576,095  at December 31, 1995.  The ratio of
current assets to current liabilities  increased to 7.5:1 from 4.7:1 at December
31,  1995.  Cash flows  from  operations  for 1996  totaled  $34,586,  resulting
primarily from  operations and partially  offset by an increase in the parts and
supply inventories necessary to support service contracts on newer technologies.
The  increase  in the  current  ratio was due chiefly to the payment in January,
1996, of the short-term note payable issued by the Company in its acquisition of
CCS Systems,  Inc. in December,  1995.  The Company  believes  that its existing
cash, as supplemented by cash flow from operations, is sufficient to satisfy its
currently anticipated working capital needs.

           Effective  August,  1996,  the Company's  $750,000  revolving line of
credit with Citizens Bank of Maryland was renewed to continue  until May,  1997.
There is presently no balance owed on this line of credit.

           The Company's principal commitments at December 31, 1996 consisted of
obligations under operating leases for facilities.


<PAGE>



                                       F-8


Item 7.  Financial Statements and Supplementary Data


CSI COMPUTER SPECIALISTS, INC. AND SUBSIDIARY


INDEX



                                                                      Page

Report of Independent Auditors.............................    F-2..........

Consolidated Balance Sheet as of December 31, 1996 ........    F-3..........F-4

Consolidated Statements of Operations for the years ended
December 31, 1996 and 1995.................................    F-5..........

Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996 and 1995.................................    F-6..........

Consolidated Statements of Cash Flows for the years ended
December 31, 1996 and 1995.................................    F-7..........F-8

Notes to Consolidated Financial Statements ...............     F-9..........F-17







                       .  .  .  .  .  .  .  .  .  .  .  .





<PAGE>


                         REPORT OF INDEPENDENT AUDITORS


To the Board of Directors and Stockholders of
   CSI Computer Specialists, Inc.
   Rockville, Maryland



       We have audited the  accompanying  consolidated  balance sheet of
CSI Computer  Specialists,  Inc. and its  subsidiary as of December 31,
1996,  and the related  consolidated  statements  of  operations,  stockholders'
equity,  and cash flows for each of the two years in the period  ended  December
31, 1996. These consolidated  financial statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audits.

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

                     In  our  opinion,  the  consolidated  financial  statements
referred to above present fairly, in all material respects, the consolidated
financial  position of CSI Computer  Specialists,  Inc. and its subsidiary as of
December 31, 1996, and the  consolidated  results of their  operations and their
cash flows for each of the two years in the period ended  December 31, 1996,  in
conformity with generally accepted accounting principles.






                                               MOORE STEPHENS, P. C.
                                               Certified Public Accountants.

Cranford, New Jersey
February 7, 1997



<PAGE>



CSI COMPUTER SPECIALISTS, INC. AND SUBSIDIARY



CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996.




Assets:
Current Assets:
   Cash and Cash Equivalents                           $        3,915,578
   Accounts Receivable                                          1,082,056
   Accounts Receivable - Related Party                            130,771
   Net Investment in Sales Type Leases - Current                   94,610
   Parts and Supplies                                             666,275
   Prepaid Income Taxes                                           115,418
   Prepaid Expenses                                               107,215
   Miscellaneous Receivables                                        6,982
                                                       ------------------

   Total Current Assets                                         6,118,905

Property and Equipment:
   Vehicles                                                        69,920
   Furniture and Fixtures                                         246,684
   Equipment                                                      666,196
   Equipment Under Operating Leases                               401,212
                                                       ------------------

   Totals - At Cost                                             1,384,012
   Less:  Accumulated Depreciation                                898,352
                                                       ------------------
   Property and Equipment - Net                                   485,660
                                                       ------------------

Other Assets:
   Goodwill [Net of Accumulated Amortization of $53,400]          747,569
   Net Investment in Sales Type Leases - Non-Current               62,268
   Other Assets                                                    53,501
                                                        -----------------

   Total Other Assets                                             863,338
                                                        -----------------

   Total Assets                                        $        7,467,903
                                                       ==================



See Notes to Consolidated Financial Statements.


<PAGE>


CSI COMPUTER SPECIALISTS, INC. AND SUBSIDIARY


CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996.




Liabilities and Stockholders' Equity:
Current Liabilities:
   Accounts Payable                                     $          337,054
   Accrued Expenses                                                140,395
   Deferred Income Taxes Payable                                   267,898
   Customer Deposits                                                73,929
   Current Maturities of Long-Term Debt                              5,753
                                                        ------------------

   Total Current Liabilities                                       825,029

Long-Term Debt - Net of Current Maturities                           6,844
                                                        ------------------

Commitments and Contingencies                                           --

Stockholders' Equity:
   Preferred Stock - Authorized, 10,000,000 Shares of $.001 Par Value;
      Issued and Outstanding, None                                      --

   Common Stock - Authorized, 25,000,000 Shares of $.001 Par Value;
      Issued and Outstanding, 3,652,500 Shares                       3,652

   Common Stock - $.001 Par Value, Stock Subscribed and
      Unissued - 75,000 Shares                                          75

   Paid-in Capital                                               5,227,428

   Retained Earnings                                             1,404,875
                                                        ------------------

   Total Stockholders' Equity                                    6,636,030
                                                        ------------------

   Total Liabilities and Stockholders' Equity           $        7,467,903
                                                        ==================



See Notes to Consolidated Financial Statements.


