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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    **FORM 10-K**

(Mark One)

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

                   For the fiscal year ended December 31, 2002

                                       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: 0-24768

                              MEDIX RESOURCES, INC.
             (Exact name of registrant as specified in its charter)

                 Colorado                              84-1123311
     (State or other jurisdiction of         (I.R.S. Employer Identification No.)
      incorporation or organization)

           The Graybar Building
           420 Lexington Avenue
                Suite 1830                                10170
            New York, New York
 (Address of principal executive offices)              (Zip Code)

Registrant's telephone number, including             (212) 697-2509
area code:

Securities registered pursuant to Section    Common Stock - $.001 par value
12(b) of the Act:                           The Common Stock is listed on the
                                                 American Stock Exchange

Securities registered pursuant to Section                 None
12(g) of the Act:

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The aggregate market value of the voting common equity held by non-affiliates of
the  registrant as of June 30, 2002 was  approximately  $23.3 million based upon
the  closing  price  of the  registrant's  common  stock on the  American  Stock
Exchange,  as of the last  business day of the most  recently  completed  second
fiscal quarter (June 28, 2002).  (For purposes of determining this amount,  only
directors,  executive officers, and 10% or greater stockholders have been deemed
affiliates.)

On February 28, 2003,  80,877,065  shares of the registrant's  common stock, par
value $0.001 per share, were outstanding.

*This Annual Report on Form 10-K and the documents  incorporated  herein  contain
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown  risks,  uncertainties  and other  factors  which  may cause the  actual
results,  performance or achievements of the Company, or industry results, to be
materially  different  from any  future  results,  performance  or  achievements
expressed  or  implied  by such  forward-looking  statements.  When used in this
Annual Report,  statements that are not statements of current or historical fact
may be deemed to be forward-looking statements.  Without limiting the foregoing,
the  words  "plan",  "intend",  "may,"  "will,"  "expect,"  "believe",  "could,"
"anticipate,"   "estimate,"  or  "continue"  or  similar  expressions  or  other
variations   or   comparable   terminology   are   intended  to  identify   such
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. Except
as  required  by law,  the  Company  undertakes  no  obligation  to  update  any
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise.***Table of Contents**

                                 Form 10-K Index

                                     PART I

Item 1. BusinessItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security Holders

                                   PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder MattersItem 6. Selected Financial DataItem 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsItem 7A Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

                                    PART III

Item 10  Directors and Executive Officers of the Registrant
Item 11  Executive Compensation
Item 12  Security Ownership of Certain Beneficial Owners
          and Management and Related Stockholder Matters
Item 13  Certain Relationships and Related Transactions
Item 14  Controls and Procedures

                                     PART IV

Item 15  Exhibits, Financial Statement Schedules and Reports
          on Form 8-K
Signatures

                                     **PART I****Item 1.  BUSINESS**

     Medix   Resources,   Inc.  ("the  Company",   "we",  "us",  or  "our")  was
incorporated  under the laws of the  State of  Colorado  in 1988  under the name
Nur-Staff  West,  Inc.  On May 24,  1988,  we  changed  our  name to  Med-Temps,
Incorporated,  and on February  16, 1990,  we changed our name to  International
Nursing  Services,  Inc.  On  February  17,  1998,  we changed our name to Medix
Resources,  Inc.  From 1988 until 2000,  we  operated as a temporary  healthcare
staffing company, with offices at various times in Colorado, New York, Texas and
California.  We disposed of the healthcare  staffing operations in February 2000
and retained only the offices in Colorado.  In January 1998, we acquired Cymedix
Corporation,  which was  merged  into our  wholly  owned  healthcare  technology
subsidiary,  Cymedix Lynx Corporation,  and in 2000 began focusing solely on the
development and  commercialization  of software and  connectivity  solutions for
certain areas of the healthcare industry.

**Overview**

     We develop and intend to market  communication  technologies for use in the
healthcare  industry  primarily  at the  point  of  care.  We  have  focused  on
electronic  prescribing  of drugs,  laboratory  orders  and  laboratory  results
because these represent the majority of the transactions  performed at the point
of care,  and  remain  largely a  paper-based  starting  point for  transferring
information in the healthcare system. Our goal is to close the gap in electronic
or automated processing by providing technologies and work-flow processes at the
point of care. Our technologies  would enable  point-of-care  providers ("POCs")
(i.e.  physician  or  caretaker)  to  connect  with  other  participants  in the
healthcare  system.  At this time, we are focused  primarily on healthcare value
chain intermediaries  ("HVCIs") (e.g. pharmacy,  lab, pharmacy benefit managers,
pharmaceutical  companies,  etc.).  Our  products  are  designed  to improve the
accuracy  and  the  efficiency  of the  processes  of drug  prescribing  and the
ordering of laboratory tests and the receiving of laboratory results.

     When we shifted to this business in 2000,  our plan was initially to deploy
the technology in a single market.  We began to test this approach in April 2002
with a small,  local sales and  installation  team in Georgia that  deployed the
Cymedix  technology  to physician  practices.  By August 2002 it was clear to us
that although the technology  worked and physicians were using the system,  this
approach was not going to be commercially  viable for several reasons  including
slow  adoption by  physicians  unless there was an economic  incentive,  limited
support by major HVCIs, and the high cost of marketing,  sales, installation and
service associated with serving individual and small medical practices. Based on
these results, the initial deployment in Georgia was halted in August 2002.

     At that time, we evaluated the business of automating  the  transaction  at
the point of care and concluded  that a viable  business  could be built,  but a
different approach would be required than originally anticipated.  Based on this
evaluation,  in September 2002, our Board recruited  certain new senior managers
including a new chief  executive  officer to assist us in  pursuing  alternative
approaches to developing and deploying technology at the point of care.

     Our current plan for the  commercialization  of our technology is to target
physician   practices   and  other   POC   centers   that  have  the   following
characteristics:  sufficient patient volume;  clear economic incentive,  such as
administrative  savings and time savings;  commitment to electronic  transfer of
point of care information;  and HVCI or other healthcare participant support for
the rollout of the technology.  Subject to the above criteria,  our goal remains
to connect  from the point of care to the  various  segments  of the  healthcare
industry  that meet these  criteria,  such as health  plans,  insurers,  skilled
nursing facilities,  pharmacy benefit management companies ("PBMs"),  pharmacies
and pharmaceutical companies.

     We believe  that it is important  to deploy  technologies  that are easy to
adopt or already have established markets. As such, on March 4, 2003 we acquired
assets from Comdisco Ventures, Inc. that were formerly used by ePhysician,  Inc.
in its software and technology  business prior to its cessation of operations in
2002. ePhysician point-of-care technologies enable physicians to securely access
and send  information to pharmacies,  billing  service  companies,  and practice
management  systems via the Palm  OS(R)-based  handheld device and the Internet,
meeting our  objective  of deploying a  recognized  technology.  Our goal is the
integration of the Cymedix and e-Physician  technologies and to market them on a
commercial basis.

     We have been in business  since 1988.  We decided in 2000 to dispose of the
temporary  healthcare  staffing business to focus on the healthcare software and
connectivity  solutions  industry.  The development of technology and the future
marketing of  connectivity  solutions is our sole business at this time. Our net
operating  loss is due to this  transition  and the  ongoing  efforts to build a
commercially  viable business in point-of-care  automation.  We currently do not
have any active users of our products.

     Our  principal  executive  office is located at The Graybar  Building,  420
Lexington Avenue, Suite 1830, New York, New York 10170, and our telephone number
is (212) 697-2509.  We have closed our California and Colorado  offices,  and we
are actively pursuing an exit to our leases in Georgia and California.

**Industry Background**

     Growth of the medical information  management  marketplace is driven by the
need to share significant  amounts of accurate clinical and patient  information
among all participants in the healthcare  system.  The U.S. Centers for Medicare
and Medicaid  Services  estimates that $1.4 trillion  dollars,  (14% of the U.S.
gross domestic  product) was spent on healthcare in 2001. It also estimates that
healthcare  expenditures are expected to grow to approximately  $2.8 trillion by
2011, due to increasingly  expensive and sophisticated  clinical technology,  an
aging  population  base and the growing  demands of  newly-empowered  and health
conscious consumers. Health economists estimate that 20% or more of the nation's
total  healthcare  expenditures  are  spent on  backroom  administration.  These
economists also estimate that another 10% of these expenditures are attributable
to the consequences of adverse health events caused by inaccurate or unavailable
patient information.

     Healthcare  has many  participants.  For Medix,  the relevant  participants
include the approximately 645,000 practicing physicians, 6,200 hospitals, 16,500
nursing homes, 8,000 home healthcare  agencies,  4,500 independent  laboratories
and  thousands  of managed care  organizations  and other  ancillary  healthcare
providers in the U.S. The larger organizations in healthcare have over the years
installed   large-scale   automated  systems  to  structure  and  share  uniform
information.  Physician  practices,  which are mostly comprised of five or fewer
physicians,  have systems to support billing,  and some clinical  activity.  The
same is  true of  hospitals.  However,  very  few  provider  organizations  have
automated the first point of a transaction, which is often at the point of care.
At the point of care,  most  practitioners  rely on paper and pen, which is only
later  converted to electronic  form.  Generally,  the industry has  large-scale
administrative  and  financial   processing  systems,   but  little  transaction
automation at the point of care.

     The  industry  is  highly  regulated.  There  are both  federal  and  state
regulations.  A federal regulation has been established relating to, among other
areas, the management of information,  called the Health  Insurance  Portability
and  Accountability Act ("HIPAA").  This act, among other things,  specifies the
communication  standards  for  administrative  and  clinical  electronic  health
information. Under HIPAA, by October 16, 2003, POCs and HVCIs, who transmit data
electronically  will be required  to use  technology  that meets HIPAA  security
standards with respect to electronic transactions and code sets.

**Technology**

     Our developing technology platform and its resulting products, as discussed
below, are intended to provide  connectivity of medical related information from
the point of care to HVCIs, over the Internet,  safely,  efficiently and easily.
It is our intention to combine aspects of the ePhysician  product  functionality
with our existing  Cymedix  technologies,  resulting in our ultimate  technology
platform,  which we intend to commercialize (these combined technologies are the
"Merged Technology").  The Merged Technology is intended to improve the accuracy
and the  efficiency  of the  processes of drug  prescribing  and the ordering of
laboratory  tests and the  receiving of  laboratory  results and will be focused
around a device-neutral architecture that uses proven workstation,  handheld and
wireless technologies.

     The technology assets acquired from ePhysician include product modules that
we believe will allow us to augment the feature set of our software.  Aspects of
ePhysician's core technology architecture,  including product functionality such
as charge capture and partner messaging,  will be evaluated for inclusion in our
technology foundation.

     The  existing  Cymedix  technology  is divided into three  distinct  areas,
Cymedix  Pharmacy,  Cymedix  Laboratory  and  the  Cymedix  Universal  Interface
("CUI"). Our Cymedix Pharmacy product automates the prescription writing process
for a medical  practice.  The Cymedix  Pharmacy  product allows a POC to perform
real-time  transactions  to  determine  patient  eligibility  for  drug  benefit
coverage,  and medication history and formulary compliance at the point-of-care.
Our Cymedix  Laboratory  product allows a POC to electronically  submit lab test
orders and to receive lab test  results.  The  Cymedix Lab product can  exchange
real-time  lab  orders  and  lab  results  with  reference  and  facility  based
laboratories.  The CUI enables our Cymedix  Pharmacy and Laboratory  products to
extract data from a POC's practice  management system in an automated and secure
manner. While we have not yet deployed these products with customers, we believe
that these technologies are all functional,  subject to appropriate  integration
with potential customers' systems.

     The  laboratory  product that will be included in the Merged  Technology is
solely based on Cymedix's technology, as ePhysician does not have any laboratory
functionality.   The  CUI  will  be  combined   with   ePhysician's   extraction
technologies, which had been developed to work with over 150 practice management
systems.  Access  to  patient  data  appears  to be a key  aspect  of any of our
potential  product  offerings,  irrespective  of target market,  so we expect to
continue investing in the expansion of the extraction capabilities of the Merged
Technology.

     The  feature  set  of  our  Merged  Technology  will  include  most  of the
functionality  described in the following charts.  However, we expect to add and
subtract functionality based on the needs of the end-users we pursue.

-----------------------  -------------------------------------------------
PRODUCT                  TARGETED FUNCTIONALITY

Pharmacy                 o     Pharmacy benefit manager identification
                                (eligibility verification and an
                                automatic link to formulary / benefits
                                information).
                         o     Electronic Prescribing (retail and mail
                                order)
                         o     Medication History
                         o     Treatment and formulary compliance
                         o     Drug to Drug interaction, drug to
                                allergy, duplicate therapy and other
                                clinical checks
                         o     Messaging and prompts
                         o     Compliance analysis

Lab                      o     Complete Lab Order Entry
                         o     Medical necessity verification
                         o     24/7 results reporting (partial and full)
                         o     Specimen tracking
                         o     Messaging and prompts

**Patents, Trademarks and Copyrights**

     US Patent No 5,995,939  was issued on November 30, 1999 to our wholly owned
subsidiary,  Cymedix Lynx Corporation.  That patent covers our automated service
request and fulfillment system and will expire October 14, 2017.

     Cymedix registered U.S.  Trademark  Registration No. 2,269,377 for the mark
CYMEDIX in  connection  with  "computer  software  for data base and  electronic
record  management in the healthcare  field" on August 10, 1999, U.S.  Trademark
Registration  No.  2,316,240  for the mark  LYNX in  connection  with  "computer
software to provide secure communication on a global  communication  information
network" on February 8, 2000, and U.S. Trademark  Registration No. 2,409,248 for
the mark  CYMEDIX.COM  in connection  with  "computer  software for database and
electronic  record  management in the healthcare field" on November 28, 2000. We
do not intend to utilize these trademarks as part of the Merged Technology.

     Cymedix has obtained seven copyright registrations for two versions of each
of three modular software  components of the Cymedix suite of products,  as well
as a technical  evaluation  document that  describes the software  products.  No
assurance can be given that any of our software products will receive additional
patent or other intellectual property protection. Cymedix has assigned the above
patent and copyright  registrations  to Medix.  It is unclear whether any of the
existing  copyrights  or the  patent  will  inure any  significant  value to our
business in the future.

     We seek to protect our software,  documentation and other written materials
primarily  through a combination of trade secret,  trademark and copyright laws,
confidentiality  procedures and contractual provisions.  In addition, we seek to
avoid  disclosure  of our trade  secrets,  by, among other  things,  restricting
access  to our  source  code and  requiring  those  persons  with  access to our
proprietary information to execute confidentiality agreements with us.

     Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or obtain and use  information  that
we  regard  as  proprietary.  Policing  unauthorized  use  of  our  products  is
difficult.  While we are unable to  determine  the extent to which piracy of our
products  exists,  software  piracy can be expected to be a persistent  problem,
particularly in foreign countries where the laws may not protect our proprietary
rights as fully as in the United States.

     From time to time, we may be involved in intellectual property disputes. We
may notify others that we believe their products  infringe upon our intellectual
property  rights,  and others may notify us that they  believe that our products
infringe on their  intellectual  property  rights.  We expect that  providers of
eHealth  solutions will  increasingly be subject to  infringement  claims as the
number of  products  and  competitors  in our  industry  grows  and  traditional
suppliers  of  healthcare  data  and   transaction   solutions  begin  to  offer
Internet-based   products.  If  our  proprietary   technology  is  subjected  to
infringement  claims,  we may  have to  expend  substantial  amounts  to  defend
ourselves,  and, if we lose,  pay damages or seek a license from third  parties,
which could delay the  commercialization  of our  products.  If our  proprietary
technology  is  infringed  upon,  we may have to expend  substantial  amounts to
prosecute the  infringing  parties,  and we may  experience  losses if we cannot
support our claim of infringement.

**Business Strategy**

     While  we  continue  the  development  of  our  Merged  Technology,  we are
evaluating ways to deploy these technologies to the healthcare  marketplace.  We
are currently exploring whether individual  potential markets for deployment are
on financial  terms that would be commercially  feasible and worth pursuing.  We
currently do not have any customers for our products.

     Some  PBMs  have  been  willing  to  pay  transaction  fees  to  electronic
prescribers for prescriptions delivered  electronically for their covered lives.
These  transaction  fees  may not  justify  the  cost of  deploying  our  Merged
Technology  to POCs.  Our existing  contract with Medco Health  Solutions,  when
implemented,  would pay us transaction fees on their covered lives. We intend to
explore the  possibilities of PBMs,  health plans and other  interested  parties
providing us with  additional  financial  assistance  that might better  justify
deploying our Merged Technology to a targeted POC audience of their choosing. At
this time,  it is not  certain  whether  this plan will be a viable  part of our
business  if  and  when  our  Merged  Technology  is  available  for  commercial
deployment.

     We are also  beginning to explore  other  distribution  channels and venues
through which our Merged  Technology could be deployed.  We believe  potentially
attractive areas for us to pursue must offer us an opportunity to aggregate POCs
or  prescriptions  in  a  concentrated   manner.   Skilled  nursing  facilities,
institutional  pharmacies,  hospices and veteran's hospitals appear to be venues
that  may  have  attractive  characteristics  for the  commercialization  of our
products.  While  the  Merged  Technology  may  meet  certain  aspects  of these
opportunities,  we expect that each area we  ultimately  pursue,  if any,  would
require  us to  undertake  additional  development  work.  In  evaluating  these
distribution channels and venues, we plan to focus on ease of entry into a given
distribution  channel  or venue,  and the  potential  to  extract  a  reasonable
economic return from a paying customer.  We do not intend to deploy our products
to areas where we would need to invest significant financial resources. Instead,
we are seeking opportunities where we perceive that we might be able to generate
attractive  levels of revenue over reasonable  periods of time. Our intention is
to develop short pilot opportunities with interested potential  customers,  with
the hope of moving to a revenue producing  relationship within the 2003 calendar
year. No assurance can be given that this goal can be achieved.  It is important
to note that we have  never  deployed  our  Cymedix  product  in any  meaningful
manner, and have not yet attempted to deploy our Merged Technology, and in fact,
the development  process of our Merged Technology is still underway,  precluding
us from attempting to deploy our Merged Technology at this time.

     Formulary  compliance,  which  is the  ability  of an  HVCI  to  have a POC
prescribe  a  pharmaceutical  product of the HVCI's  choice,  is an area that we
intend to explore.  We believe our technologies have the possibility of enabling
an HVCI to  achieve  better  formulary  compliance.  We may seek to  prove  this
premise in a given  marketplace  through pilot projects,  so as to attract HVCIs
for whom this capability would be a material attraction. The key manner in which
our Merged Technology could affect formulary compliance is through messaging and
placement of information, intended to affect the POCs prescribing behavior prior
to having  prescribed  any product.  We have not yet explored this area, and our
Merged Technology may not prove to be commercially viable in the manner in which
we contemplate its use in this area.

                                  **RISK FACTORS**

     In  addition  to the  other  information  contained  in  this  report,  the
following  risk  factors  should  be  considered   carefully  in  evaluating  an
investment  in  Medix  Resources,  Inc.  and in  analyzing  our  forward-looking
statements.

                             **Risks Related to Medix

Our continuing  losses endanger our viability as a going-concern  and caused our
accountants to issue a "going concern" exception in their annual audit report.**

     We reported net losses of  $9,014,000,  $10,636,000  and $5,415,000 for the
years ended  December 31,  2002,  2001 and 2000,  respectively.  At December 31,
2002, we had an  accumulated  deficit of $43,073,000  and a net working  capital
deficit of $252,000.  Our products are in the development  and early  deployment
stage and have not generated any revenue to date. We are funding our  operations
through the sale of our securities.  Our independent accountants have included a
"going  concern"  exception in their audit reports on our audited 2002, 2001 and
2000 financial statements.

**Our need for  additional  financing  is acute and  failure  to  obtain  adequate
financing could lead to the financial failure of our company.**

     We expect to continue to experience  losses,  in the near term,  until such
time as the Merged  Technology can be successfully  deployed with physicians and
produce  revenue.  The continuing  development,  marketing and deployment of the
Merged Technology will depend upon our ability to obtain  additional  financing.
The Merged  Technology  is in the  development  stage and has not  generated any
revenue to date.  We are  funding  our  operations  now  through the sale of our
securities.  There can be no assurance that additional investments or financings
will be available  to us on  favorable  terms or at all as needed to support the
development and deployment of Merged Technology.  Failure to obtain such capital
on a timely basis could result in lost business  opportunities,  the sale of the
Merged Technology at a distressed price or the financial failure of our company.

**We have a limited number of authorized shares of common stock for issuance,  and
if our  shareholders  do not approve of an increase in the authorized  number of
shares of our common stock, we will be unable to raise additional capital.**

     We  currently  have  125,000,000  shares of  common  stock  authorized  for
issuance under our certificate of  incorporation,  and as of February 28th 2002,
have  80,877,065  outstanding  shares of common stock and  37,064,527  shares of
common  stock  reserved  for  issuance  under  existing  options,  warrants  and
outstanding  shares  of our  convertible  preferred  stock.  Thus,  we only have
7,058,408  shares of common stock that are available for issuance.  We intend to
request that our shareholders approve, at a special meeting of shareholders,  an
increase  in the  number of shares of common  stock  that we are  authorized  to
issue.  However, we cannot predict the outcome of that vote. If our shareholders
do not approve of the  increase in the number of shares of common  stock that we
are authorized to issue, we will be unable to raise additional capital.

**Medix has frequent  cash flow  problems  that often cause us to be delinquent in
making  payments to our vendors and other  creditors,  which may cause damage to
our  business  relationships  and cause us to incur  additional  expenses in the
payment of late charges and penalties.**

     During  2002,  from time to time,  our lack of cash flow caused us to delay
payment  of our  obligations  as they  came due in the  ordinary  course  of our
business.  In some cases,  we were  delinquent in making payments by the legally
required  due dates.  At our four  office  locations,  we had 48 monthly  rental
payments due in the aggregate during 2002. Two of those payments were late. Such
payments  were paid  within 30 days of their due  date.  All  payments  plus any
required penalties were ultimately paid with respect to our 2002 obligations. We
had 26 Federal  withholding  and other  payment due dates.  Of those,  three due
dates were  missed.  The  resulting  delinquencies  ranged  from one to ten days
before the required payments were made. We paid the resulting  penalties as they
were billed.  We had state  withholding  obligations  in five states,  Colorado,
California,  Georgia,  New  Jersey  and New York.  Although  we were not late in
making withholding  payments in those five states during 2002, we have been late
in prior periods. Similarly, although we were not late in making deposits of our
employees'  401(k)  contributions  during 2002, we have been late in making such
deposits in the past.  During 2003,  we may be  delinquent  from time to time in
meeting our obligations as they become due.

**While we have had operations since 1988, we are better  considered a development
stage  company,  which  means our  products  and  services  have not yet  proved
themselves commercially viable and therefore our future is uncertain.**

     Although we have had operations  since 1988,  because of our move away from
temporary healthcare staffing,  we have a relatively short operating history and
limited  financial  data upon which you may evaluate our business and prospects,
and are better considered a development stage company. In addition, our business
model is likely to  continue  to evolve as we  attempt to  develop  our  product
offerings  and  enter  new  markets.  As a  result,  our  potential  for  future
profitability must be considered in light of the risks, uncertainties,  expenses
and difficulties  frequently encountered by development stage companies that are
attempting  to move into new markets  and  continuing  to innovate  with new and
unproven  technologies.  We are still in the  process of gaining  experience  in
marketing   physician   connectivity   products,   providing  support  services,
evaluating demand for products, financing a technology business and dealing with
government  regulation of health information  technology products.  While we are
putting together a team of experienced executives, they have come from different
backgrounds  and  may  require  some  time to  develop  an  efficient  operating
structure and corporate culture for our company.

**We rely on healthcare  professionals  for the quality of the information that is
transmitted through our  interconnectivity  systems,  and we may not be paid for
our  services  by  third-party  payors  if that  quality  does not meet  certain
standards.**

     The  success of our  products  and  services in  generating  revenue may be
subject to the quality and completeness of the data that is generated and stored
by  the  physician  or  other  healthcare  professional  and  entered  into  our
interconnectivity  systems,  including  the  failure  to  input  appropriate  or
accurate information. Such failure may negatively affect our ability to generate
revenue and our reputation.

**Our market,  healthcare  services,  is rapidly  changing and the introduction of
Internet  connectivity  services  and  products  into that market has been slow,
which may cause us to be unable to develop a profitable  market for our services
and products.**

o    As a developer of connectivity  technology products, we will be required to
     anticipate and adapt to evolving  industry  standards and new technological
     developments.  The market for the Merged  Technology  is  characterized  by
     continued  and rapid  technological  advances in both hardware and software
     development,  requiring ongoing  expenditures for research and development,
     and timely  introduction  of new  products  and  enhancements  to  existing
     products.  The  establishment  of  standards  is largely a function of user
     acceptance.  Therefore,  such  standards are subject to change.  Our future
     success,  if any, will depend in part upon our ability to enhance  existing
     products,  to respond effectively to technology  changes,  and to introduce
     new products and  technologies  that are  functional  and meet the evolving
     needs of our  clients  and  users  in the  healthcare  information  systems
     market.

o    The introduction of physician  connectivity products in our market has been
     slow due,  in part,  to the large  number  of small  practitioners  who are
     resistant  to  change  and  the  implicit  costs  associated  with  change,
     particularly  in a period of rising pressure to reduce costs in the market.
     In addition,  the  integration  of processes  and  procedures  with several
     payors and management  intermediaries  in a market area has taken more time
     than  anticipated.  The resulting delays continue to prevent the receipt of
     transaction fees and cause us to continue to raise money by the sale of our
     securities to finance our operations.

o    Our early-stage market approach  concentrated  product distribution efforts
     in a single market  (Atlanta,  Georgia),  thereby  amplifying the effect of
     localized market  restrictions on our prospects,  and delaying  large-scale
     distribution  of our  products.  While we intend to  mitigate  these  local
     factors  with a strategy  to develop  alternate  distribution  channels  in
     multiple markets, there can be no assurance that we will be successful.

o    We cannot assure you that we will successfully  complete the development of
     the Merged  Technology in a timely fashion or at all or that our current or
     future  products  will  satisfy  the  needs of the  healthcare  information
     systems market. Further, we cannot assure you that products or technologies
     developed by others will not adversely  affect our competitive  position or
     render our products or technologies noncompetitive or obsolete.

**As a provider  of medical  connectivity  products  and  services,  we may become
liable for product liability claims that could have a materially  adverse effect
on our financial condition.**

     Certain of our products provide applications that relate to patient medical
histories and treatment plans. Any failure by our products to provide  accurate,
secure and timely  information  could result in product liability claims against
us by our  clients or their  affiliates  or  patients.  We are  seeking  product
liability coverage,  which may be prohibitive in cost. There can be no assurance
that we will be able to obtain such coverage at an  acceptable  cost or that our
insurance  coverage would adequately cover any claim asserted against us. Such a
claim could be in excess of the limits imposed by any policy we might be able to
obtain.  A  successful  claim  brought  against  us in excess  of any  insurance
coverage  we might have could have a material  adverse  effect on our results of
operations,  financial  condition or business.  Even  unsuccessful  claims could
result  in the  expenditure  of funds in  litigation,  as well as  diversion  of
management time and resources.

**Our industry,  healthcare,  continually experiences rapid change and uncertainty
that could result in issues for our business  planning or operations  that could
severely impact on our ability to become profitable.**

     The healthcare and medical  services  industry in the United States is in a
period  of  rapid  change  and  uncertainty.  Governmental  programs  have  been
proposed,  and some adopted, from time to time, to reform various aspects of the
U.S.  healthcare  delivery system.  Some of these programs contain  proposals to
increase  government  involvement in healthcare,  lower  reimbursement rates and
otherwise  change  the  operating   environment  for  our  physician  users  and
customers.  Particularly,  HIPAA and the regulations that are being  promulgated
under it are causing the healthcare  industry to change its procedures and incur
substantial  cost in doing so. Although we expect these  regulations to have the
beneficial  effect of spurring  adoption  of our  software  products,  we cannot
predict with any  certainty  what impact,  if any,  these and future  healthcare
reforms might have on our business.

**We rely on intellectual property rights, such as copyrights and trademarks,  and
unprotected  propriety technology in our business operations and to create value
in our companies;  however, protecting intellectual property frequently requires
litigation and close legal  monitoring  and may adversely  affect our ability to
become profitable.**

o    Our  wholly  owned  subsidiary,   Cymedix  Lynx  Corporation,  has  certain
     intellectual property relating to its software business.  These rights have
     been assigned by our subsidiary to the parent company, Medix Resources. The
     intellectual  property  legal  issues for  software  programs,  such as the
     Cymedix(R)products,  are  complex  and  currently  evolving.  Since  patent
     applications are secret until patents are issued,  in the United States, or
     published,  in other countries,  we cannot be sure that we are the first to
     file any  patent  application.  In  addition,  we  cannot  assure  you that
     competitors,  many of which have far greater resources than we do, will not
     apply for and  obtain  patents  that will  interfere  with our  ability  to
     develop  or market  the  Merged  Technology.  Further,  the laws of certain
     foreign  countries do not provide the protection to  intellectual  property
     that is provided in the United States,  and may limit our ability to market
     our  products  overseas.  While  we  have no  prospects  for  marketing  or
     operations  in foreign  countries at this time,  future  opportunities  for
     growth in foreign markets,  for that reason, may be limited. We cannot give
     any  assurance  that the scope of the rights that we have been  granted are
     broad enough to fully protect the Merged Technology from infringement.

o    Litigation  or  regulatory  proceedings  may be  necessary  to protect  our
     intellectual  property rights,  such as the scope of our patent rights.  In
     fact, the information  technology and healthcare  industries in general are
     characterized  by substantial  litigation.  Such  litigation and regulatory
     proceedings  are very  expensive  and could be a  significant  drain on our
     resources  and  divert  resources  from  product  development.  There is no
     assurance  that we will have the  financial  resources to defend our patent
     rights  or other  intellectual  property  from  infringement  or  claims of
     invalidity.  A party has notified us that it believes our pharmacy  product
     may infringe on patents that it holds.  We have retained patent counsel who
     has made a preliminary  investigation  and determined that our product does
     not infringe on the  identified  patents.  At this time no legal action has
     been instituted.

o    We also rely upon unprotected  proprietary  technology and no assurance can
     be  given  that  others  will  not  independently   develop   substantially
     equivalent proprietary  information and techniques or otherwise gain access
     to or  disclose  our  proprietary  technology  or that we can  meaningfully
     protect our rights in such unpatented proprietary  technology.  We will use
     our best  commercial  efforts to protect such  information  and techniques;
     however,  we cannot  assure you that such efforts will be  successful.  The
     failure  to  protect  our  intellectual  property  could  cause  us to lose
     substantial  revenues and to fail to reach our financial potential over the
     long term.

**Because our business is highly  competitive  and there are many  competitors who
are  financially  stronger than we are, we are at risk of being  outperformed in
staffing,  marketing,  product  development and customer  services,  which could
severely limit our ability to become profitable.**

o    eHealth  Services.  Competition can be expected to emerge from  established
     healthcare  information  vendors and  established  or new Internet  related
     vendors. The most likely competitors are companies with a focus on clinical
     information systems and enterprises with an Internet commerce or electronic
     network focus.  Many of these competitors will have access to substantially
     greater  amounts  of  capital  resources  than we have  access  to, for the
     financing of technical,  manufacturing and marketing  efforts.  Frequently,
     these  competitors  will have  affiliations  with major medical  product or
     software  development  companies,  who may assist in the  financing of such
     competitor's product development.  We will seek to raise capital to develop
     the  Merged  Technology  in a  timely  manner,  however,  so  long  as  our
     operations  remain  under-funded,  as  they  now  are,  we  will  be  at  a
     competitive disadvantage.

o    Personnel.  The success of the development,  distribution and deployment of
     the Merged  Technology  is  dependent  to a  significant  degree on our key
     management and technical  personnel.  We believe that our success will also
     depend upon our ability to attract,  motivate  and retain  highly  skilled,
     managerial,  sales  and  marketing,  and  technical  personnel,   including
     software  programmers  and  systems  architects  skilled  in  the  computer
     languages in which the Merged  Technology  operates.  Competition  for such
     personnel in the software and information  services  industries is intense.
     The loss of key  personnel,  or the  inability to hire or retain  qualified
     personnel,  could  have  a  material  adverse  effect  on  our  results  of
     operations, financial condition or business.

**We have relied on the private placement  exemption to raise substantial  amounts
of capital, and could suffer substantial losses if that exemption was determined
not to have been properly relied upon.**

     We have raised  substantial  amounts of capital in private  placements from
time to  time.  The  securities  offered  in such  private  placements  were not
registered  with the SEC or any state agency in reliance  upon  exemptions  from
such registration  requirements.  Such exemptions are highly technical in nature
and if we  inadvertently  failed to comply with the  requirements of any of such
exemptive  provisions,  investors would have the right to rescind their purchase
of our  securities  or  sue  for  damages.  If one or  more  investors  were  to
successfully  seek such  rescission  or institute  any such suit,  we could face
severe  financial  demands  that  could  materially  and  adversely  affect  our
financial position.

**The impact of shares of our common stock that may become  available  for sale in
the future may result in the market price of our stock being depressed.**

     As of  December  31,  2002,  we  had  77,160,815  shares  of  common  stock
outstanding.  As of that date approximately 33,153,728 shares were issuable upon
the  exercise  of  outstanding  options,  warrants  or  other  rights,  and  the
conversion of preferred stock. Most of these shares will be immediately saleable
upon exercise or conversion under registration statements we have filed with the
SEC. The exercise prices of options,  warrants or other rights to acquire common
stock presently outstanding range from $.25 per share to $4.97 per share. During
the respective terms of the outstanding options,  warrants,  preferred stock and
other outstanding derivative  securities,  the holders are given the opportunity
to profit from a rise in the market price of the common stock,  and the exercise
of any options,  warrants or other rights may dilute the book value per share of
our common stock and put downward pressure on the price of the common stock. The
existence of the options,  conversion  rights,  or any outstanding  warrants may
adversely affect the terms on which we may obtain  additional  equity financing.
Moreover,  the holders of such securities are likely to exercise their rights to
acquire common stock at a time when we would otherwise be able to obtain capital
on terms  more  favorable  than  could  be  obtained  through  the  exercise  or
conversion of such securities.

**Because of  dilution  to our  outstanding  common  stock  from the below  market
pricing features of financings that are available to us, the market price of our
stock may be depressed.**

     Financings  that may be available  to us under  current  market  conditions
frequently  involve below market  sales,  as well as the issuance of warrants or
convertible debt that require exercise or conversion  prices that are calculated
in the future at a discount to the then market  price of our common  stock.  Any
agreement to sell, or convert debt or equity  securities into, common stock at a
future date and at a price based on the then  current  market price will provide
an incentive to the investor or third  parties to sell the common stock short to
decrease  the price and  increase  the  number of shares  they may  receive in a
future purchase,  whether directly from us or in the market. The issuance of our
common  stock in  connection  with such  exercise  or  conversion  may result in
substantial dilution to the common stock holdings of other holders of our common
stock.

**Because of market  volatility  in our stock price,  investors may find that they
have a loss position if emergency sales become necessary.**

     Historically,   our  common  stock  has   experienced   significant   price
fluctuations. One or more of the following factors influence these fluctuations:

o    unfavorable  announcements  or press  releases  relating to the  technology
     sector;

o    regulatory,  legislative or other developments affecting our company or the
     healthcare industry generally;

o    conversion of our preferred stock and convertible debt into common stock at
     conversion  rates based on current  market  prices or  discounts  to market
     prices,  of our common  stock and exercise of options and warrants at below
     current market prices;

o    sales by those  financing  our company  through an equity line of credit or
     convertible  securities  which have been registered with the SEC and may be
     sold into the public market immediately upon receipt; and

o    market  conditions  specific to  technology  and  internet  companies,  the
     healthcare industry and general market conditions.

In addition, in recent years the stock market has experienced  significant price
and volume  fluctuations.  These fluctuations,  which are often unrelated to the
operating  performance of specific  companies,  have had a substantial effect on
the market price for many healthcare related technology companies.  Factors such
as those cited  above,  as well as other  factors  that may be  unrelated to our
operating performance, may adversely affect the price of our common stock.

**The  application  of the "penny stock" rules to our common stock may depress the
market for our stock.**

     Trading of our common  stock may be subject to the penny  stock rules under
the Securities  Exchange Act of 1934, as amended,  unless an exemption from such
rules is available.  Broker-dealers  making a market in our common stock will be
required to provide disclosure to their customers regarding the risks associated
with our common stock,  the suitability for the customer of an investment in our
common stock,  the duties of the  broker-dealer  to the customer and information
regarding  bid and  asked  prices  for our  common  stock,  and the  amount  and
description of any  compensation the  broker-dealer  would receive in connection
with a  transaction  in our common  stock.  The  application  of these rules may
further  result in fewer market  makers  making a market in our common stock and
further restrict the liquidity of our common stock.

**RECENT DEVELOPMENTS**

     On March 4, 2003, we purchased from Comdisco Ventures,  Inc.  substantially
all of the  assets  formerly  used  by  ePhysician,  Inc.  in its  software  and
technology  business  prior to its  cessation  of  operations  in  2002.  We are
evaluating the newly acquired  technology to determine how best to integrate our
Cymedix  technology  with the  ePhysician  technology,  resulting  in our Merged
Technology.  From its formation in 1998,  through its cessation of operations in
November 2002, ePhysician developed and provided ePhysician Practice, a suite of
software products that enables physicians to prescribe medications,  access drug
reference data, schedule patients,  view formulary information,  review critical
patient  information  and  capture  charges  at the  point of care  using a Palm
OS(R)-based handheld device and the Internet.

     On March 5, 2003, we terminated  our merger  agreement  with  PocketScript,
LLC. We had entered into a  non-binding  Letter of Intent with  PocketScript  on
October 30, 2002 and had executed a definitive  merger agreement on December 19,
2002 to acquire PocketScript subject to certain conditions of closing.

**COMPETITION**

     Healthcare  Connectivity Services.  The market for healthcare  connectivity
services  continues  to be evolving and highly  fragmented.  No clear leader has
emerged.  Several  competitors have exited the market during the past two years,
having  failed to prove the  viability of their  businesses  or having  depleted
their  financial  resources.  The technology  companies in this market  include,
large  traditional  technology  vendors  such as Siemens,  General  Electric and
Hewlett Packard, as well as various healthcare-centric technology companies such
as Misys Healthcare Systems, WebMD, ProxyMed, NaviMedix and Allscripts.

     There are other connectivity  companies in the United States, both publicly
and  privately  held,  that compete  directly or indirectly  with us.  Moreover,
competition can be expected to emerge from  established  healthcare  information
vendors  and  established  or new  Internet  related  vendors.  The most  likely
competitors  are  companies  with a focus on  clinical  information  systems and
enterprises with an Internet commerce or electronic network focus. Currently, we
view our main competitors as WebMD, ProxyMed,  NaviMedix and Allscripts, as well
as practice  management  system vendors that may elect to build versus  partner.
These competitors have greater financial resources and marketing capability than
we do and may have technology  resources that are superior to ours. We will seek
to raise  capital to develop and  implement  our Merged  Technology  in a timely
manner, however, as long as our operations remain under funded, as they are now,
we will be at a competitive disadvantage.

     We believe that we can be competitive  in this industry  because our Merged
Technology  will be built on a scalable  technology  architecture,  our  product
features appear to fill a need in the healthcare connectivity marketplace and we
will have  extraction  capabilities  allowing us to interface with a significant
number of practice management systems.

**GOVERNMENT REGULATION**

       Federal and state laws and  regulations  regulate  many  aspects of our
business.  Since  sanctions  may be  imposed  for  violations  of these  laws,
compliance  is a  significant  operational  requirement.  We believe we are in
substantial  compliance with all existing legal  requirements  material to the
operation  of our  business.  There are,  however,  significant  uncertainties
involving  the  application  of  many  of  these  legal  requirements  to  our
business.   We  are  unable  to  predict  what  additional  federal  or  state
legislation or regulatory  initiatives  may be enacted in the future  relating
to our  business or the  healthcare  industry  in general,  or what effect any
such  legislation  or  regulations  might  have on us. We cannot  provide  any
assurance  that  federal  or  state  governments  will not  impose  additional
restrictions  or adopt  interpretations  of  existing  laws that  could have a
material  adverse  affect on our  results or  operations,  financial  position
and/or cash flow from operations.

     **HIPAA and Standardized  Transactions**.  Our  sponsor-customers and physician
users must comply with the Administrative Simplification provision of the Health
Insurance  Portability  and  Accountability  Act of 1996  (HIPAA),  under  which
regulations  for  governing  privacy,  electronic  transactions  and code  sets,
security  and  unique  identifiers  have been,  or are in the  process of being,
implemented. Our products must contain features and functionality that allow our
customers and users to comply with existing law and regulations.

     HIPAA  regulations  will  have  a  major  effect  on us as  well  as  other
participants in the healthcare industry.  Significant resources will be required
to  implement  these  regulations.   Major  retooling  of  medical   information
technology  will be  required  to install the  required  standardized  codes and
procedures.  Transaction  standards,  code sets, and identifiers will need to be
installed on medical participants'  networks and office computers.  Security and
privacy regulations will be difficult to implement and maintain because they are
broad in scope and require  ongoing  vigilance to assure  compliance.  Estimated
costs of  implementation  vary  widely,  but will be in the  billions of dollars
throughout the United States. Failure to comply could put us or other healthcare
participants out of business.