<PAGE>


CSI COMPUTER SPECIALISTS, INC. AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF OPERATIONS



                                                  Years ended
                                                  December 31,
                                                  ------------
                                           1 9 9 6              1 9 9 5
                                           -------              -------

Revenues                               $       10,835,678   $        6,844,722
                                       ------------------   ------------------

Costs and Expenses:
   Cost of Sales                                7,389,387            4,313,380
   Selling, General and Administrative          3,487,760            2,040,683
                                       ------------------   ------------------

   Total Costs and Expenses                    10,877,147            6,354,063
                                       ------------------   ------------------

   Operating [Loss] Profit                        (41,469)             490,659
                                       ------------------   ------------------

Other Income [Expenses]:
   Interest Income                                207,720              114,438
   Interest Expense                                (1,260)             (36,032)
                                       ------------------   ------------------

   Total Other Income                             206,460               78,406
                                       ------------------   ------------------

   Income Before Provision for Income Taxes       164,991              569,065
                                       ------------------   ------------------

Provision for Income Taxes:
   Current                                        129,719                5,537
   Deferred                                       (66,974)             213,963
                                       ------------------   ------------------

   Total Provision for Income Taxes                62,745              219,500
                                       ------------------   ------------------

   Net Income                          $          102,246   $          349,565
                                       ==================   ==================

   Net Income Per Share                $              .03   $              .12
                                       ==================   ==================

   Weighted Average Number of Shares
     Outstanding                                3,652,500            2,796,956
                                       ==================   ==================



See Notes to Consolidated Financial Statements.


<PAGE>


CSI COMPUTER SPECIALISTS, INC. AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY



                                                                         Total
                                                                        Stock-
                               Common Stock     Paid-in    Retained     holders'
                             Shares    Amount   Capital    Earnings      Equity

Balance - December 31, 1994 2,100,000  $2,100  $       -- $  953,064  $  955,164

   Initial Public Offering  1,552,500   1,552   4,683,753         --   4,685,305

   Issuance Pursuant to Stock
      Purchase Agreement -
      December 28, 1995        75,000      75     543,675         --     543,750

   Net Income                      --      --          --    349,565     349,565
                            ---------  ------  ----------  ---------   ---------

Balance - December 31, 1995 3,727,500   3,727   5,227,428  1,302,629   6,533,784

   Net Income                      --      --          --    102,246     102,246
                            ---------  ------  ---------- ----------   ---------

Balance - December 31, 1996 3,727,500  $3,727  $5,227,428 $1,404,875  $6,636,030
                            =========  ======= ========== ==========  ==========




See Notes to Consolidated Financial Statements.



<PAGE>


CSI COMPUTER SPECIALISTS, INC. AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                           Years ended
                                                           December 31,
                                                           ------------
                                                    1 9 9 6          1 9 9 5
                                                    -------          -------
Operating Activities:
   Net Income                                    $     102,246   $     349,565
                                                 -------------   -------------
   Adjustments to Reconcile Net Income to
     Net Cash Provided by Operating Activities:
      Depreciation and Amortization                    339,170         193,501
      Amortization of Parts and Supplies               446,122         315,961
      Provision for Bad Debts                           35,926          40,000
      Deferred Income Taxes                            (66,974)        213,963

   Changes in Assets and Liabilities:
      [Increase] Decrease in:
        Accounts Receivable                             55,001        (214,545)
        Net Investment in Sales-Type Leases           (156,878)             --
        Parts and Supplies                            (753,052)       (444,535)
        Prepaid Income Taxes                            48,025              --
        Prepaid Expenses                                (5,067)        (39,854)
        Miscellaneous Receivables                        1,547          (8,529)
        Other Assets                                    13,274            (740)

      Increase [Decrease] in:
        Accounts Payable and Accrued Expenses          (24,754)         86,261
        Income Taxes Payable                                --        (364,373)
                                                 -------------   -------------

      Total Adjustments                                (67,660)       (222,890)
                                                 -------------   -------------

   Net Cash - Operating Activities                      34,586         126,675
                                                 -------------   -------------

Investing Activities:
   Net Cash Transferred - Acquisition of Subsidiary         --         258,699
   Payment of Acquisition Costs                       (499,494)        (38,807)
   Acquisition of Property and Equipment              (190,770)       (340,569)
                                                 -------------   -------------

   Net Cash - Investing Activities                    (690,264)       (120,677)
                                                 -------------   -------------

Financing Activities:
   Payments on Long-Term Debt                           (4,839)         (9,905)
   Payments on Note Payable - Officer                       --        (368,754)
   Registration Costs                                       --      (1,139,930)
   Payments on Revolving Line of Credit                     --        (200,000)
   Proceeds from Stock Offering                             --       6,210,000
                                                 -------------   -------------

   Net Cash - Financing Activities                      (4,839)      4,491,411
                                                 -------------  --------------

   Net [Decrease] Increase in Cash and
      Cash Equivalents                                (660,517)      4,497,409

Cash and Cash Equivalents - Beginning of Years       4,576,095          78,686
                                                 --------------  -------------

   Cash and Cash Equivalents - End of
          Years                                  $   3,915,578   $   4,576,095
                                                 =============   =============


See Notes to Consolidated Financial Statements.