     We believe  that the Merged  Technology  is  designed  to comply with known
HIPAA  regulations.  However,  until all such  regulations are issued and final,
they could be modified,  which may require us to expend additional  resources to
comply with the revised standards. In addition,  given their novelty, breadth in
scope, and uncertainty as to  interpretation,  implementation  will be uncertain
and the  possibility of  inadvertently  failing to meet these standards is high.
Such failure could result in fines and penalties  being  assessed  against us or
cause our business to suffer in other ways.

     **Government  Regulation of the  Internet**.  New laws and  regulations  may be
adopted with respect to the Internet or other on-line  services  covering issues
such as privacy, pricing, content, copyrights,  distribution and characteristics
and  quality  of  products  and  services.  The  adoption  of any  new  laws  or
regulations  may impede the growth of the  Internet or other  on-line  services,
which could  decrease the demand for our  software  applications  and  services,
increase our cost of doing business,  or otherwise have an adverse effect on our
business, financial condition and results of operations. Moreover, the manner in
which existing laws in various  jurisdictions  governing issues such as property
ownership,  sales and other taxes, libel and personal privacy will be applied to
activities on the Internet is uncertain and may take years to resolve.  Any such
new  legislation or regulation,  the  application of laws and  regulations  from
jurisdictions  whose  laws  do  not  currently  apply  to our  business,  or the
application  of existing laws and  regulations  to the Internet and other online
services  could  have a  material  adverse  effect  on our  business,  financial
condition and results of operations.

     **Confidentiality and Security**.  While HIPAA, as discussed above, is expected
to be the most important set of laws and regulations  regarding  confidentiality
and security issues for companies in the healthcare industry,  state regulations
may also  continue  to apply  to  confidentiality  of  patient  records  and the
circumstances  under which such  records may be released  for  inclusion  in our
databases.   Such  regulations  govern  both  the  disclosure  and  the  use  of
confidential patient medical records.  Such regulations could require holders of
such information,  including us, to implement costly security  measures,  or may
materially  restrict the ability of healthcare  providers to submit  information
from patient records using our  applications.  We utilize an  architecture  that
incorporates encrypted messaging, firewalls and other security methods to assure
customers of a compliant and secure computing environment. However, no technical
security  procedure is infallible,  and we will always be at risk of a breach of
security by either willful human effort or inadvertent  human error.  If we were
found liable for any such breach,  such  finding  could have a material  adverse
affect on our business, financial condition and results of operations.

     **False  Claims Act**.  Under the federal  False Claims Act,  liability  may be
imposed on any  individual or entity who knowingly  submits or  participates  in
submitting  claims for  payment  to the  federal  government  which are false or
fraudulent, or which contain false or misleading information. Liability may also
be imposed on any  individual  or entity  that  knowingly  makes or uses a false
record  or  statement  to avoid an  obligation  to pay the  federal  government.
Certain state laws impose similar  liability.  The federal government or private
whistleblowers  may bring claims  under the federal  False Claims Act. If we are
found  liable for a violation  of the federal  False  Claims Act, or any similar
state law, due to our  processing  of claims for Medicaid and  Medicare,  it may
result in substantial  civil and criminal  penalties.  In addition,  we could be
prohibited from processing Medicaid or Medicare claims for payment.

     **Government Investigations**. There is significant scrutiny by law enforcement
authorities,  the U.S.  Department  of  Health  and  Human  Services  Office  of
Inspector  General,  the courts and Congress of  agreements  between  healthcare
providers and suppliers or other  contractors  that have a potential to increase
utilization of government healthcare resources. In particular, scrutiny has been
placed on the coding of claims for payment, incentive programs that increase use
of a product and  contracted  billing  arrangements.  Investigators  have looked
beyond the  formalities  of business  arrangements  to determine the  underlying
purposes  of  payments  between  healthcare   participants.   Although,  to  our
knowledge,  neither  we  nor  any  of  our  customers  is  the  subject  of  any
investigation,  we cannot tell whether we or our customers will be the target of
governmental investigations in the future.

     **Federal and State  Anti-Kickback  Laws**.  Provisions of the Social  Security
Act,  which  are  commonly  known as the  Federal  Anti-Kickback  Law,  prohibit
knowingly or willfully,  directly or  indirectly,  paying or offering to pay, or
soliciting  or  receiving,  any  remuneration  in exchange  for the  referral of
patients  to  a  person  participating  in,  or  for  the  order,   purchase  or
recommendation  of items or  services  that are  subject  to  reimbursement  by,
Medicare,  Medicaid  and similar  other  federal or state  healthcare  programs.
Violations may result in civil and criminal  sanctions and penalties.  If any of
our healthcare  communications or electronic  commerce activities were deemed to
be inconsistent with the Federal  Anti-Kickback Law or with state  anti-kickback
or illegal  remuneration  laws, we could face civil and criminal penalties or be
barred from such  activities.  Further,  we could be required to restructure our
existing  or  planned  sponsorship  compensation   arrangements  and  electronic
commerce activities in a manner that could harm our business.

     If compliance with government  regulation of healthcare  becomes costly and
difficult for us and our customers, we may not be able to implement our business
plan, or we may have to abandon a product or service we are providing or plan to
provide altogether.

**Employees**

     As of March 14, 2003, we had 21 full-time and no part-time  employees.  Ten
of these  employees  are  involved  in software  programming  and support of the
Cymedix  network,  four are involved in the marketing and deployment of product,
and seven are involved in our administrative and financial  operations.  None of
our employees is represented by a labor union,  and we have never  experienced a
work  stoppage.  We believe  our  relationship  with our  employees  to be good.
However, our ability to achieve our financial and operational objectives depends
in large part upon our  continuing  ability to  attract,  integrate,  retain and
motivate highly qualified sales,  technical and managerial  personnel,  and upon
the  continued  service of our  senior  management  and key sales and  technical
personnel.  See  "Executive  Officers  Compensation  -  Employment  Agreements."
Competition  for such qualified  personnel in our industry and the  geographical
locations of our offices is intense,  particularly  in software  development and
technical personnel.
**ITEM 2.   PROPERTIES**

     Our principal  executive office is located at 420 Lexington  Avenue,  Suite
1830, New York, NY 10170.  In addition,  we have three other offices  located in
Colorado, California and Georgia .

                                                 Lease
                                      Square   Expiration      2003
                                     Footage      Date      Rent (est.)
                                    ---------  ----------   ----------
          New York, New York          10,495   1-31-2005      $288,560
          Greenwood Village,
           Colorado (1)                2,967   7-31-2003        58,185
          Agoura Hills, California
           (2)                         3,474   3-31-2007        79,207
          Marietta, Georgia  (2)       2,060   2-28-2004        31,930
                                    ---------               ----------
       Totals                         18,996                $ 457,882
                                    =========               ==========
----------------
(1)  In connection with the sale of our remaining  staffing business in 2000, we
     subleased  2,735 square feet of this space to the  purchaser,  who will pay
     $50,000 in rent  annually for such space until July 31, 2003.  In 2002,  we
     sublet an additional 2,269 square feet at market rates until July 31, 2003.
     We remain jointly liable for rental payments on such subleased spaces until
     the end of the  sublease  and liable for all the space until the end of the
     lease indicated above.

(2)  As a result of the cessation of our deployment  efforts in Georgia,  and in
     order to eliminate  overhead,  we have closed our  California  and Colorado
     offices,  and we are actively pursuing an exit to our leases in Georgia and
     California.  Given current market conditions, we are not optimistic that an
     attractive  exit  strategy  exists,  but we are  seeking  to  mitigate  our
     obligations  on these two leases.  Our lease in Colorado  is  scheduled  to
     expire in mid-2003,  and will not be renewed,  as we have  consolidated all
     previous functions  performed in Colorado to New York City. We believe that
     our New York  facility  will be suitable for our needs for the  foreseeable
     future.  We have insured all of our  properties  at the levels  required to
     meet our lease  obligations.  We believe that these  levels are  reasonable
     measures of adequate levels of insurance.
**ITEM 3. LEGAL PROCEEDINGS**

     In the normal  course of business,  the Company may be party to  litigation
from time to time. Current legal proceedings are as follows:

     Tufts Associated Health Plans,  Inc. has threatened to commence  litigation
against us for allegedly  breaching the Services and Support  Agreement  between
Tufts and the Company.  Tufts has alleged that because of the termination of the
merger agreement between the Company and PocketScript,  the Company is unable to
provide the products and  services as  contemplated  by the Services and Support
Agreement  and is in  "material  breach"  thereunder.  We  disagree  with Tufts'
allegations. At this time, litigation has not been commenced.

     On August  7,  2001,  a former  officer  of the  Company  filed an  action,
entitled Barry J. McDonald v. Medix Resources, Inc., f/k/a International Nursing
Services,  Inc., and John Yeros, CN 01CV2119,  in the District Court of Arapahoe
County,  Colorado,  against the Company and its former  President  and CEO.  The
plaintiff  alleged  (1)  breach  of an  employment  agreement,  a  stock  option
agreement  and the related  stock  option  plan,  (2) breach of the duty of good
faith and fair  dealing,  and (3)  violation of the Colorado  Wage Claim Act. On
August 13, 2002,  we reached an agreement  in  principal  with the  plaintiff to
settle the litigation by paying plaintiff  $25,000 on or before October 1, 2002,
with no admission of liability on our part. This  settlement  agreement has been
signed and the $25,000 was paid during September 2002.

     On December 17, 2001,  Vision  Management  Consulting,  L.L.C.,  filed suit
against us in the Superior Court of New Jersey,  Law Division - Essex County, in
an action  entitled Vision  Management  Consulting,  L.L.C. v. Medix  Resources,
Inc., Docket No. ESX-L-11438-01. The complaint filed by Vision alleged breach of
contract,  unjust enrichment,  breach of the duty of good faith and fair dealing
and  misrepresentation  on the part of Medix in connection  with our performance
under a  negotiated  settlement  agreement  which we had entered into to resolve
certain  claims  that  existed  between  the  parties  and that arose out of the
termination of operations of our Automated  Design Concepts  division earlier in
2001.  On August 12, 2002,  we reached an agreement in principle  with Vision to
settle this litigation by payment from us to Vision of $55,000,  to be paid over
the  next  three  months,  with no  admission  of  liability  on our  part.  The
settlement  agreement  has been signed and the full  $55,000 was paid in 2002 in
compliance with the settlement.

     A party has notified us that it believes our pharmacy  product may infringe
on  patents  that it  holds.  We have  retained  patent  counsel  who has made a
preliminary  investigation  and determined that our product does not infringe on
the identified patents. At this time no legal action has been instituted.

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

The  following  matters were  submitted to our  shareholders  at the 2002 Annual
Meeting of Shareholders held on October 8, 2002:

**Proposal #1**         Election of Directors    For      Withheld
                    ---------------------    ---      --------

                    Mr. Samuel H. Havens  52,420,897  3,376,780
                    Mr. Guy L. Scalzi     52,420,897  3,376,780

Patrick W. Jeffries',  Joan E. Herman's,  Darryl R. Cohen's,  John T. Lane's and
David B. Skinner's  respective terms as directors did not expire during 2002 and
each continued to serve as a director following the October 8, 2002 meeting. Mr.
Skinner  died in January 2003 and Mr. Lane  resigned  from the Board in February
2003.

**Proposal # 2** Approval of the  proposed  amendment to the  Company's  Articles of
Incorporation  to increase  the number of shares of the  Company's  Common Stock
authorized for issuance from 100 million to 125 million.

                For        Against       Abstained
                ---        -------       ---------

              52,130,969    3,193,726      472,982

**Proposal #3**  Ratification of the appointment of Ehrhardt Keefe Steiner & Hottman
PC, independent  public  accountants,  to audit the financial  statements of the
Company for the fiscal year ended December 31, 2002.

                            For        Against       Abstained
                            ---        -------       ---------

                          51,191,307    3,400,113    1,206,257

                                     **PART II****ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**

     On April 6,  2000,  our common  stock was  listed and began  trading on the
American  Stock  Exchange under the symbol "MXR." Prior to that time, our common
stock  was  traded  on the OTC  Bulletin  Board  under the  symbol  "MDIX."  The
following  table shows high and low sale prices for each quarter in the last two
calendar  years as reported by the American Stock  Exchange.  On March 14, 2003,
the last sales price reported on the American Stock Exchange was $0.40.

                                 Common Stock Price
                                ----------------------
                                    High       Low
                                ----------------------
          2002

             First Quarter             $0.91   $0.47
             Second Quarter             0.62    0.27
             Third Quarter              0.62    0.31
             Fourth Quarter             0.94    0.48

          2001

             First Quarter             $1.62   $0.52
             Second Quarter             1.49    0.41
             Third Quarter              1.36    0.50
             Fourth Quarter             1.09    0.49

     There were  approximately  500 holders of record (and  approximately  9,000
beneficial  owners)  of our  common  stock as of March 14,  2003.  The number of
record  holders  includes  shareholders  who may hold  stock for the  benefit of
others.

     We did not declare or pay a dividend for the years ending December 31, 2002
or December 31, 2001 and do not expect to pay any  dividends on our common stock
in the foreseeable future. We currently intend to retain all available funds for
the development of our business and for use as working  capital.  The payment of
dividends on our common stock is subject to our prior payment of all accrued and
unpaid dividends on any preferred stock outstanding.

**Equity Compensation Plan Information**

     The  following  table  provides   information  about   compensation   plans
(including  individual   compensation   arrangements)  under  which  our  equity
securities are authorized  for issuance to employees or  non-employees  (such as
directors and consultants), as of December 31, 2002:

Plan Category

                    Number of                                  Number of securities
                 securities to be                            remaining available for
                   issued upon                                future issuance under
                   exercise of        Weighted-average         equity compensation
                   outstanding         exercise price of        plans (exluding)
                options, warrants    outstanding options,    securities reflected in
                    and rights       warrants and rights           column (a))
                       (a)                   (b)                       (c)
                ------------------   ---------------------   ------------------------

Equity                9,340,000                $1.11                    505,000
compensation plans
approved by
security holders
o 1999 Stock
  Option Plan

Equity               10,955,777                $0.63                          -
compensation plans
not approved by
security holders
                     ----------               ------                  ---------

Total                20,295,777                $0.85                    505,000
                     ==========               ======                  =========

**Recent Sales of Unregistered Securities**

     From October 2002 through February 2003, in private placements, the Company
sold to accredited  investors 10,151,250 shares of its common stock and warrants
covering 10,151,250 shares of common stock for aggregate proceeds of $4,060,500.
In  addition,  from  January  2003 through  February  2003,  the Company  issued
warrants covering 960,966 shares of common stock to accredited investors who are
finders who assisted the Company in the private  placements  and to  consultants
who provided services to the Company.
**ITEM 6. SELECTED FINANCIAL DATA**

     The following  consolidated  selected financial data, at the end of and for
the last five fiscal years,  should be read in conjunction with our Consolidated
Financial  Statements  and related  Notes  thereto  appearing  elsewhere in this
Report.   The  consolidated   selected  financial  data  are  derived  from  our
consolidated  financial  statements  that have been  audited by  Ehrhardt  Keefe
Steiner & Hottman PC, our  independent  auditors,  as  indicated in their report
included herein.  The selected  financial data provided below is not necessarily
indicative of our future results of operations or financial performance.

                             2002          2001            2000 (1)      1999           1998 (2)
                         ------------   ------------  -------------- --------------  -------------

Operating revenues        $       0       $29,000        $326,000       $24,000      $17,412,000

Software and technology
 costs                    2,366,000     1,288,000         865,000       596,000          780,000

(Loss) or profit from
continuing operations    (9,014,000)   (10,636,000)    (6,344,000)   (5,422,000)        (515,000)

(Loss) or profit from
continuing operations per
share                         (0.14)         (0.21)         (0.15)        (0.29)           (0.15)

Total Assets              3,793,000      3,101,000      5,089,000     4,629,000        5,175,000

Working Capital            (252,000)    (1,404,000)       394,000       644,000       (2,612,000)

Long Term Obligations          -               -              -         400,000             -

Stockholder's Equity
(Deficit)                 1,618,000      1,345,000      4,202,000     2,376,000         (218,000)

The  following  supplemental  information  is  related to  software  development
expenses.

Software Development Costs:   2002           2001         2000 (1)         1999         1998 (2)
                         ------------   ------------  -------------- --------------  -------------
Software research and
development
costs (3)                  $691,000    $1,075,000          $685,000     $596,000       $780,000

Capitalized software
development costs           633,000       434,000           495,000           -             -

Total Software Development
Costs incurred            1,324,000     1,509,000         1,180,000      596,000        780,000

-----------------------
(1)  In February of 2000, we disposed of our remaining medical staffing business
     and became  solely a  developer  of software  for our own use in  providing
     Internet based communications for the medical services industry.

(2)  In January of 1998, we acquired the Cymedix software business and began the
     process of disposing of our medical staffing business.

(3)  Excludes amortization of previously capitalized  development software costs
     and license fees and impairment  write-off of capitalized costs included in
     software costs in the Company's Statement of Operations.

**ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION****Overview**

     Currently,  we  develop  and  market  healthcare  communication  technology
products.  Our  technologies  are  designed to provide  connectivity  of medical
related information between POCs and HVCIs. Our products are designed to improve
the accuracy and the efficiency of the processes of prescribing  medications and
the ordering of laboratory tests and the receiving of laboratory results.

     Our  current  financial  condition  is a direct  result of the  efforts  to
develop a commercially viable healthcare connectivity business.

**Critical Accounting Policies**

     We  have  identified  the  policies  below  as  critical  to  our  business
operations and the  understanding  of our results of operations.  The impact and
any  associated  risks related to these  policies on our business  operations is
discussed throughout Management's Discussion and Analysis of Financial Condition
and Results of Operations  where such policies  affect our reported and expected
financial results.

     In the ordinary course of business,  we have made a number of estimates and
assumptions  relating to the  reporting of results of  operations  and financial
condition in the  preparation  of our financial  statements  in conformity  with
accounting principles generally accepted in the United States of America. Actual
results  could  differ   significantly  from  those  estimates  under  different
assumptions and conditions.  We believe that the following  discussion addresses
our most critical accounting  policies,  which are those that are most important
to the  portrayal  of our  financial  condition  and results of  operations  and
require our most difficult, subjective, and complex judgments, often as a result
of the need to make  estimates  about the effect of matters that are  inherently
uncertain.

*Revenue Recognition*

     Our policy is to recognize revenue when the  communication  transaction has
been  completed  by  the  customer,  persuasive  evidence  of the  terms  of the
arrangement  exist, our fee is fixed and  determinable,  and  collectibility  is
reasonably  assured.  Our plan is that delivery  will take place  electronically
when the customer has completed the exchange  (transmission  or receipt) of data
or as monthly service is provided.  Revenue will be charged to the customer on a
per  transaction   basis  as  each   transaction  is  completed  or  as  monthly
subscription services are provided and are billed monthly.

*Valuation of Goodwill*

     In accordance with SFAS No. 142 we no longer amortize goodwill,  but rather
perform an annual assessment as to whether any impairment has occurred.  We also
assess the impairment of goodwill  whenever  events or changes in  circumstances
indicate  that the carrying  value may not be  recoverable.  Factors we consider
important that could trigger an impairment review include the following:

     o    significant  under-performance  relative  to  expected  historical  or
          projected future operating results;
     o    significant changes in the manner of our use of the acquired assets or
          the strategy for our overall business;
     o    significant negative industry or economic trends;
     o    significant decline in our stock price for a sustained period; and
     o    our market capitalization relative to net book value.

     We determine  whether the carrying value of goodwill may not be recoverable
annually and more frequently based upon events and  circumstances  including the
existence of one or more of the above  indicators  of  impairment.  We determine
whether  impairment has occurred by first,  comparing the fair value of our only
reporting unit to the carrying value of the reporting unit. If the fair value of
the reporting unit is less than the carrying  value of the net assets,  then the
second step is to  initially  determine  the fair value of the net assets in the
reporting  unit  exclusive of goodwill,  and record any necessary  impairment of
assets other than goodwill in accordance  with SFAS No. 144 or other  applicable
standards.  The  difference  in the fair  value  of the  individual  net  assets
exclusive of goodwill  and the  reporting  unit results in the implied  value of
goodwill.  The implied  value of goodwill is compared to its carrying  value and
the difference is recorded as an impairment  charge, if necessary.  We performed
our annual  evaluation  of  goodwill  and the fair value of the  reporting  unit
exceeded its carrying value,  therefore,  no impairment of goodwill existed. Net
goodwill amounted to $1.6 million as of December 31, 2002.

*Software and Technology Costs*

     We capitalize  costs,  which primarily  include salaries in connection with
developing  software for internal  use. We use judgment in  determining  whether
development  costs meet the criteria for  immediate  expense or  capitalization.
Direct costs incurred in the  development of software are  capitalized  once the
preliminary project stage is completed,  management has committed to funding the
project,  and  completion  and use of the software for its intended  purpose are
probable.  We cease  capitalization  of development  costs once the software has
been  substantially  completed and is ready for its intended use. We capitalized
$633,000,  $434,000 and  $495,000 of costs  during the years ended  December 31,
2002, 2001 and 2000,  respectively.  The software  development costs capitalized
were  amortized  over the  estimated  useful  life of the  software,  which  was
estimated  to be five years.  Amortization  expense was  $216,000,  $156,000 and
$134,000 for the years ended December 31, 2002, 2001 and 2000, respectively.

     Included  in  software  costs  are those  costs  associated  with  software
research and development  efforts that have not been capitalized under SOP 98-1.
Software  research  and  development  costs  totaled  $691,000,  $1,075,000  and
$685,000 for the years ended December 31, 2002, 2001 and 2000, respectively.

     Software costs also include the amortization of capitalized  software costs
and license fees paid to service providers, which totaled $609,000, $213,000 and
$180,000 for the years, ended December 31, 2002, 2001 and 2000, respectively.

     Uncertainties  regarding  future cash flows did not  support  the  carrying
value of those costs at December 31, 2002. In accordance with SFAS No. 144 , the
Company wrote-off the remaining  $1,066,000 of previously  capitalized net costs
during the forth quarter of 2002.  Future  performance will be enhanced with the
acquisition of assets formerly used by  e-Physician,  the merger of the acquired
technologies with the Cymedix technologies and the implementation of the revised
business strategies.

     While the Company's  business model has changed  potentially  affecting the
Company's  anticipated near term future operating results,  the Company believes
its modified  plan  continues to rely on the same  technology  that was acquired
from Cymedix in 1998. Accordingly,  management does not believe an impairment of
goodwill has occurred and it continues to have a viable long-term  strategy that
is supported by its current market  capitalization  at December 31, 2002,  which
supports the fair value of its only reporting unit.

**Results of Operation***Comparison of years ended December 31, 2002 and December 31, 2001*

     At present we are not receiving  revenue from the sale of our products.  In
2001, we recognized $29,000 in revenue primarily from the sales of ADC Hardware,
a product that we no longer sell.

     Software and  technology  costs of  $2,366,000  were  incurred in 2002,  an
increase  of  $1,078,000  compared  to  $1,288,000  for 2001.  The  increase  is
primarily  related to the write-off of $1,066,000 of previously  capitalized net
software  development  costs for which  recoverability  became  uncertain due to
uncertainty in future cash flows. The increase also reflects  additional license
costs  incurred in 2002 of  $336,000  over 2001 due to added  infrastructure  to
support our transaction service  capabilities in 2002 as we placed a major focus
on deployment of our  technologies  with PBMs during the first three quarters of
2002.  Amortization of capitalized software development costs increased $60,000,
while  research  and  development  costs  decreased by $384,000 due to increased
capitalization of costs associated with active projects in 2002.

     Selling,  general and administrative expenses increased $166,000 or 3% from
$5,746,000 in 2001 to $5,912,000 in 2002. The increase is primarily attributable
to $374,000 of leasehold  abandonment  costs incurred in 2002 due to the closure
of our  California  and  Georgia  offices,  offset  by a  reduction  in  outside
consulting fees.

     During 2001, we recorded  impairment  expense of $1,111,000  resulting from
the  discontinuance  of our Automated  Design  Concepts  division  which totaled
$443,000,  to  focus  staff  resources  on  our  primary  technology,   and  the
cancellation  of our  Zirmed  license  totaling  $668,000  which was a result of
management's  assessment  that our  needs  would be better  served  by  superior
technology. There were no comparable expenses in 2002.

     Interest  expense  decreased  by $28,000 due to a decrease in the amount of
debt  financing  we had  outstanding  in 2002  compared  to 2001.  Additionally,
financing  costs  decreased  in 2002 by  $2,124,000  as we obtained  most of our
financing  through the direct sale of equity  securities  compared to 2001 when,
(1) shares were issued for  conversions  and  redemptions  under the convertible
notes  payable  credit  facility  at modified  conversion  prices  resulting  in
financing costs of $1,286,000,  (2) shares were issued in private  placements in
connection  with  our note  payable  credit  facility  at  below  market  prices
resulting  in financing  costs of $448,000 and (3) warrants  valued at $415,000,
were issued in connection with private  placements of common stock in connection
with our note payable credit facility.

     During 2002, we disposed of certain fixed assets that resulted in a loss of
$69,000. We did not have any of these disposals in 2001.

     Net loss improved  approximately  $1,622,000  from  $10,636,000  in 2001 to
$9,014,000 in 2002 due to the reasons discussed above.

*Comparison of years ended December 31, 2001 and December 31, 2000*

     Total revenues  decreased  approximately  $297,000 from $326,000 in 2000 to
$29,000 in 2001. The decrease is due to a decrease in Cymedix pilot program fees
billed  during 2001 of $189,000,  and a decrease in ADC revenue of $108,000 as a
result of discontinuing that business segment.

     Software and technology costs increased  $423,000 or approximately 49% from
$865,000 in 2000 to $1,288,000 in 2000, as a result of increased personnel costs
incurred in the ongoing development of the Cymedix product line

     Selling,  general and administrative  expenses  decreased  approximately 3%
from $5,925,000 in 2000 to $5,746,000 in 2001. The decrease is attributable to a
company wide salary reduction program that was undertaken early in 2001.

     During 2001, we recorded  impairment  expense of $1,111,000  resulting from
the  discontinuance  of our Automated  Design  Concepts  division  which totaled
$443,000,  to  focus  staff  resources  on  our  primary  technology,   and  the
cancellation  of our  Zirmed  license  totaling  $668,000  which was a result of
management's  assessment  that our  needs  would be better  served  by  superior
technology.

     Other  income  decreased  approximately  $151,000  from 2000 to 2001.  This
increase  reflects a decline in  interest  income that had been earned on excess
cash  received  and  invested  during  2000 from the  exercise  of  options  and
warrants.

     Interest expense  increased  $61,000 from 2000 to 2001 due to interest that
was paid on a convertible promissory note issued during 2001.

     Financing  costs of $2,428,000 were incurred in 2001 due to warrants issued
and an in-the money  conversion  feature in connection with the convertible debt
credit  facility of $581,000,  a warrant issued in the private equity  placement
valued at  $113,000,  and shares  issued in the  conversion  of debt and related
equity  share  issuances  at below  market  prices  which  resulted  in costs of
$1,734,000.

     Net  gain  (loss)  from  discontinued  operations  decreased  approximately
$929,000  from $929,000 in 2000 to $0 in 2001,  due to the sale during  February
2000 of the remaining assets of the company's staffing operations.

     Net loss  increased  approximately  $5,221,000  from  $5,415,000 in 2000 to
$10,636,000 in 2001 due to the reasons discussed above.

**Liquidity and Capital Resources**

     We had  $1,369,000  in cash as of December  31, 2002  compared to $8,000 in
cash as of December 31, 2001 and $1,007,000 as of December 31, 2000. Net working
capital reflected a deficit of ($252,000) as of December 31, 2002, compared to a
deficit of  ($1,404,000)  at  December  31, 2001 and a surplus of $394,000 as of
December 31, 2000.

     During 2002, net cash used in operating  activities was $5,469,000 compared
to $5,397,000 in 2001. During 2002, we raised $5,125,000 from private placements
of our common  stock net of offering  costs,  $1,000,000  from the issuance of a
convertible  debenture,  $972,000 from our equity line of credit net of offering
costs and $817,000 from exercise of options and warrants. During 2001, we raised
$1,500,000 from a convertible note financing, $1,200,000 from private placements
of our common stock, $1,510,000 from our equity line of credit and $369,000 from
exercise of options and  warrants.  During 2000, we raised  $6,091,000  from the
exercise of options and  warrants.  Our equity line of credit was  terminated in
August 2002.

     We are funding our operations now through the sale of our securities. There
can be no assurance that additional  investments or financings will be available
to us on  favorable  terms or at all as needed to support  the  development  and
deployment of the Merged Technology.  Failure to obtain such capital on a timely
basis  could  result  in lost  business  opportunities,  the sale of the  Merged
Technology at a distressed price or the financial failure of our company.

**Impacts of Accounting Standards**

     In June  2001,  the  FASB  issued  SFAS  No.  143,  "Accounting  for  Asset
Retirement Obligations." SFAS No. 143 requires the fair value of a liability for
an asset  retirement  obligation  to be  recognized in the period in which it is
incurred  if a  reasonable  estimate of fair value can be made.  The  associated
asset  retirement  costs are  capitalized as part of the carrying  amount of the
long-lived  asset.  SFAS No. 143 is effective for years beginning after June 15,
2002. The Company  believes the adoption of this statement will have no material
impact on its consolidated financial statements.

     In  August  2001,  the  FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment  or Disposal of  Long-Lived  Assets."  SFAS 144  requires  that those
long-lived  assets be measured  at the lower of  carrying  amount or fair value,
less cost to sell, whether reported in continuing  operations or in discontinued
operations. Therefore, discontinued operations will no longer be measured at net
realizable  value or include  amounts  for  operating  losses  that have not yet
occurred. SFAS 144 is effective for financial statements issued for fiscal years
beginning   after  December  15,  2001  and,   generally,   are  to  be  applied
prospectively.  The Company  believes that the adoption of this  statement  will
have no material impact on its consolidated financial statements.

     In April 2002, the FASB issued SFAS No. 145,  "Rescission of FASB No. 4, 44
and 64,  Amendment  of FASB No. 13,  and  Technical  Corrections."  SFAS No. 145
rescinds  FASB No. 4 "Reporting  Gains and Losses from  Extinguishments  of Debt
Made to Satisfy  Sinking-Fund  Requirements."  This statement also rescinds SFAS
No. 44 "Accounting for Intangible  Assets of Motor Carriers" and amends SFAS No.
13,  "Accounting  for Leases."  This  statement  is  effective  for fiscal years
beginning  after  May 15,  2002.  The  Company  believes  the  adoption  of this
statement will have no material impact on its consolidated financial statements.

     In June  2002,  the  FASB  issued  SFAS  No.  146,  "Accounting  for  Costs
Associated with Exit or Disposal  Activities." SFAS No. 146 addresses accounting
and  reporting  for  costs  associated  with  exit or  disposal  activities  and
nullifies Emerging Issues Task Force Issue No. 94-3, "Liability  Recognition for
Certain  Employee  Termination  Benefits  and  Other  Costs to Exit an  Activity
(Including  Certain Costs Incurred in a  Restructuring)."  SFAS No. 146 requires
that a liability  for a cost  associated  with an exit or  disposal  activity be
recognized and measured  initially at fair value when the liability is incurred.
SFAS No. 146 is effective  for exit or disposal  activities  that are  initiated
after December 31, 2002, with early application encouraged. The Company believes
the adoption of this statement will have no material impact on its  consolidated
financial statements.

     In November  2002, the FASB published  interpretation  No, 45  "Guarantor's
Accounting  and  Disclosure  requirements  for  Guarantees,  Including  Indirect
Guarantees  of  Indebtedness  of  Others".  The  Interpretation  expands  on the
accounting  guidance of Statements No. 5, 57, and 107 and  incorporates  without
change the provisions of FASB  Interpretation No. 34, which is being superseded.
The Interpretation  elaborates on the existing disclosure  requirements for most
guarantees, including loan guarantees such as standby letters of credit. It also
clarifies  that at the time a company  issues a  guarantee,  that  company  must
recognize  an initial  liability  for the fair value,  or market  value,  of the
obligations it assumes under that  guarantee and must disclose that  information
in its interim and annual  financial  statements.  The initial  recognition  and
initial measurement provisions apply on a prospective basis to guarantees issued
or modified  after  December  31, 2002,  regardless  of the  guarantor's  fiscal
year-end.  The disclosure  requirements in the  Interpretation are effective for
financial  statements  of interim or annual  periods  ending after  December 15,
2002. The Company  believes the adoption of this statement will have no material
impact on its consolidated financial statements.

     In December 2002, the FASB issued SFAS No. 148  "Accounting for Stock-Based
Compensation-  Transition and  Disclosure."  This statement amends SFAS No. 123,
"Accounting  for Stock-Based  Compensation"  to provide  alternative  methods of
transition  for an entity that  voluntarily  changes to the fair value method of
accounting  for  stock-based  compensation.  In  addition,  SFAS 148  amends the
disclosure  provision of SFAS 123 to require more prominent disclosure about the
effects of an entity's  accounting  policy decisions with respect to stock-based
employee  compensation  on reported  net  income.  The  effective  date for this
Statement  is for fiscal years ended after  December  15, 2002.  The adoption of
this  statement  did not have a material  effect on the  consolidated  financial
statements  as the Company  continues  to account  for stock based  compensation
under the  intrinsic  value  approach,  and  follows  the  pro-forma  disclosure
requirements of SFAS No. 123, as amended by SFAS No 148.
**ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

     We do not  hold or  engage  in  transactions  with  market  risk  sensitive
instruments
**ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

     Attached  hereto and filed as a part of this Annual Report on Form 10-K are
our Consolidated Financial Statements, beginning on page F-1.
**ITEM 9.  CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE**

     None

                                    **PART III****ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors and Executive Officers**

     Our  directors  and  executive  officers,  as of March 14, 2003,  and their
biographical information are set forth below:

----------------------------------------------------------------------------------
         Name               Age               Position             Director or
                                                                  Officer Since
----------------------------------------------------------------------------------
Darryl R. Cohen (3)          50      President, Chief Executive       2002
                                     Officer and a Director
----------------------------------------------------------------------------------
Louis E. Hyman               35      Executive Vice President and     2001
                                     Chief Technology Officer
----------------------------------------------------------------------------------
James Q. Gamble              52      Executive Vice President for     2002
                                     Operations
----------------------------------------------------------------------------------
Mark W. Lerner               49      Executive Vice President and     2002
                                     Chief Financial Officer
----------------------------------------------------------------------------------
Brian R. Ellacott            46      Senior Vice President of         2000
                                     Corporate Development
----------------------------------------------------------------------------------
Patrick W. Jeffries (1)(3)   50      Director; Chairman of            2001
                                     the Board and Chair of the
                                     Finance Committee
----------------------------------------------------------------------------------
Samuel H. Havens (2)(4)      59      Director and Chair of the        1999
                                     Nominating Committee
----------------------------------------------------------------------------------
Joan E. Herman (1)(2)        49      Director and Chair of the        2000
                                     Audit Committee
----------------------------------------------------------------------------------
Guy L. Scalzi (1)(2)(4)      56      Director and Chair of the        2001
                                     Compensation Committee
--------------------
(1)   Member of the Audit Committee
(2)   Member of the Compensation Committee
(3)   Member of the Finance Committee
(4)   Member of Nominating Committee

All of our executive  officers  devote  full-time to our business and affairs.
Biographical  information  on each current  executive  officer and director is
set forth below.

**Biographical Information***Darryl R. Cohen.* Mr. Cohen joined Medix in September 2002 as President and Chief
Executive Officer. His support for Medix began in 1999 as both a shareholder and
strategic  advisor.  As an investor in private and public  companies,  Mr. Cohen
frequently  works with the  management of the companies in which he is invested,
assisting  them in the areas of marketing  strategy and financing  efforts.  Mr.
Cohen was  President  of DCNL  Incorporated,  a  privately  held  beauty  supply
manufacturer  and  distributor  he  founded in 1988 and sold to Helen of Troy in
1998.  During his tenure as President of DCNL,  Mr. Cohen was also  co-owner and
President of Basics Beauty  Supply  Stores.  The  innovative  business  building
strategies  developed by Mr. Cohen not only launched  DCNL to success,  but have
become  standard  practice  in a  variety  of  industries  to  create  effective
marketing  and  distribution  channels.  Since the sale of DCNL, he has remained
active as a co-owner of a financial  services  advisory  firm,  Omni  Financial,
providing financial restructuring services for individuals.  Mr. Cohen is also a
member of the Board of  Directors of Access  Marketing  and consults for a major
media company in the cable television  market. Mr. Cohen holds a BA in Political
Science from the University of California at Berkeley.

*Louis E. Hyman.*  Mr. Hyman joined Medix in May 2001 as Executive  Vice President
and Chief  Technology  Officer.  He was a consultant to the Company,  serving as
interim Chief Technology  Officer from March 2001 until May 2001. From September
1999 until joining Medix, Mr. Hyman was President and CEO of Ideal Technologies,
Inc., a healthcare integration consulting firm. Mr. Hyman held senior technology
management and executive  positions with  CareInsite,  Inc. (from August 1999 to
September  2000 as Vice  President of  Information  Technology)  and LaPook Lear
Systems Inc.  (from August 1992 to August 1999 as Vice President and Director of
Technology),  both of which were merged into WebMD, Inc. in September 2000. As a
result  of  these  transactions,  Mr.  Hyman  maintained  his  position  as Vice
President of Information  Technology with WebMD through  November 2000, where he
played a key role in  WebMD's  integration  efforts  as well as  initiatives  to
improve  its  profitability.  He  graduated  Summa  Cum  Laude  from St.  John's
University where he earned a B.S. degree in Computer Science.

*James Q. Gamble.*  Mr.  Gamble  joined Medix in December  2002 as Executive  Vice
President Operations.  Prior to joining Medix, Mr. Gamble was with Perot Systems
where he served as the Director of Consulting. Mr. Gamble was with Perot Systems
from 1999 to 2002. At Perot Systems,  he managed the Healthcare Payer Consulting
team in the creation  and  implementation  of creative  business  solutions  for
health  plans.  Additionally,  Mr.  Gamble  managed a corporate  turnaround  and
numerous business re-engineering projects at Harvard Pilgrim Healthcare, a major
regional  health  plan,  from  1999 to 2001,  where he served as a member of the
Executive  Turnaround  Steering Committee.  Previously,  Mr. Gamble was a Senior
Director at Alamo Rent-A-Car from 1980 to 1999,  responsible for the development
and  implementation  of corporate  strategic  planning  initiatives as well as a
variety of other  executive  operations  positions.  Mr.  Gamble  holds a BBA in
Business Administration from the University of Georgia.

*Mark W. Lerner.* Mr. Lerner joined Medix in July 2002 as Chief Financial Officer.
Prior to joining Medix, Mr. Lerner was with Boardroom,  Inc., a direct marketing
company located in Greenwich,  Connecticut, where he served as Vice President in
charge of Finance Operations and Development.  Mr. Lerner was at Boardroom, Inc.
from December 2000 to June 2002.  Prior to Boardroom  Inc., Mr. Lerner served as
the Senior Vice President in charge of eCommerce for Weinstein & Holtzman,  Inc.
from 1998 to 2000 and as Vice  President and CFO for The Thompson  Corporation's
Science &  Professional  Division  from 1993 to 1998 and as well as a variety of
executive  positions  within Pfizer Inc. Mr. Lerner holds a BS degree in Finance
from Miami University,  Ohio and an MBA in Finance from Emory University.  He is
also a graduate of Columbia University's Executive Program.

*Brian R.  Ellacott.*  Mr.  Ellacott  joined  Medix in March  2000 as Senior  Vice
President of Business  Development.  In mid-2001,  Mr. Ellacott was appointed as
the Division CEO for Southeast Region Markets for the Company.  Prior to joining
Medix,  Mr. Ellacott served as president of Cosmetic  Surgery  Consultants  from
November  1998  until  March  2000.  From  1996 to 1998  he was  executive  vice
president of Alignis Inc., an alternative  healthcare  PPO.  Before that, he was
President of Bibb Hospitality (Atlanta) for The Bibb Company. Mr. Ellacott began
his career in healthcare at Baxter International/American  Hospital Supply where
he held numerous  positions,  including Director of National Accounts (Chicago);
Director of  Marketing  (Australia);  Director of  Marketing  (Canada);  Systems
Manager  (Canada);  Regional  Manager  (British  Columbia);  and Product Manager
(hospital products).  He holds a B.A. in Business  Administration,  with Honors,
from Wilfrid Laurier University (Waterloo, Canada).

*Patrick W. Jeffries.*  Mr.  Jeffries joined Medix as a director in 2001. In 1997,
Mr.  Jeffries  founded,  and since that time has served as the President of, the
predecessor  company of Health  Technology  Partners,  L.L.C.,  a privately-held
provider of investment guidance, CEO- and Board-level counseling, and management
consulting  services.  Mr.  Jeffries  also served as the CEO and Chairman of the
Board of OpTx  Corporation in 1997 and 1998. From December 1995 to July 1997, he
was  Executive  Vice  President of Salick Health Care,  Inc., a  publicly-traded
company  that  managed  cancer  treatment  facilities.  From  1985 to 1995,  Mr.
Jeffries was first an associate and then a partner of McKinsey & Company,  Inc.,
an  international  management-consulting  firm.  He holds  an MBA  from  Cornell
University and a BSEE from Washington University.