<PAGE>


CSI COMPUTER SPECIALISTS, INC. AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                       Years ended
                                                       December 31,
                                                      ------------
                                                  1 9 9 6           1 9 9 5
                                                  -------           -------
Supplemental Disclosures of Cash Flow Information:
   Cash paid during the years for:
      Interest                                  $       1,407   $      36,032
      Income Taxes                              $     120,251   $     390,641

Supplemental Disclosure of Non-Cash Investing and Financing Activities:
   On December 28, 1995, the Company purchased all of the issued and outstanding
shares of Capitol Computer  Services,  Inc. T/A CCS Systems for a total purchase
price of $1,128,750.  On this date,  $100,000 was paid with $485,000  payable in
January of 1996. The remaining  $543,750 is payable in January 1998 in shares of
the  Company's  common stock based on a formula  providing for the issuance of a
minimum of 75,000 shares and a maximum of 150,000  shares and  calculated  using
the then-closing bid price of the common stock.




See Notes to Consolidated Financial Statements.



<PAGE>



                                                                      F-17

CSI COMPUTER SPECIALISTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


[1] Corporate Organization and Principles of Consolidation

The  consolidated  financial  statements  include the  accounts of CSI  Computer
Specialists,  Inc. and its wholly-owned  subsidiary  Capitol Computer  Services,
Inc. T/A CCS Systems [the "Company"]. All intercompany balances and transactions
have been eliminated.

CSI Computer  Specialists,  Inc., a Delaware  corporation,  is the  successor to
Computer Specialists,  Inc., a Maryland corporation ["CSI-Maryland"],  which was
incorporated  in 1988.  The  Company was  organized  by  CSI-Maryland  to enable
CSI-Maryland  to merge  with and into the  Company  in March  1994,  in order to
effectuate a reincorporation in the State of Delaware.

The Company, which operates primarily from Maryland,  provides computer hardware
services,   which  primarily  consist  of  maintenance  and  repair  along  with
installation and  deinstallation of equipment,  and sales of parts and equipment
to governmental and commercial entities in the Mid-Atlantic region of the United
States.  The Company  provides its services to customers  primarily  pursuant to
maintenance agreements for terms of one to three years.

[2] Summary of Significant Accounting Policies

A summary of the  significant  accounting  policies  in the  preparation  of the
accompanying consolidated financial statements follows:

Cash and Cash  Equivalents - Cash  equivalents are comprised of certain highly
liquid  investments  with a maturity of three months or less when purchased.

Parts and  Supplies  - Bulk  purchases  of spare  parts and  supplies  which are
utilized to support maintenance contracts are recorded at cost and are amortized
to operations on a  straight-line  basis over a period  ranging from eighteen to
twenty-four  months.  The Company also purchases certain parts for immediate use
which are  charged  to  expense  as  incurred.  Management  estimates  that this
methodology  approximates  a lower of cost or market  inventory  valuation on an
average cost basis. Actual results could differ from those estimates.

Property and Equipment and  Depreciation - Property and equipment is recorded at
cost.  Depreciation  is provided for using  declining  balance  methods based on
estimated useful lives of five to seven years.  Equipment under operating leases
are depreciated  over the terms of the respective  leases,  usually two to three
years.  Expenditures for normal repairs  and  maintenance  are  charged  against
income as incurred.  Depreciation for the years ended December 31, 1996 and 1995
was $285,770 and $193,501, respectively.

Income Taxes - The provision for income taxes includes  federal and state income
taxes  currently  payable and those  deferred  because of temporary  differences
between the financial statement and tax bases of assets and liabilities. In 1996
the Company elected to change its method of reporting income for tax purposes to
the accrual method.  Temporary  differences  between financial reporting and tax
reporting  existing  as of  January 1, 1996 are being  recognized  over the next
five-year period [See Note 8].

Goodwill  Policy -  Amortization  is provided on a  straight-line  basis over 15
years.  Goodwill represents the excess of cost over the fair value of net assets
acquired.

Impairment -  Management  evaluates  the period of  amortization  of  intangible
assets to determine whether events and  circumstances  warrant revised estimates
of useful lives.  Additionally,  management  reviews long-lived assets including
intangible  assets for impairment  whenever  events or changes in  circumstances
indicate  that the carrying  amount may not be  recoverable.  As of December 31,
1996, management expects these assets to be fully recoverable.


<PAGE>


CSI COMPUTER SPECIALISTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2

[2] Summary of Significant Accounting Policies [Continued]

Stock Options Issued to Employees - The Company  adopted  Statement of Financial
Accounting   Standards   ["SFAS"]   No.   123,   "Accounting   for   Stock-Based
Compensation,"  on January 1, 1996 for financial  note  disclosure  purposes and
applies the  intrinsic  value  method of  Accounting  Principles  Board  ["APB"]
Opinion  No. 25,  "Accounting  for Stock  Issued to  Employees,"  for  financial
reporting  purposes.

Advertising  Costs - Advertising costs are expensed when incurred.   Advertising
expense  was  $35,534 and $8,900 for the years ended December 31, 1996 and 1995,
respectively.