*Samuel H. Havens.*  Mr. Havens  joined Medix as a director in 1999.  Prior to his
retirement in 1996, Mr. Havens served as President of Prudential  Healthcare for
five years. He had begun his career with The Prudential  Insurance  Company as a
group sales  representative  in 1965,  and served in various posts in Prudential
healthcare operations over three decades.  Since retiring, Mr. Havens has served
on the Board and as a consultant to various  healthcare  organizations.  He is a
member of the Board of Advisors of Temple Law School and the Editorial  Board of
Managed Care Quarterly.  Mt. Havens completed the Executive  Program in Business
Administration  at  Columbia  University.  He holds a JD degree  from Temple Law
School, a CLU from the American College of Life  Underwriters,  and an AB degree
from Hamilton College.

*Joan E. Herman.* Ms. Herman joined Medix as a director in 2000. Ms. Herman is the
President  of  WellPoint's  Senior,  Specialty,  and  State  Sponsored  Programs
division and is responsible for its Dental,  Life & AD&D,  Pharmacy,  Behavioral
Health,  Workers'  Compensation  Managed Care  Services,  Senior  Services,  and
Disability  businesses.  She is also responsible for WellPoint's State Sponsored
Programs,  which  include  MediCal and Healthy  Families.  In 1999,  a WellPoint
affiliate  entered  into an  agreement  with the  Company to  implement  a pilot
program for the  introduction  of  Cymedix(R)software  to  healthcare  providers
identified  by such  affiliate.  Ms.  Herman  serves on the  Company's  Board of
Directors pursuant to the terms of that agreement. Prior to joining WellPoint in
1998, Ms. Herman was the Senior Vice President, Strategic Development and Senior
Vice President,  Group Insurance for Phoenix Home Life Mutual Insurance Company.
Ms.  Herman has served as chairman of the board of Leadership  Greater  Hartford
and  been a  member  of the  board  of  directors  of the  American  Academy  of
Actuaries,  the American  Leadership  Forum,  the Hartford  Ballet,  the Greater
Hartford Arts Council,  and the Children's Fund of Connecticut.  She is a member
of the American  Academy of Actuaries  and a Fellow of the Society of Actuaries.
Ms. Herman holds an MA in Mathematics from Yale University,  an MBA from Western
New England College, and an A.B. in mathematics from Barnard College.

*Guy L. Scalzi.* Mr. Scalzi joined Medix as a director in 2001. Mr. Scalzi is Vice
President  of First  Consulting  Group  Management  Services,  LLC, a healthcare
information  technology  consultant.  Prior to joining  that  company in January
2000, he was Senior Vice  President and Chief  Information  Officer for New York
Presbyterian  Healthcare  System from April 1996 to December 1999.  From January
1995 to March 1996, Mr. Scalzi was Director of Planning for Information Services
at New York Hospital-Cornell Medical Center. From June 1993 to December 1994, he
was  Chief  Information  Officer,  The  Hospital  for Joint  Diseases,  New York
University  Medical  Center.  From  1984 to 1993,  he was a founder  and  senior
executive  with  DataEase  International,  Inc.,  an  international  PC software
development and marketing company.  Mr. Scalzi has an MBA from Manhattan College
and a B.S. degree from The State University of New York at Oswego.

**Compliance with Section 16(a) of the Securities Exchange Act of 1934**

     Section 16(a) of the Securities Exchange Act of 1934, as amended,  requires
directors  and  executive  officers,  and  persons  who own  more  than 10% of a
registered  class  of a  company's  equity  securities,  to file  with the U. S.
Securities and Exchange  Commission  initial reports of ownership and reports of
changes in ownership of the Company's common stock and other equity  securities.
Officers, directors and greater than 10% shareholders are required by Securities
and Exchange  Commission  regulations  to furnish the Company with copies of all
Section 16(a) reports they file. Based solely upon such reports, we believe that
none of such persons  failed to comply with the  requirements  of Section  16(a)
during  2002,  except for Samuel H.  Havens,  John T. Lane (a former  director),
Patrick W. Jeffries and James Q. Gamble,  for each of whom one Form 4 and in the
case of Mr. Gamble one Form 3 inadvertently was filed late, and David Skinner, a
former  director who died prior to a Form 5 filing date, and Gary Smith a former
executive  officer  who  failed  to  file a  Form 5  after  his  termination  of
employment.

**ITEM 11.  EXECUTIVE COMPENSATION

Executive Officer Compensation

*Summary  Compensation  Table.***  The  following  table  sets  forth the annual and
long-term  compensation  for services in all  capacities  to the Company for the
three years ended December 31, 2002,  awarded or paid to, or earned by our Chief
Executive  Officer  ("CEO"),  the former  executive  officer  who served as such
during 2002, the three other most highly  compensated  officers who were serving
as such at December 31, 2002 (the "Named Officers") and two additional executive
officers who would  otherwise  have been  included had they  remained  executive
officers at December 31, 2002.

                           **Summary Compensation Table**

                                                                         Long-Term
                                Annual Compensation                      Compensation
                        --------------------------------------------     ----------------
                                                                         Securities
Name and                                                 Other Annual    Underlying
Principal Position      Year    Salary           Bonus   Compensation    Options (Shares)
-----------------------------------------------------------------------------------------

Darryl R. Cohen
President and
CEO (2)                 2002    $124,135(2)         -           -             2,220,000

John Prufeta
CEO (former)
(3)                     2002    $200,137            -           -
                        2001    $114,000            -           -               425,000

Louis E. Hyman
Executive Vice
President
And Chief
Technology
Officer (4)             2002    $220,096            -           -               125,000
                        2001    $156,625(4)         -           -               250,000

Mark W. Lerner
Executive Vice
President and
Chief
Financial
Officer (5)             2002    $107,481            -           -               275,000

Brian R.
Ellacott
Senior Vice
President               2002    $185,032            -           -                50,000
                        2001    $165,000            -           -               175,000
                        2000    $125,769            -           -               150,000

Patricia
Minicucci
Chief
Operating
Officer
(former) (6)            2002    $228,363            -           -
                        2001    $197,000            -           -               175,000

Gary Smith
Chief
Financial
Officer
(former) (7)            2002    $140,844            -           -
                        2001    $197,000            -           -               175,000

     (1)  Other annual  compensation  is made up of automobile  allowances,  and
          disability and health insurance premiums,  in amounts less than 10% of
          the officer's annual salary plus bonus.

     (2)  Mr. Cohen joined the Company as CEO in  September  2002.  During 2002,
          Mr.  Cohen  served as a  consultant  to the Company  from June through
          September.  The $124,135 includes the consulting  compensation paid to
          Mr. Cohen. He was not employed by the Company in 2001 or 2000.

     (3)  Mr. Prufeta's  employment with the Company was terminated in September
          2002.  Mr.  Prufeta  received $ 7,150 from the Company  following  his
          termination  pursuant to a Separation  Agreement and General  Release,
          which amount is included in his $200,137 compensation for 2002.

     (4)  During 2001,  Mr.  Hyman,  through an affiliated  entity,  served as a
          consultant  to the Company  before he became a full time  employee and
          executive  officer in May 2001.  The $156,625  includes the consulting
          compensation paid to Mr. Hyman's firm. Mr. Hyman also received a grant
          of options to  purchase  20,000  shares for his  consulting  services,
          which are included in the 250,000  options granted in 2001. He was not
          employed by the Company in 2000.

     (5)  Mr. Lerner joined the Company as CFO in July 2002. He was not employed
          by the Company in 2001 or 2000.

     (6)  Ms. Minicucci's  employment with the Company was terminated in October
          2002. Ms. Minicucci  received  $46,800 from the Company  following her
          termination  pursuant to a Separation  Agreement and General  Release,
          which amount is included in her $228,363 compensation for 2002.

     (7)  Mr.  Smith's  employment  with the Company was  terminated  in July 1,
          2002.

**Stock  Option  Awards.**  In August  1999,  our Board of  Directors  approved  and
authorized  our 1999 Stock Option Plan (the "1999  Plan"),  which is intended to
grant  either  non-qualified  stock  options  or  incentive  stock  options,  as
described below. In 2000, our  shareholders  approved the 1999 Plan. The purpose
of the 1999 Plan is to enable our company to provide  opportunities  for certain
officers and key employees to acquire a proprietary  interest in our company, to
increase  incentives  for such  persons to  contribute  to our  performance  and
further  success,  and  to  attract  and  retain  individuals  with  exceptional
business,  managerial and  administrative  talents,  who will  contribute to our
progress, growth and profitability.

Options  granted  under our 1999  Plan  include  both  incentive  stock  options
("ISOs"),  within the meaning of Section  422 of the  Internal  Revenue  Code of
1986, as amended (the "Code"),  and non-qualified stock options ("NQOs").  Under
the terms of the Plan,  all officers  and  employees of our company are eligible
for ISOs. Our company  determines in its discretion,  which persons will receive
ISOs, the applicable  exercise price,  vesting  provisions and the exercise term
thereof.  The terms and  conditions  of option  grants  differ from  optionee to
optionee and are set forth in the optionees'  individual stock option agreement.
Such options  generally vest over a period of one or more years and expire after
up to ten years.  In order to qualify for certain  preferential  treatment under
the Code, ISOs must satisfy various statutory requirements. Options that fail to
satisfy those requirements will be deemed NQOs and will not receive preferential
treatment under the Code.  Upon exercise,  shares will be issued upon payment of
the exercise  price in cash, by delivery of shares of common stock,  by delivery
of options or a combination of any of these methods. At our 2001 Annual Meeting,
our  shareholders  approved an increase of 3,000,000 shares to 13,000,000 as the
total amount of shares of our common stock  reserved for issuance under the 1999
Plan.

As of March 14, 2003,  we had issued  6,197,260  shares of our common stock upon
exercise  of  options to current or former  employees  and  directors,  and have
10,555,000  shares currently  covered by outstanding  options held by current or
former employees and directors, with exercise prices ranging form $.25 to $4.97.
Such  options  have been  granted  under the 1999 Plan and earlier  stock option
plans.

Option information for fiscal 2002 relating to the Named Officers is set
forth below:

                   Options Granted in 2002
---------------------------------------------------------------------------------------

                             Percentage of
                             Total Options                              Valuation
                              Granted to                                under Black-
                Share        Employees in   Exercise    Expiration      Scholes Pricing
Name            Granted         2002        Price       Date            Method (1)
---------------------------------------------------------------------------------------
Darryl Cohen   2,220,000        62.9%       $0.69       11-20-2007      1,367,042

Brian
Ellacott          50,000         1.4%       $0.59        3-8-2007          22,141

Mark W.
Lerner           275,000         7.8%       $0.38        7-1-2007          78,430

Louis Hyman      125,000         3.5%       $0.70        3-8-2007          53,633

----------------

     (1) The Black-Scholes option-pricing model estimates the options fair value
by  considering  the  following  assumptions:  the  options  exercise  price and
expected  life,  the  underlying  current market price of the stock and expected
volatility,  expected dividends and the risk free interest rate corresponding to
the term of the option. The fair values calculated above use expected volatility
of 95%, a risk-free rate of 5.5%, no dividend yield and anticipated  exercise at
the end of the term.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

                                            Number of shares underlying       Value of Unexercised in-the-
                                            Unexercised Options at Year-End   Money Options at Year-End(1)
                Shares          Value       -------------------------------   -----------------------------
Name            Exercised       Realized    Exercisable     Unexercisable     Exercisable     Unexercisable
-----------------------------------------------------------------------------------------------------------

Darryl Cohen       0               0         780,000          1,440,000         $39,000         $72,000

Mark W.
Lerner             0               0          78,125            196,875         $28,125         $70,875

Brian
Ellacott           0               0         350,000             25,000         $26,750          $3,750

Louis Hyman        0               0         285,000             90,000         $29,625          $6,075

------------------

     (1)  The dollar values are calculated by determining the difference between
          $0.74 per share, the fair market value of the Common Stock at December
          31, 2002, and the exercise price of the respective options.

Medix has no retirement,  pension or  profit-sharing  program for the benefit of
its directors, executive officers or other employees, but the Board of Directors
may recommend  one or more such programs for adoption in the future.  Medix does
not make any contributions to its 401(k) Plan for its employees.

**Employment Agreements.**

     Mr. Cohen has an Employment Agreement with the Company, which has a term of
one year,  ending on September 24, 2003. The agreement  provides that he will be
compensated at a salary of $175,000 annually. He holds the position of President
and Chief  Executive  Officer,  and  reports to the  Chairman  of the Board.  In
addition,  Mr. Cohen serves as a member of the Board of  Directors.  Pursuant to
his Employment Agreement, he has been granted options to purchase 780,000 shares
of common stock at price of $0.69 per share,  all of which vested upon execution
of the agreement.  An additional  1,440,000 options to purchase shares of common
stock  also at a price of $0.69  per share  were  granted  under the  Employment
Agreement and vest upon the  achievement  of milestones  fully  described in the
agreement.  The Employment  Agreement  provides  that,  upon the occurrence of a
Change in Control of the Company,  all Options and Additional  Options described
in the Employment  Agreement shall be deemed fully vested and  exercisable  upon
the effective date of the Change in Control Mr. Cohen's Employment  Agreement is
terminable  by either  the  Company  or Mr.  Cohen for any  reason on sixty days
notice.

     Mr. Gamble has an Employment  Agreement with the Company,  which has a term
of one year,  ending on  December  9,  2003,  and is  renewable  for  additional
one-year terms.  The agreement  provides that he will be compensated at a salary
of $175,000  annually.  He holds the position of Executive  Vice  President  and
Chief Operating  Officer,  and reports to the President and CEO. Pursuant to his
Employment Agreement,  he has been granted options to purchase 300,000 shares of
common  stock  at a price of $0.68  per  share,  of  which  75,000  vested  upon
execution of the  agreement  with the  remainder  vesting  equally over the next
three quarters (April 1, July 1 and October 1, 2003), and an additional  150,000
options to purchase shares were granted under the Employment  Agreement and vest
upon the  achievement  of  milestones  fully  described  in the  agreement.  His
Employment  Agreement  provides for termination at any time by the employee with
or without cause or by the Company with cause. The Employment  Agreement is also
subject to termination by the Company  without cause subject to the right of the
employee to continue to receive compensation for a period which is the lesser of
three months or the period from the effective  date of  termination  to the last
day of the Initial Term (as defined in the Employment Agreement). The Employment
Agreement also contains a non-compete provision that extends for a period of one
year  after  termination  or  resignation  of the  employee,  as well as certain
confidentiality provisions.

     Mr. Hyman has an Employment Agreement with the Company, which has a term of
one year,  ending on May 14, 2003,  and is  renewable  for  additional  one year
terms.  The  agreement  provides  that he will be  compensated  at a  salary  of
$225,000  annually.  He holds the position of Executive Vice President and Chief
Technology  Officer,  and  reports to the  President  and CEO.  Pursuant  to his
Employment Agreement,  he has been granted options to purchase 125,000 shares of
common stock at a price of $.70 per share, which vested 50% on September 8, 2002
and the  remainder  on March 8, 2003.  His  Employment  Agreement  provides  for
termination  at any time by the employee with or without cause or by the Company
with cause.  The  Employment  Agreement  is also subject to  termination  by the
Company without cause after the initial  one-year term,  subject to the right of
the employee to continue to receive  compensation  for 6 months.  The Employment
Agreement also contains a non-compete provision that extends for a period of one
year  after  termination  or  resignation  of the  employee,  as well as certain
confidentiality   provisions.   The  Employment  Agreement  contains  provisions
providing that, upon the occurrence of a "Triggering  Event" (defined to include
a change in ownership of 50% of the outstanding  shares of the Company's  common
stock through a merger or otherwise) during the term of his employment,  he will
receive a lump sum payment equal to his then current year's base and bonus pay.

     Mr. Ellacott has an Employment Agreement with the Company, which has a term
of one year,  ending on May 1, 2003,  and is renewable for  additional  one-year
terms.  The  agreement  provides  that he will be  compensated  at a  salary  of
$180,000 annually.  He holds the position of Senior Vice President and Southeast
Division  Market CEO,  reporting to the Executive  Vice  President,  Operations.
Pursuant to his Employment  Agreement,  he has been granted  options to purchase
50,000  shares of common  stock at a price of $0.59 per share,  which  vested in
equal parts on September  8, 2002 and March 8, 2003.  His  Employment  Agreement
provides for termination at any time by the employee with or without cause or by
the Company with cause. The Employment  Agreement is also subject to termination
by the Company  without cause,  subject to the right of the employee to continue
to receive  compensation for 6 months. The Employment  Agreement also contains a
non-compete provision that extends for a period of one year after termination or
resignation of the employee, as well as certain confidentiality  provisions. The
Employment  Agreement contains provisions providing that, upon the occurrence of
a  "Triggering  Event"  (defined to include a change in  ownership of 50% of the
outstanding  shares of the Company's common stock through a merger or otherwise)
during the term of his  employment,  he will receive a lump sum payment equal to
his then current year's base and bonus pay.

     Mr. Lerner has an Employment  Agreement with the Company,  which has a term
of one year,  ending on July 1, 2003,  and is renewable for  additional one year
terms.  The  agreement  provides  that he will be  compensated  at a  salary  of
$207,000  annually.  He holds the position of Executive Vice President and Chief
Financial  Officer,  and  reports  to the  President  and CEO.  Pursuant  to his
Employment Agreement,  he has been granted options to purchase 275,000 shares of
Common Stock at a price of $.38 per share,  of which 50,000  vested  immediately
and the remaining 225,000 vest in equal quarterly increments over the next eight
calendar quarters. His Employment Agreement provides for termination at any time
by the  employee  with or  without  cause  or by the  Company  with  cause.  The
Employment Agreement is also subject to termination by the Company without cause
after  the  initial  one-year  term,  subject  to the right of the  employee  to
continue to receive  compensation  for 6 months.  The Employment  Agreement also
contains a  non-compete  provision  that  extends for a period of one year after
termination or resignation of the employee,  as well as certain  confidentiality
provisions.  The Employment  Agreement contains provisions  providing that, upon
the occurrence of a "Triggering Event" (defined to include a change in ownership
of 50% of the outstanding  shares of the Company's common stock through a merger
or  otherwise)  during the term of his  employment,  he will  receive a lump sum
payment equal to his then current year's base and bonus pay.

**Director Compensation**

     In January  2002,  the  Directors  discontinued  the policy of cash fees to
Directors  for  attending  Board or committee  meetings.  Instead,  non-employee
Directors will be compensated for their services through the grant of options to
purchase our common stock.  On January 22, 2002,  each Director,  other than Ms.
Herman  based on the  policy  referred  to above,  has been  granted  options to
purchase  40,000 shares of common stock at an exercise price of $0.70 per share.
Those options vest in quarterly 10,000 share  increments,  on the date of grant,
provided that the Director remains on the Board of the Company.

     In November  2002,  the following  options,  each with an exercise price of
$0.69, were granted;

     1.   To Mr. Havens and Mr.  Scalzi  options to purchase  120,000  shares of
          common stock  vesting  September 1, 2003,  provided  that the Director
          remains on the Board of the Company.

     2.   To Mr. Cohen, as part of his employment agreement, options to purchase

                       Shares of
                    Common Stock Vesting
                    ------------ -------

                         780,000 Immediately
                         240,000  4-1-03 if still a Board Member
                         240,000  10-1-03 if still a Board Member
                         480,000  Upon achieving $5,000,000 in financing
                         480,000  Upon achieving $500,000 in monthly revenue

     3.   To Mr. Jeffries, Chairman of the Board, options to purchase

                       Shares of
                    Common Stock Vesting
                    ------------ -------

                         520,000  Immediately
                         120,000  4-1-03 if still a Board Member
                         120,000  10-1-03 if still a Board Member
                         240,000  Upon achieving $5,000,000 in financing
                         240,000  Upon achieving $500,000 in monthly revenue

     In 1999, we entered into a consulting  agreement  with Mr.  Samuel  Havens,
which  provides  that we pay Mr.  Havens  $5,000  per month  for his  consulting
services in connection  with our marketing  efforts.  This  agreement  concludes
April 2003. Mr. Havens has deferred his monthly payment since April 2001. During
2002,  we paid Mr.  Havens  $20,000 for his services and as of March 14, 2003 we
owed Mr. Havens $85,000 under this  agreement,  which amount will be paid 50% in
cash and the remainder in options to acquire our common stock.

**Compensation Committee Interlocks and Insider Participation**

     In 1999, we entered into  agreements  with  WellPoint  Pharmacy  Management
("WPM") to implement a pilot program for the introduction of Cymedix(R) software
to healthcare  providers  identified by WPM.  After the required  testing of the
software,  the  agreements  provide  for a  production  program to  install  the
software  broadly among WPM managed  providers.  One of the agreements  provides
that Medix will nominate a representative  of WPM to be elected to the Company's
Board of  Directors.  Ms. Herman is that  representative.  Such  agreement  also
provided that WPM would be granted warrants  evidencing the right to purchase up
to 6,000,000  shares of common stock,  which vest upon the occurrence of certain
performance criteria.  The agreement provides for the grant of warrants covering
3,000,000  shares  with an  exercise  price of $0.30  per  share,  and  warrants
covering  3,000,000  shares  with an  exercise  price of $0.50  per  share,  all
expiring five years from the date of grant, September 8, 2004. In February 2002,
the warrant agreement was amended to revise the performance  criteria and to add
an additional right to purchase up to 1,000,000  additional shares at a purchase
price of $1.75 per share. At March 15, 2003, warrants covering 1,850,000 shares,
exercisable at $.30 per share,  had vested.  In February 2002,  WellPoint Health
Networks  Inc.,  the parent of WPM made a secured  convertible  loan to Medix of
$1,000,000,  which note was converted into 2,405,216  shares of our common stock
in 2002. In addition,  Mr. Jeffries, who became a director of Medix in 2001, was
a consultant to WellPoint Health Networks.