Revenue  Recognition - The Company  derives its revenue  principally  from fixed
price maintenance  contracts,  which it recognizes  ratably over the term of the
contract.  Revenue from computer  equipment sales and performance under time and
materials  contracts are recognized upon product  shipment or the performance of
the related work.

The Company leases computer equipment under operating and sales type leases. The
determination of whether a computer lease is treated as an  operating  or  sales
type lease is dependent on the terms of the lease and  management's  judgment as
to the collectibility of the lease payments.

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

Earnings Per Share - Earnings per share are  calculated by dividing net earnings
by  the  weighted  average  common  shares  outstanding  during  1996  and  1995
[3,652,500 and 2,796,956, respectively].  Options and warrants did not result in
dilution for the years ended December 31, 1996 and 1995.

[3] Accounts Receivable

Accounts receivable at December 31, 1996 consist of:

Receivables Under U. S. Government Contracts and Subcontracts:
   Amounts Billed                                              $       144,635
   Unbilled Amounts                                                    146,822
Commercial and Other Receivables                                     1,117,477
                                                               ---------------
Total                                                                1,408,934
Less:  Allowance for Doubtful Receivables                              170,000
                                                               ---------------

   Total                                                       $     1,238,934
   -----                                                       ===============

[4] Leasing Activities

The Company's leasing operations  consist principally of the leasing of computer
equipment to existing monthly maintenance customers.  A number of the leases are
for terms of two to three years, and  are  cancelable at any time by the lessee.
If the lease goes to term, ownership of the equipment passes to the lessee. When
collectibility of lease payments is uncertain due to the cancelable terms of the
lease, and because of  uncertainties  regarding  unreimburseable  costs  to  the
Company, such leases are classified as operating leases. The Company also leases
equipment under sale-type leases.  A summary of the Company's leasing activities
is as follows:

Sales Type Leases - Beginning January of 1996, the Company's leasing operations
consist  principally  of  leasing  computer  equipment  under  sales-type leases
expiring in various years through 1999.


CSI COMPUTER SPECIALISTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3


[4] Leasing Activities [Continued]

Sales Type Leases [Continued] - Minimum lease payments to be received as of
December 31, 1996 are as follows:

 Year ended                                  Amount
 ----------                                  ------
December 31,
------------
   1997                                     $ 112,488
   1998                                        57,336
   1999                                         9,428
   2000                                            --
   2001                                            --
                                            ---------

   Total                                      179,252
   Less: Interest Portion                     (22,374)
                                            ---------
     Total                                  $ 156,878
                                            =========

  Current Portion                           $  94,610
  Non-Current Portion                       $  62,268

Operating Leases - The following summarizes equipment under operating leases at
December 31, 1996:

Computer Equipment                          $ 401,212
Accumulated Depreciation                     (285,274)
                                            ---------

  Total                                     $ 115,938
  -----                                     =========

Minimum future rentals to be received  on  operating  leases  as of December 31,
1996 are as follows:

 Year ended                                  Amount
 ----------                                  ------
December 31,
-----------
  1997                                      $ 121,880
  1998                                         32,430
  1999                                             --
  2000                                             --
  2001                                             --
                                            ---------

  Total                                     $ 154,310
  -----                                     =========

[5] Notes Payable

The Company has a note payable to General  Motors  Financing  with  an  interest
rate of 9% and maturity date of January 11, 1998. The note  payable  was used to
finance the purchase of a vehicle.
                                                             December 31,
                                                                1 9 9 6

Note Payable to General Motors Financing                 $       12,597
Less: Current Maturities                                          5,753
                                                         --------------

   Long-Term Debt                                        $        6,844
   --------------                                        ==============




<PAGE>


CSI COMPUTER SPECIALISTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #4

[5] Notes Payable [Continued}

Maturities of long-term debt at December 31, 1996 is as follows:

1997                                                     $        5,753
1998                                                              6,844
                                                         --------------

   Total                                                 $       12,597
   -----                                                 ==============


[6] Revolving Line of Credit

The  Company  arranged  for a bank  line of  credit  with a  maximum  amount  of
$750,000. The line bears interest at the rate of 1.0% over prime. The prime rate
at  December  31, 1996 was 8.25%.  The line is secured by  accounts  receivable,
general intangibles and parts and supplies,  and is personally guaranteed by the
officers of the Company.  The Company is required to maintain certain ratios and
$650,000 in tangible net worth. The Company was in compliance with the ratio and
tangible net worth  requirements at December 31, 1996.  There was no balance due
on the line of credit at December 31, 1996.

[7] Fair Value of Financial Instruments

Effective  December  31,  1995,  the  Company  adopted  Statement  of  Financial
Accounting Standards ["SFAS"] No. 107, "Disclosure about Fair Value of Financial
Instruments,"  which  requires  the  disclosure  of the  fair  value of off- and
on-balance  sheet financial  instruments.  The carrying amounts of cash and cash
equivalents,  accounts  receivable,  accounts  payable  and  notes  payable  are
estimated to  approximate  fair value  because of the short  maturities of those
instruments.

[8] Commitments

The Company leases  facilities and vehicles under operating  leases which expire
at various  dates  through  2002.  Facility  lease  agreements  provide for rent
increases  based on changes in the Consumer  Price Index and  adjustments  for a
proportionate share of real estate taxes and operating expenses.  Minimum rental
commitments  under all  noncancelable  operating leases with a remaining term in
excess of one year are as follows:

Year                                                          Amount

1997                                                   $      233,985
1998                                                          207,683
1999                                                          145,998
2000                                                          128,407
2001                                                           71,863
Thereafter                                                     73,664
                                                       --------------

   Total                                               $      861,600
   -----                                               ==============

Total rent expense for the years ended  December 31, 1996 and 1995  approximated
$423,400 and $271,000, respectively.

In April 1995, the Company  entered into  employment  agreements  with its Chief
Executive  Officer,  Chief Financial  Officer,  and its President for an initial
period through 1999 with automatic  renewals for  successive  one-year  periods,
unless  terminated by the Company or the executive.  The agreements  provide for
initial base compensation  aggregating $378,250 subject to annual cost of living
increases,  as well as a bonus to the Chief  Executive  Officer equal to 5.5% of
the Company's  earnings before income taxes.  Additional  employment  agreements
were entered into as part of the acquisition of Capitol Computer Services,  Inc.
T/A CCS Systems [See Note 12].




CSI COMPUTER SPECIALISTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5



[9] Income Taxes

The components of income tax expenses are as follows:

                                                   December 31,
                                                   ------------
                                            1 9 9 6             1 9 9 5
                                            -------             -------
Current:
   Federal                              $       109,282     $        5,537
   State                                         20,437                --
                                         ---------------     -------------

   Total Current                                129,719              5,537
                                        ---------------     --------------

Deferred:
   Federal                                      (58,937)           182,938
   State                                         (8,037)            31,025
                                        ----------------    --------------

   Total Deferred [Benefit] Expense             (66,974)           213,963
                                        ---------------     --------------

   Totals                               $        62,745     $      219,500
   ------                               ===============     ==============

The major components  of  deferred  income  tax  assets  and  liabilities are as
follows:

                                                        December 31,
                                                        ------------
                                                            1996
                                                            ----

Deferred Tax Liability:
  Effect of the Change from a Cash Basis of Income
    Tax Reporting to an Accrual Basis                  $   (323,482)

Deferred Tax Asset:
  Reserves                                                   55,584
                                                       ------------

  Net Deferred Tax Liability                           $   (267,898)
                                                       ============

The following table reconciles the U.S. federal income tax rate to the Company's
effective tax rate:

                                             1 9 9 6               1 9 9 5
                                             -------               -------

U.S. Statutory Rate                            34.0%                 34.0%

Increases [Decreases] Resulting from:
   State Income Taxes                           7.0%                  5.6%
   Surtax Exemption                            (3.0)%                (1.0)%
                                        ------------          ------------

   Totals                                      38.0%                 38.6%
   ------                                ===========          ============

[10] Related Party Transactions

For the years ended December 31, 1996 and 1995, the Company  recognized  revenue
approximating  $490,000  [including  equipment sales of $107,000],  and $375,000
[including equipment sales of $86,000],  respectively,  from a corporation owned
by the Company's majority stockholder. At December 31, 1996, accounts receivable
include $130,771 from the related party.

<PAGE>


CSI COMPUTER SPECIALISTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6

[11] Major Vendors/Customers

The  Company  paid  approximately  $221,200  and  $414,000  in  1996  and  1995,
respectively,  to one vendor for subcontract  services and the purchase of parts
and supplies. Management believes that there are alternative competitive sources
within the industry.

Revenue under U. S. Government contracts approximated 21% and 25%, respectively,
of total revenues for the years ended December 31, 1996 and 1995.

[12] Concentrations of Credit Risk

Financial instruments which potentially subject the Company to concentrations of
credit  risk  consist  of cash and cash  equivalents  and  accounts  receivable.
Concentrations of credit risk with respect to accounts receivable are limited as
a  result  of  the  dispersion  of  the  Company's   customer  base  among  both
governmental and commercial  entities in the Mid-Atlantic area.  Generally,  the
Company  does not  require  collateral  or other  security  to support  customer
receivables.  The  Company  routinely  assesses  the  financial  strength of its
customers  and based upon factors  surrounding  the credit risk of its customers
establishes  an  allowance  for  uncollectible  accounts  receivable  and,  as a
consequence,  believes that its accounts  receivable credit risk exposure beyond
such allowances is limited. The Company places its cash with high credit quality
financial  institutions.  The  amount on  deposit  in any one  institution  that
exceeds  federally  insured  limits is  subject  to  credit  risk.  The  Company
currently maintains cash of approximately  $3,450,000 in financial  institutions
which are subject to such risk.

[13] Acquisition of Subsidiary

The Company  acquired 100% of the outstanding  capital stock of Capitol Computer
Services,  Inc.  T/A CCS  Systems,  on  December  28, 1995 for  $1,128,750  in a
business combination accounted for under the purchase method of accounting.  The
Company paid $100,000 of the purchase price at closing with $485,000 of the cash
purchase  price due on January  6, 1996.  The  balance  of the  purchase  price,
$543,750,  is payable in January  1998 in shares of the  Company's  common stock
based on a formula  providing for the issuance of a minimum of 75,000 shares and
a maximum of 150,000 shares and calculated  using the  then-closing bid price of
the common stock.