**ITEM 12. SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS**

     The following  table sets forth certain  information  regarding  beneficial
ownership  of our common  stock as of March 14, 2003 by (i) each person known by
us to own  beneficially  more than 5% of the  outstanding  shares of our  common
stock  (ii) each  director,  named  executive  officer  and (iii) all  executive
officers and  directors as a group.  On such date, we had  80,917,065  shares of
common stock outstanding.  Shares not outstanding but deemed  beneficially owned
by virtue of the right of any  individual  to acquire  shares within 60 days are
treated as outstanding only when determining the amount and percentage of common
stock owned by such individual. Each person has sole voting and investment power
with respect to the shares shown, except as noted.

                                        Number of Shares Percentage of Class
                                        ---------------- -------------------

Darryl R. Cohen (1) (2)                        2,688,320        3.1%
420 Lexington Avenue, Suite 1830
New York, NY 10170

Patrick W. Jeffries (2)                        1,635,000        1.9%
15332 Antioch Street, Suite 320
Pacific Palisades, CA 90272

Joan E. Herman (2) (3)                              None         *
One WellPoint Way
Thousand Oaks, CA 91362

Guy L. Scalzi (2)                                240,000         *
First Consulting Group
405 Lexington Avenue, 37th Floor
New York, NY 10174

Samuel H. Havens (2)                             290,000         *
58 Winged Foot Drive
Livingston, NJ

Mark W. Lerner (2)                               184,375         *
420 Lexington Avenue, Suite 1830
New York, NY 10170

Louis E. Hyman (2)                               475,000         *
420 Lexington Avenue, Suite 1830
New York, NY 10170

Brian R. Ellacott (2)                            425,000         *
101 Villager Parkway, Building 1
Marietta, Georgia 30067

James Q. Gamble (2)                              150,000         *
101 Villager Parkway, Building 1
Marietta, Georgia 30067

All Directors and Officers as a                                 7.1%
group (9)                                      6,087,695
* Less than 1% of outstanding shares

--------------------
(1)   Mr. Cohen disclaims  beneficial ownership of 67,950 of these shares held
      in trust for his minor children
(2)   Represents  shares  of  common  stock  available  upon the  exercise  of
      outstanding options.
(3)   Ms.  Herman has  declined  the grant of any options  based on  Wellpoint
      company policy.

**ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

     Since 1996, we have had a policy that any  transactions  with  directors or
officers or any  entities in which they are also  officers  or  directors  or in
which  they  have a  financial  interest,  will only be on terms  that  would be
reached in an arms-length  transaction,  consistent with industry  standards and
approved by a majority of our disinterested directors. This policy provides that
no such  transaction by shall be either void or voidable  solely because of such
relationship  or interest of such  directors or officers or solely  because such
directors  are present at the meeting of the Board of  Directors  or a committee
thereof that approves such transaction or solely because their votes are counted
for  such  purpose.  In  addition,   interested  directors  may  be  counted  in
determining the presence of a quorum at a meeting of the Board of Directors or a
committee  thereof  that  approves  such a  transaction.  We have also adopted a
policy that any loans to officers,  directors  and 5% or more  shareholders  are
subject to  approval by a majority of the  disinterested  directors.  All of the
transactions described below have been approved according to this policy.

     In 1999, we entered into a consulting  agreement  with Mr.  Samuel  Havens,
which  provides  that we pay Mr.  Havens  $5,000  per month  for his  consulting
services in connection  with our marketing  efforts.  This  agreement  concludes
April 2003. Mr. Havens has deferred his monthly payment since April 2001. During
2002,  we paid Mr.  Havens  $20,000 for his services and as of March 14, 2003 we
owed Mr. Havens $85,000 under this  agreement,  which amount will be paid 50% in
cash and the remainder in options to acquire our common stock.

     See "EXECUTIVE COMPENSATION - Compensation Committee Interlocks and Insider
Participation" for a description of other related party transactions.

**ITEM 14  CONTROLS AND PROCEDURES**

     Within the 90 days  prior to the date of this  report,  we  carried  out an
evaluation,  under the supervision and with the participation of our management,
including  our Chief  Executive  Officer  and Chief  Financial  Officer,  of the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures  pursuant to  Securities  Exchange Act Rule  13a-14.  Based upon that
evaluation,  our Chief Executive  Officer and Chief Financial  Officer concluded
that our disclosure  controls and  procedures  are effective in timely  alerting
them  to  material  information  relating  to  us  (including  our  consolidated
subsidiaries)  required to be included in our periodic  SEC filings.  There have
been no  significant  changes in our internal  controls or in other factors that
could  significantly  affect internal  controls  subsequent to the date of their
evaluation,   including  any  corrective  actions  with  regard  to  significant
deficiencies and material weaknesses.

**ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K**

(a)   Documents filed as part of this Report

       (1)  Financial Statements

       See Financial Statements included after the signature page beginning
at page F-1.

       (2) Financial statement schedules

       All schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or the
notes thereto.

       (3)  List of Exhibits

       See Index to Exhibits in paragraph (c) below.

(b)   Reports on Form 8-K.  The Company filed four reports on Form 8-K during
the last quarter of 2002 as follows:

1. Report filed with the SEC on October 11, 2002, reporting under Item 5, the
issuance of a press release respecting the conversion of debt into equity.

2. Report filed with the SEC on October 16, 2002, reporting under Item 5, the
issuance of a press release respecting the results from Medix's October 8,
2002 shareholder meeting.

3. Report filed with the SEC on November 1, 2002, reporting under Item 5, the
issuance of a press release respecting the execution of a letter of intent to
merge with PocketScript, LLC.

4. Report filed with the SEC on December 23, 2002, reporting under Item 5,
the issuance of a press release respecting the execution of a definitive
agreement to acquire PocketScript, LLC.

(c)   Exhibits  required by Item 601 of Regulation S-K. We will furnish to
our  shareholders a copy of any of the exhibits listed below upon payment of
$.25 per page to cover the costs of the Company of furnishing the exhibits.

Exhibit No. Description

 3.1.1   Articles of incorporation of the Company as filed on April 22, 1988
         with the Secretary of State of the State of Colorado, incorporated by
         reference to Exhibit 3.1.1 to the Registration Statement on Form SB-2
         (Reg. No. 33-81582-D), filed with the SEC in July 14,1994 (the "1994
         Registration Statement").

 3.1.2   Articles of Amendment to Articles of Incorporation of the Company as
         filed on May 24, 1988 with the Secretary of State of the State of
         Colorado, incorporated by reference to Exhibit 3.1.2 to the 1994
         Registration Statement.

 3.1.3   Articles of Amendment to Articles of Incorporation of the Company as
         filed on February 16, 1990 with the Secretary of State of the State
         of Colorado, incorporated by reference to Exhibit 3.1.3 to the 1994
         Registration Statement.

 3.1.4   Articles of Amendment to Articles of Incorporation of the Company as
         filed on August 12, 1994 with the Secretary of State of the State of
         Colorado, incorporated by reference to Exhibit 3.1.4 to Amendment No.
         1 to the 1994 Registration Statement, filed with the SEC on August
         15, 1994

 3.1.5    Articles of Amendment to Articles of Incorporation of the Company as
         filed on September 12, 1994 with the Secretary of State of the State
         of Colorado, incorporated by reference to Exhibit 3.1.5 to Amendment
         No. 3 to the 1994 Registration Statement, filed with the SEC on
         September 12, 1994.

 3.1.6   Certificate of Designation of 1996 Convertible Preferred Stock,
         incorporated by reference to Exhibit 3.1 to Amendment No. 1 to the
         Registration Statement of the Company on Form S-3, filed with the SEC
         October 10, 1996.

 3.1.7   Articles to Amendment to Articles of Incorporation filed with the
         Secretary of State of the State of Colorado on October 9, 1996,
         incorporated by reference to Exhibit 3.2 to Amendment No. 1 to the
         Registration Statement of the Company on Form S-3 filed with the SEC
         on October 10, 1996.

 3.1.8   Articles of Amendment containing Articles of Designation of 1997
         Convertible Preferred Stock, incorporated by reference to Exhibit
         3.1.8 to the Company's Form 10-KSB filed with the SEC on March 31,
         1997.

 3.1.9    Articles of Amendment to Articles of Incorporation of the Company as
         filed on November 14, 1997 with the Secretary of State of the State
         of Colorado, incorporated by reference to Exhibit 3.1.9 to the
         Company's Form 10-KSB filed with the SEC on March 30, 1998.

3.1.10    Articles of Amendment to Articles of Incorporation of the Company as
         filed on February 17, 1998 with the Secretary of State of the State
         of Colorado, incorporated by reference to Exhibit 3.1.10 to the
         Company's Form 10-KSB filed with the SEC on March 30, 1998.

3.1.11   Articles of Amendment to Articles of Incorporation of the Company as
         filed on March 17, 1998 with the Secretary of State of the State of
         Colorado, incorporated by reference to Exhibit 3.1.11 to the
         Company's Form 10-KSB filed with the SEC on March 30, 1998.

3.1.12    Articles of Amendment of Articles of Incorporation establishing the
         1999 Series A Convertible Preferred Stock as filed on April 21, 1999,
         with Secretary of State of the State of Colorado, incorporated by
         reference to Exhibit 3.1.12 to the Company's Form 10-KSB, filed with
         the SEC on March 30, 2000.

3.1.13    Articles of Amendment of Articles of Incorporation increasing the
         authorized capital of the Company as filed on June 11, 1999, with
         Secretary of State of the State of Colorado, incorporated by
         reference to Exhibit 3.1.13 to the Company's Form 10-KSB, filed with
         the SEC on March 30, 2000.

3.1.14   Articles of Amendment of Articles of Incorporation establishing the
         1999 Series B Convertible Preferred Stock as filed on July 22, 1999,
         with Secretary of State of the State of Colorado, incorporated by
         reference to Exhibit 3.1.14 to the Company's Form 10-KSB, filed with
         the SEC on March 30, 2000.

3.1.15   Articles of Amendment of Articles of Incorporation establishing the
         1999 Series C Convertible Preferred Stock as filed on January 21,
         2000, with Secretary of State of the State of Colorado, incorporated
         by reference to Exhibit 3.1.15 to the Company's Form 10-KSB, filed
         with the SEC on March 30, 2000

3.1.16   Articles of Amendment of Articles of Incorporation increasing the
         authorized capital of the Company as filed on March 22, 2000, with
         Secretary of State of the State of Colorado, incorporated by
         reference to Exhibit 3.1.16 to the Company's Form 10-KSB, filed with
         the SEC on March 30, 2000.

3.1.17    Articles of Amendment of Articles of Incorporation increasing the
         authorized capital of the Company filed on October 14, 2002, the
         Secretary of State of the State of Colorado.*

  3.2     Amended and Restated By-Laws of the Company, incorporated by
         reference to Exhibit 3.2.2 to Amendment No. 1 to the Registration
         Statement filed with the SEC on August 15, 1994.

  4.1     Form of specimen certificate for common stock of the Company,
         incorporated by reference to Exhibit 4.1. to the Company's Form
         10-KSB filed with the SEC on March 30, 1998.

  4.2     Form of 1996 Unit Warrant, incorporated by reference to Exhibit 4.1
         to Amendment No. 1 to the Registration Statement of the Company on
         Form S-3 filed with the SEC on October 10, 1996.

  4.3     Form of Warrant issued with the 1999 Series A, B, and C Convertible
         Preferred Stock, incorporated by reference to Exhibit 4.7 to the
         Company's Form 10-KSB, filed with the SEC on March 30, 2000.

  4.4     Amended and Restated Warrant to Purchase Common Stock issued to
         Wellpoint Pharmacy Management, dated September 8, 1999 and amended
         February 18, 2002, incorporated by reference to Exhibit 10.7 to the
         Company's Amendment No.1 to Registration Statement on Form S-2 (Reg.
         No. 333-73572), filed with the SEC on February 28, 2002.

  4.5     Form of Warrant issued with the 2002 private placement of stock with
         warrants.*

10.1.1    Incentive Stock Option Plan, adopted May 5, 1988, authorizing
         100,000 shares of common stock for issuance pursuant to the Plan,
         incorporated by reference to Exhibit No. 10.2.1 of the 1994
         Registration Statement.

10.1.2    Omnibus Stock Option Plan, adopted effective January 1, 1994,
         authorizing 500,000 shares of common stock for issuance pursuant to
         the Plan, incorporated by reference to Exhibit No. 10.2.2 of the 1994
         Registration Statement.

10.1.3    1996 Stock Incentive Plan, adopted by the Company's Board of
         Directors on November 27, 1996, authorizing 4,000,000 shares of
         common stock for issuance pursuant to the Plan., incorporated by
         reference to Exhibit 10.2.3 to the Company's Form 10-KSB filed with
         the SEC on March 30, 1998.

10.1.4    1999 Stock Option Plan, adopted by the Board of Directors on August
         16, 1999, as amended, incorporated by reference to Exhibit 10.2.4 to
         the Company's Form 10-KSB filed with the SEC on March 21, 2001.

10.1.5    Form of non-plan Option Agreement issued to five Directors on
         November 20, 2002*

 10.2     Employment Agreement between the Company and Mr. Darryl R. Cohen,
         dated as of September 25, 2002.*

 10.3     Employment Agreement between the Company and Mr. James Q. Gamble,
         dated as of December 9, 2002*

 10.4     Employment Agreement between the Company and Mr. Mark W. Lerner,
         dated as of July 1, 2002, incorporated by reference to Exhibit 10.3
         to the Company's Form 10-Q, filed with the SEC on August 20, 2002.

 10.5    Employment Agreement between the Company and Louis E. Hyman dated as
         of May 14, 2002, incorporated by reference to Exhibit 10.5 to the
         Company's Form 10-Q, filed with the SEC on August 20, 2002.

 10.6     Employment Agreement between the Company and Bryan R. Ellacott dated
         as of March 1, 2002, incorporated by reference to Exhibit 10.6 to the
         Company's Form 10-Q, filed with the SEC on August 20, 2002.

 10.7     Employment Agreement between the Company and Mr. John R. Prufeta,
         dated as of February 1, 2002, incorporated by reference to Exhibit
         10.5 to the Company's Form 10-K filed with the SEC on March 31, 2002.

 10.8     Separation Agreement between the Company and Mr. John R. Prufeta,
         dated December 20, 2002*

 10.9     Employment Agreement between the Company and Patricia A. Minicucci
         dated as of February 15, 2002, incorporated by reference to Exhibit
         10.4 to the Company's Form 10-Q, filed with the SEC on August 20,
         2002.

 10.10   Separation Agreement between the Company and Ms. Patricia Minicucci,
         dated December 12, 2002. *

 10.11   Asset Purchase Agreement, dated as of February 19, 2000, among Medix
         Resources, Inc., Medical Staffing Network, Inc., National Care
         Resources - Texas, Inc., National Care Resources - Colorado, Inc. and
         TherAmerica, Inc., incorporated by reference to Exhibit 10.2 to the
         Company's Form 8-K, filed with the SEC on March 7, 2000.

 10.12    Agreement and Plan of Merger, dated as of March 8, 2000, among Medix
         Resources, Inc., Cymedix Lynx Corporation, Automated Design Concepts,
         Inc. and David R. Pfeil, incorporated by reference to Exhibit 10.24
         to the Company's Form 10-KSB, filed with the SEC on March 30, 2000.

 10.13   Consulting Agreement between the Company and Mr. Samuel H. Havens,
         dated as of October 1, 1999, incorporated by reference to Exhibit
         10.25 to the Company's Form 10-KSB, filed with the SEC on March 30,
         2000.

 10.14    Registration Rights Agreement, dated as of December 29, 2000,
         between RoyCap Inc. and Medix Resources, Inc. incorporated by
         reference to Exhibit 10.3 to the Company's Form S-2 Registration
         Statement filed with the SEC on January 29, 2001.

 10.15    Warrant Agreement, dated as of December 29, 2000, between RoyCap
         Inc. and Medix Resources, Inc., incorporated by reference to Exhibit
         10.4 to the Company's Form S-2 Registration Statement filed with the
         SEC on January 29, 2001.

 10.16    Securities Purchase Agreement, dated February 19, 2002, between
         Medix and Wellpoint Health Networks Inc. incorporated by reference to
         Exhibit 10.8 to the Company's Amendment No.1 to Registration
         Statement on Form S-2 (Reg. No. 333-73572), filed with the SEC on
         February 28, 2002.

 10.17    General Security Agreement, dated February 19, 2002, among Medix,
         Cymedix and Wellpoint Health Networks Inc., incorporated by reference
         to Exhibit 10.9 to the Company's Amendment No.1 to Registration
         Statement on Form S-2 (Reg. No. 333-73572) filed with the SEC on
         February 28, 2002.

 10.18   Agreement, dated as of October 18, 2001, between Medix and
         Merck-Medco Managed Care, L.L.C., incorporated by reference to
         Exhibit 10.2 to the Company's Amendment No.1 to Registration
         Statement on Form S-2 (Reg. No. 333-73572), filed with the SEC on
         February 28, 2002. (Portions of this Exhibit have been omitted
         pursuant to a request for confidential treatment filed with the
         Office of the Secretary of the SEC)

 10.19    Vendor Services Agreement, dated as of September 28, 2001, between
         Medix and Express Scripts, Inc., incorporated by reference to Exhibit
         10.3 to the Company's Amendment No.1 to Registration Statement on
         Form S-2 (Reg. No. 333-73572), filed with the SEC on February 28,
         2002. (Portions of this Exhibit

 10.20    Binding Letter of Intent for Pilot and Production Programs, dated
         September 8, 1999, between Medix, Cymedix and Professional Claims
         Services, Inc. (d/b/a Wellpoint Pharmacy Management), incorporated by
         reference to Exhibit 10.1 to the Company's Form 10-Q filed with the
         SEC on August 20, 2002.

 10.21    Pilot Agreement, dated as of December 28, 1999, between Cymedix and
         Professional Claims Services, Inc. (d/b/a Wellpoint Pharmacy
         Management), incorporated by reference to Exhibit 10.2 to the
         Company's Form 10-Q filed with the SEC on August 20, 2002.

 10.22    Registration Rights Agreement, dated March 4, 2003, between T3
         Group, LLC and Medix.*

 10.23    Asset Purchase Agreement among Medix, Comdisco Ventures, Inc. and T3
         Group, LLC, dated March 4, 2003.*

 10.24    Lease between SLG Graybar Sublease, LLC and the Company, dated
         January 17, 2002 for the Company's principal executive office,
         incorporated by reference to Exhibit 10.25 to the Company's Form 10-K
         filed with the SEC on March 31, 2002.

  21      Subsidiaries of the Company.*

  23      Consent of Ehrhardt Keefe Steiner & Hottman PC, independent
         certified public accountants for the Company, to the incorporation by
         reference of its report dated February 14, 2003, appearing elsewhere
         in this From 10-K into the Company's Registration Statements on Form
         S-3 (Reg. No. 333-32308, 333-85483 and 333-100650) and Registration
         Statements on Form S-8 (Reg. No. 333-31684, 333-57558 and 333-73578).*
 99.1     Certification of Chief Executive Officer pursuant to Section 906 of
         the Sarbanes-Oxley Act of 2002.*
 99.2     Certification of Chief Financial Officer pursuant to Section 906 of
         the Sarbanes-Oxley Act of 2002.*

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

                                   **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.

                                MEDIX RESOURCES, INC.