The purchase price of this  acquisition  exceeded  the fair  value  of  the  net
assets of CCS Systems by $800,969 which is being amortized over 15  years  under
the straight-line method.

Certain principal  stockholders of CCS Systems and certain key employees entered
into employment  agreements with CCS Systems in conjunction  with the closing on
December  31,  1995.  The  employment  agreements  provide that CCS Systems will
employ each of such persons for varying terms of two,  three,  and five years at
salaries  commensurate  with their positions and duties.  Each of the employment
agreements contain non-compete and confidentiality provisions.

The  following  pro  forma  unaudited  results  assume the above acquisition had
occurred at January 1, 1995:

                                   December 31,
                                   -----------
                                     1 9 9 5
                                     -------

Net Revenues                       $10,562,935
Net Income                         $   330,701
Income Per Share                   $       .08

The pro forma information is not necessarily indicative of either the results of
operations that would have occurred had the  acquisition  been  effective at the
beginning of the year or of the future results of operations.

<PAGE>


CSI COMPUTER SPECIALISTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #7

[14] Initial Public Offering

During 1995, the Company completed an initial public offering of 1,552,500 units
at $4.00 per share, each consisting of one share of common stock and two Class A
common stock warrants exercisable at $4.50 per share from July 1996 through July
2000. The net proceeds to the Company were approximately $4.7 million.

[15] Stock Options

The Company adopted the CSI Computer Specialists, Inc. 1994 Stock Option Plan in
1994 which  provides  for the grant of both  qualified  and  nonqualified  stock
options to officers, directors, employees and consultants. The Stock Option Plan
has  authorized  the granting,  in the  aggregate,  of options to purchase up to
200,000 shares of stock. Options granted under the Plan vest immediately.

The  Company  also  adopted  an  incentive  compensation  plan in 1995,  for the
majority  stockholder whereby the stockholder has been granted a ten year option
to purchase up to 200,000  shares of common stock at an exercise  price of $1.95
per share.  The options are exercisable if the Company achieves certain earnings
levels as follows:

   Earnings Before
  Interest and Taxes                                          Number of Shares

    $       1,200,000                                                    100,000
    $       2,000,000                                                    100,000

If it becomes  probable  that the above  earnings  levels will be achieved,  the
Company will recognize  compensation expense equal to the difference between the
fair  market  value and the  exercise  price  pursuant  to APB  Opinion  No. 25.
Achievement  of the above  earnings  levels  is likely to result in  substantial
compensation expense to the Company in future years.

 A summary of stock options activity under all plans is as follows:

                                            1 9 9 6             1 9 9 5
                                            -------             -------
                                               Weighted-               Weighted-
                                               Average                 Average
                                               Exercise                Exercise
                                        Shares   Price         Shares    Price

Outstanding - January 1,               134,750     5.38           --        --

Granted                                  2,000     3.81      134,750       5.38
Exercised                                  --       --           --         --
Forfeited/Expired                       (7,250)   (5.38)         --         --
                                      --------   ------     --------     ------

   Outstanding - December 31,          129,500     5.35      134,750       5.38
   --------------------------         ========   ======      =======     ======

   Exercisable - December 31,          129,500     5.35      134,750       5.38
   --------------------------         ========   ======      =======     ======

   Shares Available on December 31,
      For Options that may be Granted  270,500               265,250
      ------------------------------- ========               =======

The Company  applies APB Opinion No. 25 for stock options issued to employees in
accounting  for its stock option plans for  financial  reporting  purposes.  The
exercise  price for all stock options  issued to employees  during 1996 and 1995
was  equal to the  market  price of the  Company's  stock at the date of  grant.
Accordingly,  no  compensation  expense has been  recognized  for the  Company's
stock-based compensation plans.




<PAGE>


CSI COMPUTER SPECIALISTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8



[15] Stock Options [Continued]

Had  compensation  cost for the Company's stock options issued to employees been
determined  based upon the fair value at the grant date for stock options issued
under these plans  pursuant to the  methodology  prescribed  under  Statement of
Financial  Accounting  Standards  ["SFAS"] No. 123,  "Accounting for Stock-Based
Compensation,"  the  Company's net income and earnings per share would have been
increased,  on a pro forma basis, by approximately  $5,781, or $.0 per share for
the year ended December 31, 1996 because  forfeitures  exceeded  grants of stock
options  and  reduced by  approximately  $173,892 or $.06 per share for the year
ended  December  31,  1995.  The  weighted-average  fair value of stock  options
granted to employees used in  determining  the pro forma amounts is estimated at
$2.90 and $2.08,  during 1996 and 1995,  respectively,  using the  Black-Scholes
option-pricing  model  for the pro forma  amounts  with the  following  weighted
average assumptions:

                                                        December 31,
                                                        ------------
                                               1 9 9 6                1 9 9 5
                                               -------                -------

Risk-free Interest Rate                         6.20%                  5.89%
Expected Life                                  4 Years                4 Years
Expected Volatility                            109.9%                 39.01%
Expected Dividends                               N/A                    N/A

Net  income and income  per share as  reported,  and on a pro forma  basis as if
compensation  cost had been  determined  on the basis of fair value  pursuant to
SFAS No. 123 is as follows:

                                                      December 31,
                                                      ------------
                                                1 9 9 6             1 9 9 5
                                                -------             -------
Net Income:
   As Reported                                $     102,246   $      349,565
                                              -------------   --------------
   Pro Forma                                  $     108,027   $      175,673
                                              -------------   --------------

Income Per Share:
   As Reported                                $         .03   $          .12
                                              -------------   --------------
   Pro Forma                                  $         .03   $          .06
                                              --------------  --------------

[16] New Authoritative Pronouncements

The  Financial Accounting Standards Board ["FASB"] issued Statement of Financial
Accounting  Standards ["SFAS"] No. 125, "Accounting for Transfers and  Servicing
of  Financial  Assets  and  Extinguishment  of  Liabilities."   SFAS  No. 125 is
effective for transfers and  servicing of financial assets and extinguishment of
liabilities  occurring  after  December  31, 1996.  Earlier  application  is not
allowed.   The  provisions  of  SFAS  No. 125  must  be  applied  prospectively;
retroactive  application  is  prohibited.   Adoption  on  January 1, 1997 is not
expected to have a material  impact  on the Company.  Some  provisions  of  SFAS
No. 125, which are unlikely to apply  to  the Company, have been deferred by the
FASB.

The FASB has also issued SFAS No. 128, "Earnings  per  Share," and SFAS No. 129,
"Disclosure of Information about Capital Structure," in February 1997.


<PAGE>


CSI COMPUTER SPECIALISTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #9



[15] New Authoritative Pronouncements [Continued]

SFAS No. 128 simplifies the earnings per share ["EPS"] calculations  required by
Accounting Principles Board ["APB"] Opinion No. 15, and related interpretations,
by replacing the  presentation  of primary EPS with a presentation of basic EPS.
SFAS No. 128  requires  dual  presentation  of basic and diluted EPS by entities
with complex capital structures.  Basic EPS includes no dilution and is computed
by dividing  income  available to common  stockholders  by the  weighted-average
number of common  shares  outstanding  for the period.  Diluted EPS reflects the
potential  dilution of securities that could share in the earnings of an entity,
similar  to the  fully  diluted  EPS of APB  Opinion  No.  15.  SFAS No.  128 is
effective for financial  statements issued for periods ending after December 15,
1997,  including  interim periods;  earlier  application is not permitted.  When
adopted,  SFAS No. 128 will require  restatement  of all  prior-period  EPS data
presented;  however,  the Company has not sufficiently  analyzed SFAS No. 128 to
determine  what effect SFAS No. 128 will have on its  historically  reported EPS
amounts.

SFAS No. 129 does not change any previous  disclosure  requirements,  but rather
consolidates existing disclosure requirements for ease of retrieval.

[17] Subsequent Events

The Company acquired 100% of the outstanding capital stock of Cintronix, Inc. on
January 10, 1997 for  $1,300,000 in a business  combination  accounted for under
the purchase method of accounting.  The Company paid $900,000 in cash and issued
313,726 shares of common stock having a value of $400,000 for the balance of the
purchase price. In addition, the Company placed $400,000 in an escrow account to
be held for two years in the event the existing  shareholders  elect to have the
stock issued redeemed for cash.

In  addition,  the Company  acquired  the  business  assets of Advanced  Network
Systems, a subsidiary of American Bankers  Association  Service  Corporation for
$200,000  in February  1997 in a business  combination  accounted  for under the
purchase method of accounting.

The purchase price of these  acquisitions  exceeded the fair market value of the
net assets of  Cintronix,  Inc.  and  Advanced  Network  Systems by $950,000 and
$200,000, respectively, which will be amortized over 15 years under the straight
line method commencing in February and March 1997,  respectively.  For financial
reporting purposes,  the results of operations of Cintronix,  Inc., and Advanced
Network Systems will be included with the results of the Company  beginning with
the relative acquisition dates.

Certain of the  principal  stockholders  of  Cintronix,  Inc.  and  certain  key
employees of both  Cintronix,  Inc. and Advanced  Network  Systems  entered into
employment  agreements with their  respective  companies in conjunction with the
closings of each acquisition. The employment agreements provide that each of the
Companies  will  employ each of such  persons for varying  terms of two to three
years at salaries  commensurate  with their  positions  and duties.  Each of the
employment agreements contain non-compete and confidentiality provisions.



                     .   .   .   .   .   .   .   .   .



<PAGE>




Item 8.  Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
n/a


Item 9.  Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act

Directors of Registrant

Donald C. Weymer
Chairman of the Board of Directors
Chief Executive Officer
Corporate Secretary
Donald C. Weymer has been the Chief Executive Officer and a director of the
Company since 1989 and has been the Corporate Secretary of the Company since
March, 1994, and was the Chief Financial Officer from March, 1994 until October,
1995.  In 1991 Mr. Weymer founded  Interactive Systems, Inc., ("ISI"), a
Virginia corporation, which is a data processing company which provides
outsourcing, timesharing and fundraising assistance to agencies of the federal
government, non-profit organizations and commercial clients.  Mr. Weymer has
served as the Chief Executive Officer and the President of ISI from 1991 to the
present.
Term of Office: Mr. Weymer's term of office as director is three years expiring
June 14, 1998.
Age: 52

William F Pershin
Director
President
Chief Accounting Officer
William F. Pershin has been the  President  and a director of the Company  since
December 1, 1988 and has been the Chief Accounting  Officer of the Company since
March, 1994.
Term of Office: Mr. Pershin's current term as director is three years expiring
June 14, 1999.
Age: 42



Executive Officers of Registrant

Donald C Weymer
           See Directors of Registrant.