                                By:      /s/ Darryl R. Cohen
                                   -------------------------------------
                                    Darryl R. Cohen
                                    President and Chief Executive Officer

                                Dated: March 22, 2003

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

Signature                           Title             Date

/s/Darryl R. Cohen                  President, Chief Executive          March 22, 2003
__________________________          Officer and Director
Darryl R. Cohen                     (Principal Executive
                                     Officer)

/s/Mark W. Lerner                   Executive Vice President,           March 25, 2003
__________________________          Chief Financial Officer and
Mark W. Lerner                      Secretary (Principal
                                    Financial and Accounting
                                    Officer)

/s/Patrick W. Jeffries              Director                            March 24, 2003
--------------------------
Patrick W. Jeffries

/s/Joan E. Herman                   Director                            March 24, 2003
--------------------------
Joan E. Herman

/s/ Guy L. Scalzi                   Director                            March 24, 2003
--------------------------
Guy L. Scalzi

**Certifications
Pursuant to Section 302 of the Sarbanes Oxley Act of 2002**

I, Darryl R. Cohen, certify that:

1.   I have reviewed this annual report on Form 10-K of Medix Resources, Inc.;

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent functions):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:  March 22, 2003

/s/   Darryl R. Cohen
------------------------------
President and Chief Executive Officer

I, Mark W. Lerner, certify that:

1.   I have reviewed this annual report on Form 10-K of Medix Resources, Inc.;

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during the period in which this annual report
          is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent functions):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:  March 25, 2003

/s/   Mark W. Lerner
------------------------------
Executive Vice President
 and Chief Financial Officer

                             **MEDIX RESOURCES, INC.

                        Consolidated Financial Statements
                                       and
                          Independent Auditors' Report
                           December 31, 2002 and 2001****MEDIX RESOURCES, INC.****Table of Contents**Independent Auditors' Report

Consolidated Financial Statements

Consolidated Balance SheetsConsolidated Statements of OperationsConsolidated Statement of Changes in Stockholders' EquityConsolidated Statements of Cash FlowsNotes to Consolidated Financial Statements**INDEPENDENT AUDITORS' REPORT**

Board of Directors and Stockholders
Medix Resources, Inc.
New York, NY

We have audited the accompanying consolidated balance sheets of Medix Resources,
Inc. and  subsidiaries  (the Company) as of December 31, 2002 and 2001,  and the
related consolidated  statements of operations,  changes in stockholders' equity
and cash flows for each of the three  years in the  period  ended  December  31,
2002. 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 auditing standards generally accepted
in the  United  States of  America.  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 financial  position of Medix Resources,
Inc. and subsidiaries as of December 31, 2002 and 2001, and the results of their
operations  and their cash flows for each of the years in the three year  period
ended  December 31, 2002 in  conformity  with  accounting  principles  generally
accepted in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
the Company  will  continue as a going  concern.  As  discussed in Note 2 to the
consolidated financial statements,  the Company has experienced recurring losses
and has a working  capital  deficit  which  raise  substantial  doubt  about its
ability to continue  as a going  concern.  Management's  plans  regarding  those
matters also are described in Note 2. The consolidated  financial  statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.

                                          /s/Ehrhardt Keefe Steiner & Hottman PC
                                             Ehrhardt Keefe Steiner & Hottman PC
February 14, 2003
Denver, Colorado

**MEDIX RESOURCES, INC.

                           Consolidated Balance Sheets**

                                                                 December 31,
                                                         --------------------
                                                              2002          2001
                                                         -----------------------
                                      Assets

Current assets
  Cash ....................................................   $  1,369,000    $      8,000
  Stock subscription receivable ...........................         76,000            --
  Prepaid expenses and other ..............................        478,000         344,000
                                                              ------------    ------------
      Total current assets ................................      1,923,000         352,000
                                                              ------------    ------------

Non-current assets
  Software development costs, net .........................           --           649,000
  Property and equipment, net .............................        265,000         365,000
  Goodwill, net ...........................................      1,605,000       1,735,000
                                                              ------------    ------------
      Total non-current assets ............................      1,870,000       2,749,000
                                                              ------------    ------------

Total assets ..............................................   $  3,793,000    $  3,101,000
                                                              ============    ------------

                       Liabilities and Stockholders' Equity

Current liabilities
  Notes payable ...........................................   $    175,000    $    158,000
  Accounts payable ........................................        961,000         851,000
  Accounts payable - related parties ......................        130,000         166,000
  Accrued expenses ........................................        736,000         581,000
  Deferred revenue ........................................        173,000            --
                                                              ------------    ------------
      Total current liabilities ...........................      2,175,000       1,756,000
                                                              ------------    ------------

Commitments and contingencies

Stockholders' equity
  1996 Preferred stock, 10% cumulative convertible, $1
   par value, 488 shares authorized, 155 shares issued,
   1 share outstanding, liquidation preference $17,000 ....           --              --
  1997 convertible preferred stock, $1 par value, 300
   shares authorized, 167.15 shares issued, zero shares
   outstanding ............................................           --              --
  1999 Series A convertible preferred stock, $1 par
   value, 300 shares authorized, 300 shares issued,
   zero shares outstanding ................................           --              --
  1999 Series B convertible preferred stock, $1 par
   value, 2,000 shares authorized, 1,832 shares issued,
   zero and 50 shares outstanding, liquidation
   preference $0 and $50,000 ..............................           --              --
  1999 Series C convertible stock, $1 par value, 2,000
   shares authorized, 1,995 shares issued, 75 and 375
   shares outstanding, liquidation preference $75,000
   and $375,000 ...........................................           --              --
  Common stock, $.001 par value, 125,000,000 shares
   authorized, 77,160,817 and 56,651,407 issued and
   outstanding, respectively ..............................         77,000          56,000
  Dividends payable with common stock .....................          9,000           7,000
  Additional paid-in capital ..............................     44,605,000      35,341,000
  Accumulated deficit .....................................    (43,073,000)    (34,059,000)
                                                              ------------    ------------
      Total stockholders' equity ..........................      1,618,000       1,345,000
                                                              ------------    ------------

Total liabilities and stockholders' equity ................   $  3,793,000    $  3,101,000
                                                              ============    ============

                 See notes to consolidated financial statements.

**MEDIX RESOURCES, INC.

                      Consolidated Statements of Operations**

                                                       For the Years Ended
                                                          December 31,
                                           ------------------------------------------
                                               2002           2001            2000
                                           ------------    -----------    -----------

Revenues ................................   $       --      $   29,000   $    326,000

Costs and expenses
  Software and technology costs .........     2,366,000      1,288,000        865,000
  Selling, general and administrative
    expenses ............................     5,912,000      5,746,000      5,925,000
  Costs associated with terminated
    acquisition .........................       309,000            --             --
  Impairment of intangible assets .......           --       1,111,000            --
                                           ------------    -----------    -----------
      Total operating expenses ..........     8,587,000      8,145,000      6,790,000
                                           ------------    -----------    -----------

Other income (expense)
  Other income ..........................        22,000         12,000        163,000
  Interest expense ......................       (76,000)      (104,000)       (43,000)
  Loss on disposal of assets ............       (69,000)          --             --
  Financing costs .......................      (304,000)    (2,428,000)          --
                                           ------------    -----------    -----------
      Total other (expense) income ......      (427,000)    (2,520,000)       120,000
                                           ------------    -----------    -----------

Loss from continuing operations .........    (9,014,000)   (10,636,000)    (6,344,000)
                                           ------------    -----------    -----------

Discontinued operations .................           --             --         929,000
                                           ------------    -----------    -----------

Net loss ................................    (9,014,000)   (10,636,000)    (5,415,000)

Preferred stock dividends ...............           --             --          (1,000)
                                           ------------    -----------    -----------

Net loss available to common stockholders  $ (9,014,000)  $(10,636,000)   $(5,416,000)
                                           ============    ===========    ===========

Basic and diluted weighted average
 common shares outstanding ..............    63,417,283     50,740,356     41,445,345
                                           ============    ===========    ===========

Basic and diluted loss per common share
 - continuing operations ................   $     (0.14)   $     (0.21)   $     (0.15)
Basic and diluted income (loss) per
 common share - discontinued operations .           --             --            0.02
                                           ------------    -----------    -----------

Basic and diluted loss per common share .   $     (0.14)   $     (0.21)   $     (0.13)
                                           ============    ===========    ===========

(Continued on following page.)

                 See notes to consolidated financial statements.

                              **MEDIX RESOURCES, INC.

                      Consolidated Statements of Operations**

(Continued from previous page.)

Had the Company  adopted SFAS 142 as of January 1, 2000, the historical  amounts
previously reported would have been adjusted to the following:

                                                       For the Years Ended
                                                          December 31,
                                           ------------------------------------------
                                               2002           2001            2000
                                           ------------    -----------    -----------

Net loss as reported                      $ (9,014,000)   $(10,636,000)  $ (5,415,000)
Add back: Goodwill amortization                      -         209,000        205,000
                                           ------------    -----------    -----------

Adjusted net loss                         $ (9,014,000)   $(10,427,000)  $ (5,210,000)
                                           ============    ===========    ===========

Basic and diluted loss per share as       $       (0.14)  $      (0.21)  $      (0.15)
                                           ============    ===========    ===========
reported

Goodwill amortization                     $          -   $          -  $          -
                                           ============    ===========    ===========

Adjusted loss per share                   $       (0.14)  $      (0.21) $       (0.15)
                                           ============    ===========    ===========

                 See notes to consolidated financial statements.

**MEDIX RESOURCES, INC.

            Consolidated Statement of Changes in Stockholders' Equity
              For the Years Ended December 31, 2002, 2001 and 2000**

                                                                                                         1999 Series                    1999 Series             1999 Series                                                 Dividend                       Total
                                   1996 Preferred Stock          Preferred Stock 1997                 A Preferred Stock              B Preferred Stock        C Preferred Stock         Common Stock         Additional      Payable                   Stockholders'
                               ----------------------------   ------------------------------   --------------------------------  ------------------------  -----------------------   ----------------------    Paid-in     with Common    Accumulated     Equity
                                  Shares          Amount          Shares           Amount           Shares           Amount        Shares       Amount      Shares       Amount       Shares       Amount      Capital       Stock          Deficit      (Deficit)
                               ------------   -------------   --------------    ------------   ---------------    -------------  ----------   -----------  --------    -----------   ----------  ----------  -----------   ------------   -----------  -------------

Balance - December 31, 1999        1.00        $     --             5.00            $   --            185             $   --        817        $  1,000      1,995       $ 2,000     27,642,691  $27,000     $20,329,000    $  25,000    $(18,008,000)   $  2,376,000

Conversion of note
 payable into common
 stock ....................          --              --               --                --             --                 --         --              --         --            --        800,000    1,000         399,000           --              --         400,000

Warrants issued in
 legal settlement .........          --              --               --                --             --                 --         --              --         --            --             --       --         238,000           --              --         238,000

Common stock issued in
 connection with ADC
 merger ...................          --              --               --                --             --                 --         --              --         --            --         60,400       --         374,000           --              --         374,000

Preferred stock
 conversions ..............          --              --            (5.00)               --           (185)                --       (767)         (1,000)    (1,120)       (1,000)     4,564,000     5,000         18,000      (21,000)             --              --

Exercise of warrants ......          --              --               --                --             --                 --         --              --         --            --      9,352,620     9,000      4,585,000           --              --       4,594,000

Exercise of stock
 options ..................          --              --               --                --             --                 --         --              --         --            --      4,039,734     4,000      1,493,000           --              --       1,497,000

Stock options and
 warrants issued for
 services .................          --              --               --                --             --                 --         --              --         --            --             --        --        138,000           --              --         138,000

Cancellation of shares
 issued in error ..........          --              --               --                --             --                 --         --              --         --            --       (142,423)       --             --           --              --              --

Net loss ..................          --              --               --                --             --                 --         --              --         --            --             --        --             --           --      (5,415,000)     (5,415,000)

Dividends declared ........          --              --               --                --             --                 --         --              --         --            --             --        --         (1,000)       1,000              --              --
                               ------------   -------------   --------------    ------------   ---------------    -------------  ----------   -----------  --------    -----------   ----------  ----------  -----------   ------------   -----------   -------------

Balance - December 31, 2000        1.00              --               --                --             --                 --         50              --        875         1,000     46,317,022    46,000     27,573,000        5,000     (23,423,000)      4,202,000

Exercise of options and
 warrants .................          --              --               --                --             --                 --         --              --         --            --      1,462,642     1,000        368,000           --              --         369,000

Warrants and in the
 money conversion
 feature issued with
 convertible note
 payable ..................          --              --               --                --             --                 --         --              --         --            --             --        --        581,000           --              --         581,000

Stock issued on
 conversion of note
 payable ..................          --              --               --                --             --                 --         --              --         --            --      2,618,066     3,000      2,823,000           --              --       2,826,000

Stock and warrants
 issued in private
 placement ................          --              --               --                --             --                 --         --              --         --            --      1,872,308     2,000      2,061,000           --              --       2,063,000

Preferred stock
 conversions ..............          --              --               --                --             --                 --         --              --       (500)       (1,000)     1,000,000     1,000             --           --              --              --

Stock issued with
 equity line ..............          --              --               --                --             --                 --         --              --         --            --      3,291,369     3,000      1,507,000           --              --       1,510,000

Stock and warrants
 issued in legal
 settlement ...............          --              --               --                --             --                 --         --              --         --            --         90,000        --        285,000           --              --         285,000

Stock options and
 warrants issued for
 services .................          --              --               --                --             --                 --         --              --         --            --             --        --        145,000           --              --         145,000

Net loss ..................          --              --               --                --             --                 --         --              --         --            --             --        --             --           --              --     (10,636,000)

Dividends declared ........          --              --               --                --             --                 --         --              --         --            --             --        --         (2,000)       2,000              --              --
                               ------------   -------------   --------------    ------------   ---------------    -------------  ----------   -----------  --------    -----------   ----------  ----------  -----------   ------------   -----------   -------------

Balance - December 31, 2001        1.00              --               --                --             --                 --         50              --        375            --     56,651,407    56,000     35,341,000        7,000              --       1,345,000

Extension of warrant
 exercise period ..........          --              --               --                --             --                 --         --              --         --            --             --        --         58,000           --              --          58,000

Exercise of options and
 warrants .................          --              --               --                --             --                 --         --              --         --            --      1,746,975     2,000        815,000           --              --         817,000

In the money conversion
 feature issued with
 convertible note
 payable ..................          --              --               --                --             --                 --         --              --         --            --             --        --         70,000           --              --          70,000

Warrants issued in
 satisfaction of
 liability ................          --              --               --                --             --                 --         --              --         --            --             --        --        590,000           --              --         590,000

Stock issued on
 conversion of note
 payable ..................          --              --               --                --             --                 --         --              --         --            --      2,405,216     2,000      1,046,000           --              --       1,048,000

Stock and warrants
 issued in private
 placements, net of
 offering expenses of                --              --               --                --             --                 --         --              --         --            --    $13,702,500    14,000      5,187,000           --              --       5,201,000

Preferred stock
 conversions ..............          --              --               --                --             --                 --        (50)             --       (300)           --        700,000     1,000             --           --              --           1,000

Stock issued with
 equity line, net of
 offering costs of                   --              --               --                --             --                 --         --              --         --            --      1,954,719     2,000        970,000           --              --         972,000

Stock options and
 warrants issued for
 consulting services ......          --              --               --                --             --                 --         --              --         --            --             --        --        260,000           --              --         260,000

Stock options issued to
 officer for financial
 support ..................          --              --               --                --             --                 --         --              --         --            --             --        --        132,000           --              --         132,000

Fair value of option
 vesting acceleration .....          --              --               --                --             --                 --         --              --         --            --             --        --         94,000           --              --          94,000

Warrants issued to
 officer for cash
 advance made .............          --              --               --                --             --                 --         --              --         --            --             --         --        44,000           --              --          44,000

Net loss ..................          --              --               --                --             --                 --         --              --         --            --             --         --            --           --              --      (9,014,000)

Dividends declared ........          --              --               --                --             --                 --         --              --         --            --             --         --        (2,000)       2,000              --              --
                               ------------   -------------   --------------    ------------   ---------------    -------------  ----------   -----------  --------    -----------   ----------  ----------  -----------   ------------   -----------   -------------

Balance - December 31, 2002        1.00          $   --               --            $   --             --            $    --      $  --           $  --         --          $ --    $77,160,817    $77,000   $44,605,000       $9,000    $(43,073,000)    $ 1,618,000
                               ============   =============   ==============    ============   ===============    ============== ==========   ===========  ========    ===========   ==========  ==========  ===========   ============   ===========   =============

                 See notes to consolidated financial statements.

**MEDIX RESOURCES, INC.

                      Consolidated Statements of Cash Flows**

                                                       For the Years Ended
                                                          December 31,
                                           --------------------------------------------
                                               2002            2001            2000
                                           ------------    ------------    ------------
Cash flows from operating activities
  Net loss .............................   $ (9,014,000)   $(10,636,000)   $ (5,415,000)
                                           ------------    ------------    ------------
  Adjustments to reconcile net loss to
   net cash used in operating activities
   Depreciation and amortization .......        343,000         488,000         426,000
   Compensation expense relating to
     stock options .....................         94,000            --              --
   Loss on disposal of assets ..........         69,000            --              --
   Write-off of capitalized software
     project costs .....................      1,066,000            --              --
   Impairment of intangible assets .....           --         1,111,000            --
   Financing costs .....................        304,000       2,428,000            --
   Common stock, options and warrants
    issued for settlements .............           --           149,000            --
   Common stock, options and warrants
    issued for services ................        260,000         145,000         376,000
   Warrants issued associated with
     convertible debt ..................           --              --              --
   Gain on sale of staffing business ...           --              --        (1,102,000)
   Change in net assets of discontinued
     operations ........................           --              --           857,000
   Changes in assets and liabilities
     Accounts receivable, net ..........           --            49,000         (29,000)
     Prepaid expenses and other ........        238,000        (119,000)        (49,000)
     Accounts payable and accrued
      liabilities ......................        998,000         988,000        (237,000)
     Deferred revenue ..................        173,000            --              --
                                           ------------    ------------    ------------
                                              3,545,000       5,239,000         242,000
                                           ------------    ------------    ------------
      Net cash used in operating
       activities ......................     (5,469,000)     (5,397,000)     (5,173,000)
                                           ------------    ------------    ------------

Cash flows from investing activities
  Proceeds from sale of divisions ......           --              --           500,000
  Software development costs incurred ..       (633,000)       (434,000)       (495,000)
  Purchase of property and equipment ...        (96,000)        (70,000)       (400,000)
  Purchase of software license .........           --              --          (720,000)
  Proceeds from notes receivable .......           --              --           500,000
  Business acquisition costs, net of
   cash acquired .......................           --              --           (94,000)
                                           ------------    ------------    ------------
      Net cash used in investing
       activities ......................       (729,000)       (504,000)       (709,000)
                                           ------------    ------------    ------------

Cash flows from financing activities
  Proceeds from issuance of debt and
   notes payable .......................      1,000,000       1,824,000         178,000
  Payments under financing agreement ...           --              --          (484,000)
  Principal payments on debt and notes
   payable .............................       (355,000)       (303,000)       (125,000)
  Issuance of preferred and common
   stock, net of offering costs ........      6,097,000       3,012,000            --
  Proceeds from the exercise of options
   and warrants ........................        817,000         369,000       6,091,000
                                           ------------    ------------    ------------
      Net cash provided by financing
       activities ......................      7,559,000       4,902,000       5,660,000
                                           ------------    ------------    ------------

Net increase (decrease) in cash ........      1,361,000        (999,000)       (222,000)

Cash - beginning of year ...............          8,000       1,007,000       1,229,000
                                           ------------    ------------    ------------

Cash - end of year .....................   $  1,369,000    $      8,000    $  1,007,000
                                           ============    ============    ============

(Continued on the following page.)

                 See notes to consolidated financial statements.

                              **MEDIX RESOURCES, INC.

                      Consolidated Statements of Cash Flows**

(Continued from the previous page.)

Supplemental disclosure of cash flow information:

Cash paid for:                      Interest
                                  ----------

    2002                          $     28,000
    2001                          $     42,000
    2000                          $     21,000

Supplemental disclosure of non-cash activity:

     Dividends declared payable in common stock were $2,000,  $2,000, and $1,000
     for December 31, 2002, 2001 and 2000, respectively.

     During  2002,  50 and 300 shares of the series B and C preferred  stock was
     converted into 100,000 and 600,000 shares of common stock, respectively.

     During 2002, a $1,000,000  convertible  note payable and $48,000 of accrued
     interest were converted and redeemed into 2,405,216 shares of common stock.

     During 2002, the Company issued options and warrants valued at $260,000 for
     consulting services provided.

     During 2002, the Company recorded $70,000 for the value of the in-the-money
     conversion feature on the debt.

     During 2002, an accrued  liability of $590,000 for warrants  earned in 2001
     was satisfied through the issuance of the warrants.

     During 2002,  options valued at $132,000 as financing  costs were issued to
     an officer for past financial support.

     During 2002,  warrants were issued to a related  party in  connection  with
     advances provided valued at $44,000.

     During 2002,  private stock  offering  proceeds were reduced by $76,000 for
     subscription receivable for cash not received.

     During 2002, the Company financed  insurance premiums of $372,000 through a
     finance company.

     During 2002,  the Company  extended the  exercise  period of warrants  that
     expired.  The value of the  extension was $58,000 and recorded as financing
     costs.

     During 2002, the Company wrote off old payroll tax  liabilities of $130,000
     assumed in the Cymedix  acquisition  which were  recorded as a reduction to
     goodwill.

     During  2002,  the  Company  accelerated  the  vesting  period for a former
     officer's stock options  pursuant to a severance  agreement.  Fair value of
     the acceleration was calculated at $94,000.