William F Pershin
           See Directors of Registrant.

James D Boccabella
           Chief Financial Officer
Mr. Boccabella has been the Chief Financial Officer of the Company since October
of 1995.  For the five years prior to that he owned and operated a public
accounting practice, James D. Boccabella, CPA, CFP
Term of Office: Unlimited until terminated by the Board of Directors.
Age: 43


Nominees For Director

N/A



Item 10.  Executive Compensation



SUMMARY COMPENSATION TABLE



                  Annual Compensation
--------------------------------------------------------------------------------
                                                                Other
Name                                                            Annual
and                                                             Compen-
Principal                                    Salary    Bonus    sation
Position          Year                        ($)       ($)      ($)
--------------------------------------------------------------------------------
Donald C. Weymer: 1996                      $163,404  $9,600        --
Chief Executive
Officer, Chairman
of the Board,
Secretary
                  1995                      $155,625  $33,100       --
                  1994                      $112,500  $55,000   $30,000(1)

William F.Pershin:1996                      $136,168     --         --
President and
Director
                  1995                      $129,688     --         --
                  1994                      $125,000  $25,000       --

James D.          1996                       $96,842     --         --
Boccabella:
Chief Financial
Officer
                  1995                       $39,400     --      $18,355(2)






(1)  Represents payment by the Company to Mr. Weymer for marketing and
management consulting services provided to the Company by Mr. Weymer.
(2)  Represents payment by the Company to Mr. Boccabella for accounting and
management consulting services provided to the Company by Mr. Boccabella.

SUMMARY COMPENSATION TABLE

                                       Long-Term Compensation

                                       Awards               Payouts
--------------------------------------------------------------------------------

Name                                   Restricted  Under-              All Other
and                                    Stock       lying    LTIP        Compen-
Principal                              Award(s)   Options/  Payouts     sation
Position          Year                           ($)(#)SARS  ($)         ($)
--------------------------------------------------------------------------------
Donald C. Weymer: 1996                 none          none     none        none
Chief Executive
Officer, Chairman
of the Board,
Secretary
                  1995                 none          none     none        none
                  1994                 none          none     none        none

William F.Pershin:1996                 none          none     none        none
President and
Director
                  1995                 none          none     none        none
                  1994                 none          none     none        none

James D.          1996                 none          none     none        none
Boccabella:
Chief Financial
Officer
                  1995                 none      Options to   none        none
                                                 acquire
                                                 25,000
                                                 shares of
                                                 class A
                                                 common
                                                 stock






Item 11.  Security Ownership of Certain Beneficial Owners and Management

           Security Ownership of Certain Beneficial Owners


                      Name and Address              Amount and
Title of Class        of Beneficial Owner           Nature of           Percent
                                                    Beneficial Owner    of Class
--------------------------------------------------------------------------------
Class A common stock   Donald C Weymer                960,000             24.2%
common stock           2275 Research Boulevard
                       Suite 430
                       Rockville, Maryland  20850
Class A common stock   William F Pershin              640,000             16.1%
common stock           2275 Research Boulevard
                       Suite 430
                       Rockville, Maryland  20850



Security Ownership of Management
                      Name and Address              Amount and
Title of Class        of Beneficial Owner           Nature of           Percent
                                                    Beneficial Owner    of Class
--------------------------------------------------------------------------------

See "Security Ownership of Certain Beneficial Owners" table above.


Item 12.  Certain Relationships and Related Transactions

Donald C. Weymer
 The Company  provides  computer  maintenance  services to Interactive  Systems,
Inc.,  ("ISI") a Maryland  corporation owned by Donald C. Weymer, a stockholder,
director  and  officer  of the  Company,  pursuant  to the terms of  maintenance
agreements.  Mr.  Weymer is also the owner and chief  executive  officer of ISI.
During the fiscal years ended December 31, 1996 and 1995, approximately $490,000
(including  equipment sales of $107,000) and $375,000 (including equipment sales
of $86,000) of the Company's  revenues were  generated by services  rendered and
equipment  sold to ISI by the Company.  See Note 9 of the  Financial  Statements
included elsewhere within . Item 13. Exhibits,  Financial  Statement  Schedules,
and Reports on Form 8-K

No report on Form 8-K was filed  during  the  final  quarter  of the year  ended
December 31, 1996.

<PAGE>



                             SIGNATURES

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

                                           CSI Computer Specialists, Inc.

May 8, 1997                                By: Donald C. Weymer
----------------                               ----------------
Date                                           Donald C. Weymer, Chief Executive
                                               Officer



May 8, 1997                                By: James D. Boccabella
----------------                               -------------------
Date                                           James D. Boccabella, Chief
                                               Financial Officer






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

May 8, 1997                                By: Donald C. Weymer
-----------                                    ----------------
Date                                           Donald C. Weymer, Chairman of the
                                               Board, Chief Executive Officer
                                               and Director



May 8, 1997                                By: William F. Pershin
-----------                                    ------------------
Date                                           William F. Pershin, President and
                                               Director