(Continued on following page.)

                 See notes to consolidated financial statements.

                              **MEDIX RESOURCES, INC.

                      Consolidated Statements of Cash Flows**

(Continued from the previous page.)

     During 2001, 500 shares of the series C preferred  stock was converted into
     1,000,000 shares of common stock.

      During 2001,  $1,500,000  note payable  advances under a credit  facility and
     $40,000 of accrued interest were converted and redeemed into 2,618,066
      shares of common stock.

     During 2001,  the Company issued 90,000 shares of common stock and warrants
     valued at $285,000 in connection  with  settlement of certain legal claims,
     of which  $137,000  was an  adjustment  to goodwill  related to the Cymedix
     acquisition.

     During 2001, the Company issued options and warrants valued at $145,000 for
     services provided.

     During 2001,  the Company  issued  829,168  warrants  valued at $506,000 in
     connection  with a convertible  note payable credit  facility.  The Company
     also recorded $75,000 for the value of the in-the-money  conversion feature
     on the debt.

     During 2001,  shares issued in private  placements  in connection  with its
     note payable credit  facility at below market prices  resulted in financing
     costs of $448,000.

     During  2001,  warrants  issued to  finders  under  private  placements  in
     connection  with its note payable  credit  facility were valued at $113,000
     and recorded as financing costs.

     During  2001,  shares  issued for  conversions  and  redemptions  under the
     convertible  notes payable credit  facility at modified  conversion  prices
     resulted in financing costs of $1,286,000.

     During  2001,  the Company  issued  warrants  in  connection  with  private
     placements  of common  stock in  connection  with its note  payable  credit
     facility valued at $415,000.

     During 2001, the Company wrote off old payroll tax  liabilities of $100,000
     assumed in the Cymedix acquisition which reduced goodwill.

     During 2000, 5.0 units of the 1997 preferred  stock, 185 shares of the 1999
     Series A preferred  stock,  767 shares of the Series B preferred stock, and
     1,120 shares of the series C preferred  stock were converted into 4,564,000
     shares of common stock.

     During  2000,  the  Company   acquired  the  assets  and  assumed   certain
     liabilities of a business from a related party (Note 4).

     During 2000, the Company disposed of the remainder of its staffing business
     (Note 2).

     During  2000,  the Company  converted a $400,000  note payable into 800,000
     shares of common stock.

                 See notes to consolidated financial statements.

**MEDIX RESOURCES, INC.

                   Notes to Consolidated Financial Statements****Note 1 - Description of Business and Summary of Significant Accounting Policies**

The Company develops and intends to market healthcare  communication  technology
products for electronic  prescribing of drugs,  laboratory orders and laboratory
results.  These  technologies  are designed to provide  connectivity  of medical
related information between point-of-care  providers ("POCs") (i.e. physician or
caretaker) and specific  healthcare value chain  intermediaries  ("HVCIs") (e.g.
pharmacy, lab, pharmacy benefit managers,  pharmaceutical companies,  etc.). The
Company's  technology is designed to improve the accuracy and the  efficiency of
the processes of drug  prescribing and the ordering of laboratory  tests and the
receiving of laboratory  results. In February of 2000, the Company completed the
divestiture of its healthcare staffing businesses in (Note 3).

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Medix
Resources,  Inc. and its subsidiary,  Cymedix Lynx  Corporation  (Cymedix).  All
intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities, disclosures 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.

Concentrations of Credit Risk

It is the  Company's  policy to extend  credit to its  customers  in the  normal
course of business.  It is also our policy to reduce credit risk by periodically
performing  credit  analysis  and  monitoring  the  financial  condition  of our
customers.

Fair Value of Financial Instruments

The carrying amounts of financial  instruments  including  accounts  receivable,
notes receivable,  accounts payable and accrued expenses  approximate their fair
values as of December 31, 2002 and 2001 due to the relatively  short maturity of
these instruments.

The carrying  amounts of notes  payable and debt issued  approximate  their fair
value  as of  December  31,  2002  and  2001  because  interest  rates  on these
instruments approximate market interest rates.

Revenue Recognition

It is the  company's  policy to record  revenue  when  transaction  services are
provided  to  its  customers  through  the  use of its  suite  of  communication
software. Revenue will also be recorded for monthly subscription services earned
as those monthly services are provided.  The Company does not currently generate
any  revenue  from  the  licensing,   sale  or  installation  of  its  suite  of
communication software.

It  is  the  Company's  policy  to  recognize  revenue  when  the  communication
transaction has been completed by the customer, persuasive evidence of the terms
of the arrangement exist, its fee is fixed and determinable,  and collectibility
is reasonably assured. Delivery takes place electronically when the customer has
completed the exchange  (transmission or receipt) of data. Revenue is charged to
the customer on a per transaction  basis as each  transaction is completed or as
monthly subscription services are provided and are billed monthly.

Income Taxes

The  Company  recognizes  deferred  tax  liabilities  and  assets  based  on the
differences  between the tax basis of assets and  liabilities and their reported
amounts in the  financial  statements  that will result in taxable or deductible
amounts in future years. The Company's  temporary  differences  result primarily
from capitalized software development costs, depreciation and amortization,  and
net operating loss carryforwards.

Property and Equipment

Property and equipment is stated at cost. Depreciation is provided utilizing the
straight-line  method over the estimated useful lives for owned assets,  ranging
from 3 to 7 years.

Software and Technology Costs

The Company  applies the  provisions  of Statement of Position  98-1 (SOP 98-1),
"Accounting  for Costs of Computer  Software  Developed for Internal  Use".  The
Company  accounts for costs incurred in the development of computer  software as
software research and development  costs until the preliminary  project stage is
completed.  Direct costs incurred in the development of software are capitalized
once the  preliminary  project stage is completed,  management  has committed to
funding the project and  completion  and use of the  software  for its  intended
purpose are probable.  The Company ceases  capitalization  of development  costs
once the software has been substantially completed and is ready for its intended
use. Software  development costs are amortized over their estimated useful lives
of five years.  Costs associated with upgrades and  enhancements  that result in
additional functionality are capitalized.

Included in software costs are those costs associated with software research and
development  efforts  that have not been  capitalized  under SOP 98-1.  Software
research and development costs totaled $691,000, $1,075,000 amd $685,000 for the
years ended December 31, 2002, 2001 and 2000, respectively.

Software costs also include the  amortization of capitalized  software costs and
license fees paid to service  providers  which  totaled  $609,000,  $213,000 and
$180,000 for the years ended December 31, 2002, 2001 and 2000, respectively.

Additionally during the fourth quarter of 2002, the Company wrote-off $1,066,000
of previously  capitalized  software development costs which are included in the
accompanying financial statements in software costs.

Financing Costs

The  Company   records  as  financing  costs  in  its  statement  of  operations
amortization of in-the-money  conversion  features on convertible debt accounted
for in  accordance  with EITF 98-5 and 00-27,  amortization  of  discounts  from
warrants  issued  with  debt  securities  in  accordance  with  APB  No.  14 and
amortization of discounts  resulting from other securities  issued in connection
with debt based on their  relative fair values,  and any value  associated  with
inducements to convert debt in accordance with Statement of Financial Accounting
Standards No. 84 (SFAS No 84).

Long Lived Assets

The Company  reviews its  long-lived  assets for impairment  whenever  events or
changes in circumstances  indicate that the carrying amount of the asset may not
be recovered in accordance with Statement of Financial  Accounting Standards No.
144 (SFAS No. 144). The Company looks primarily to the undiscounted  future cash
flows in its assessment of whether or not long-lived assets have been impaired.

Goodwill

In accordance with SFAS 141, goodwill is no longer being amortized.

Under SFAS 142,  the Company  reviews its goodwill  for  impairment  annually or
whenever events or changes in circumstances indicate that the carrying amount of
the asset may not be  recovered.  The  Company  looks  primarily  to the  market
capitalization  of the Company in its  assessment of whether or not goodwill has
been  impaired.  At  December  31,  2002,  the Company  has  determined  that no
impairment of the Company's goodwill is required.

Reclassifications

Certain amounts in the 2001 and 2000 consolidated financial statements have been
reclassified to conform to the 2002 presentation.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising expenses were as
$23,000,  $23,000,  and $42,000 for the years ended December 31, 2002, 2001, and
2000.

Basic Loss Per Share

The Company applies the provisions of Statement of Financial Accounting Standard
No. 128,  "Earnings Per Share" (SFAS 128). All dilutive  potential common shares
have an antidilutive effect on diluted per share amounts and therefore have been
excluded in determining net loss per share. The Company's basic and diluted loss
per share are  equivalent  and  accordingly  only  basic loss per share has been
presented.

For the years  ended  December  31,  2002,  2001 and 2000 total  stock  options,
warrants and convertible debt and preferred stock of 33,166,853,  14,693,254 and
13,767,143,  were not  included  in the  computation  of diluted  loss per share
because their effect was antidilutive,  however,  if the Company were to achieve
profitable  operations  in  the  future,  they  could  potentially  dilute  such
earnings.

Recently Issued Accounting Pronouncements

In June 2001,  the FASB issued SFAS No. 143,  "Accounting  for Asset  Retirement
Obligations."  SFAS No. 143 requires the fair value of a liability  for an asset
retirement  obligation to be recognized in the period in which it is incurred if
a reasonable estimate of fair value can be made. The associated asset retirement
costs are  capitalized as part of the carrying  amount of the long-lived  asset.
SFAS No. 143 is effective for years  beginning  after June 15,2002.  The Company
believes  the  adoption of this  statement  will have no material  impact on its
consolidated financial statements.

In August 2001, the FASB issued SFAS No. 144,  "Accounting for the Impairment or
Disposal of Long-Lived  Assets." SFAS 144 requires that those long-lived  assets
be measured at the lower of  carrying  amount or fair value,  less cost to sell,
whether  reported  in  continuing  operations  or  in  discontinued  operations.
Therefore,  discontinued operations will no longer be measured at net realizable
value or include amounts for operating  losses that have not yet occurred.  SFAS
144 is effective  for  financial  statements  issued for fiscal years  beginning
after December 15, 2001 and,  generally,  are to be applied  prospectively.  The
Company  believes  that the  adoption  of this  statement  will have no material
impact on its consolidated financial statements.

In April 2002,  the FASB issued SFAS No. 145,  "Rescission of FASB No. 4, 44 and
64, Amendment of FASB No. 13, and Technical  Corrections." SFAS No. 145 rescinds
FASB No. 4  "Reporting  Gains and Losses  from  Extinguishments  of Debt Made to
Satisfy  Sinking-Fund  Requirements."  This  statement also rescinds SFAS No. 44
"Accounting  for  Intangible  Assets of Motor  Carriers" and amends SFAS No. 13,
"Accounting  for Leases." This statement is effective for fiscal years beginning
after May 15, 2002.  The Company  believes the adoption of this  statement  will
have no material impact on its consolidated financial statements.

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with  Exit or  Disposal  Activities."  SFAS No.  146  addresses  accounting  and
reporting for costs  associated  with exit or disposal  activities and nullifies
Emerging  Issues Task Force Issue No. 94-3,  "Liability  Recognition for Certain
Employee  Termination  Benefits  and Other Costs to Exit an Activity  (Including
Certain  Costs  Incurred  in a  Restructuring)."  SFAS No. 146  requires  that a
liability for a cost associated with an exit or disposal  activity be recognized
and measured  initially at fair value when the  liability is incurred.  SFAS No.
146 is  effective  for exit or  disposal  activities  that are  initiated  after
December 31, 2002, with early application  encouraged.  The Company believes the
adoption  of this  statement  will have no material  impact on its  consolidated
financial statements.

In  November  2002,  the  FASB  published  interpretation  No,  45  "Guarantor's
Accounting  and  Disclosure  requirements  for  Guarantees,  Including  Indirect
Guarantees  of  Indebtedness  of  Others".  The  Interpretation  expands  on the
accounting  guidance of Statements No. 5, 57, and 107 and  incorporates  without
change the provisions of FASB  Interpretation No. 34, which is being superseded.
The Interpretation  elaborates on the existing disclosure  requirements for most
guarantees, including loan guarantees such as standby letters of credit. It also
clarifies  that at the time a company  issues a  guarantee,  that  company  must
recognize  an initial  liability  for the fair value,  or market  value,  of the
obligations it assumes under that  guarantee and must disclose that  information
in its interim and annual  financial  statements.  The initial  recognition  and
initial measurement provisions apply on a prospective basis to guarantees issued
or modified  after  December  31, 2002,  regardless  of the  guarantor's  fiscal
year-end.  The disclosure  requirements in the  Interpretation are effective for
financial  statements  of interim or annual  periods  ending after  December 15,
2002. The Company  believes the adoption of this statement will have no material
impact on its consolidated financial statements.

In  December  2002,  the FASB issued SFAS No. 148  "Accounting  for  Stock-Based
Compensation-  Transition and  Disclosure."  This statement amends SFAS No. 123,
"Accounting  for Stock-Based  Compensation"  to provide  alternative  methods of
transition  for an entity that  voluntarily  changes to the fair value method of
accounting  for  stock-based  compensation.  In  addition,  SFAS 148  amends the
disclosure  provision of SFAS 123 to require more prominent disclosure about the
effects of an entity's  accounting  policy decisions with respect to stock-based
employee  compensation  on reported  net  income.  The  effective  date for this
Statement is for fiscal years ended after December 15, 2002.

The  adoption  of  this  statement  did  not  have  a  material  effect  on  the
consolidated  financial statements as the Company continues to account for stock
based compensation under the intrinsic value approach, and follows the pro-forma
disclosure requirements of SFAS No. 123, as amended by SFAS No 148.

**Note 2 - Management's Plan for Continued Existence**

The  accompanying  financial  statements  have been  prepared on a going concern
basis  which   contemplates   the  realization  of  assets  and  liquidation  of
liabilities in the ordinary course of business.

The  Company has  incurred  operating  losses for the past  several  years,  the
majority of which are related to the  development  of the  Company's  healthcare
connectivity  technology  and  related  marketing  efforts.  These  losses  have
produced operating cash flow deficiencies,  and negative working capital,  which
raise  substantial  doubt about its ability to continue as a going concern.  The
Company's future  operations are dependent upon  management's  ability to source
additional equity capital.

The Company  expects to continue to  experience  losses in the near term,  until
such  time  that  its  technologies  can be  merged  with  those  acquired  from
ePhysician,  Inc. (see Note 12) and  successfully  deployed  with  physicians to
produce revenues.  The continuing  deployment,  marketing and the development of
the  merged  technologies  will  depend  on  the  Company's  ability  to  obtain
additional  financing.  The merging of technologies with ePhysician,  Inc. is in
the early  development  stage and has not generated any  significant  revenue to
date.  The Company is currently  funding  operations  through the sale of common
stock, and there are no assurances that that additional investment or financings
will be available as needed to support the  development  and  deployment  of the
merged technologies.  The need for the Company to obtain additional financing is
acute and failure to obtain  adequate  financing  could result in lost  business
opportunities,  the sale of the Cymedix  business at a  distressed  price or may
lead to the financial failure of the Company. -

**Note 3 - Discontinued Operations**

In February  2000, the Company closed on the sale of the assets of its remaining
staffing  businesses for  $1,000,000.  The purchase price was paid with $500,000
cash  at  closing  and  the  Company  receiving  a  $500,000  subordinated  note
receivable.  The note  provided for interest at prime plus 1% and was due in May
of 2001. The note was repaid on December 29, 2000.  This sale was the final step
of a plan approved by the Board of Directors in December 1999 for the Company to
divest itself of the staffing  businesses  and focus its efforts on its internet
communication software products for the healthcare industry.

The accompanying  financial  statements reflect the results of operations of the
remaining  staffing   businesses  as  a  discontinued   business  segment.   The
discontinued  results of operations  include those direct  revenues and expenses
associated  with  running  the  remaining  staffing  businesses  as  well  as an
allocation of corporate costs.

The results of  operations  of the  Company's  discontinued  remaining  staffing
businesses for the year ended December 31, 2000 are as follows:

Revenue ...........................   $ 1,128,000
Direct costs of services ..........       927,000
                                      -----------
Gross margin ......................       201,000
                                      -----------
Selling, general and administrative       219,000
Interest expense ..................        18,000
Litigation settlement .............       137,000
                                      -----------

Net loss ..........................   $  (173,000)
                                      ===========

During the fourth  quarter of 2000,  the Company wrote off  unrealizable  assets
related to the discontinued operations in the amount of $43,000, and $322,000 in
remaining  related  liabilities.  The net  write-off  of assets and  liabilities
totaling  $279,000,  less net assets  acquired by the purchaser of $77,000,  has
been  recorded as an  increase of $202,000 to the gain from the  disposal of the
remaining staffing businesses as of December 31, 2000.

During the first quarter of 2000, the Company reported the following gain on the
disposal of the assets of its remaining staffing businesses:

Sales price .........................................   $ 1,000,000
Accounts receivable collection costs ................      (100,000)
                                                        -----------
                                                            900,000
Net assets acquired, liabilities assumed and
 liabilities written off ............................       202,000
                                                        -----------
Gain on disposal of the remaining staffing businesses     1,102,000
Gain from operation of the remaining staffing
 businesses through the disposal date ...............      (173,000)
                                                        -----------

Net gain on disposal of the remaining staffing
 businesses .........................................   $   929,000
                                                        ===========

Also as previously  noted the  purchaser did not acquire the Company's  accounts
receivable  as part of the sale.  However,  in  connection  with the  sale,  the
purchaser will collect the Company's  receivables  and remit the proceeds to the
Company net of a 10% collection fee. The $100,000 reflected above represents the
Company's  estimate  of  the  collection  costs  to be  paid  to  purchaser  for
performing this function.

**Note 4 - Acquisition of Assets**

On March  1,  2000,  the  Company  purchased  the  assets  and  assumed  certain
liabilities of Automated Design Concepts, Inc., an entity owned by a director of
the  Company,  for the  issuance  of 60,400  shares of  common  stock  valued at
$374,000  and a payment of  $100,000.  The Company  also entered into a two-year
lease for $1,000 per month expiring in February 2002.  Assets purchased  include
cash and accounts receivable.

The purchase was accounted for under the purchase method. The purchase price was
allocated to the assets  purchased  and  liabilities  assumed  based on the fair
market values at the date of acquisition as follows:

Cash ..............   $   6,000
Accounts receivable      27,000
Goodwill ..........     487,000
Accounts payable ..     (41,000)
Accrued liabilities      (5,000)
                      ---------

                      $ 474,000
                      =========

The  results of  operations  have been  reflected  from the date of  acquisition
forward. The resulting goodwill is being amortized over 15 years.

During the third  quarter of 2001,  the Company  discontinued  operation  of its
Automated  Design Concepts  division to focus on its core business and as a cost
saving measure. As a result, $443,000 of impairment expense has been included in
Consolidated Statements of Operations for the year ended December 31, 2001. This
amount  represents  the  unamortized  balance of the  investment  at the time of
discontinuance.

The following  table  summarizes  the unaudited pro forma results of the Company
giving effect to the  acquisition  as if it had occurred on January 1, 2000. The
unaudited pro forma information is not necessarily  indicative of the results of
operations of the Company had this acquisition  occurred at the beginning of the
years presented, nor is it necessarily indicative of future results.

                                          For the Years Ended
                                              December 31,
                                      ---------------------------
                                           2000          1999
                                      ------------   ------------

Sales                                 $    440,000   $    569,000
                                      ============   ============

Net income (loss)                     $ (5,408,000)  $ (4,816,000)
                                      ============   ============

Loss per share                        $      (0.13)  $      (0.20)
                                      ============   ============

**Note 5 - Balance Sheet Disclosures**

Software development costs consist of the following:

                                              December 31,
                                      ----------------------------
                                            2002         2001
                                      -------------  -------------

Software development costs            $           -  $     929,000
Less accumulated amortization                     -       (280,000)
                                      -------------  -------------
                                      $           -  $     649,000
                                      =============  =============

Annual amortization expense, which is included in costs of services provided was
$216,000,  $156,000,  and $124,000 for the years ended December 31, 2002,  2001,
and 2000, respectively.

During the fourth quarter of 2002 the Company changed its business model,  which
significantly impacted its projections of expected future operating results. Due
to the change in the business model the anticipated undiscounted cash flows from
the  Company's  capitalized  software  development  costs  did not  support  the
carrying value of those costs at December 31, 2002. In accordance  with SFAS No.
144, the Company  wrote-off the remaining  $1,066,000 of previously  capitalized
net costs during the fourth quarter of 2002. While the Company's  business model
has  changed  impacting  the  expected  future  operating  results,  the Company
believes  that the basis of its continued  plan is embedded with the  technology
business  plan it  acquired  in the Cymedix  transaction  in 1998.  Accordingly,
management  does not believe an  impairment  of  goodwill  has  occurred  and it
continues to have a viable  long-term  strategy that is supported by its current
market  capitalization at December 31, 2002 which supports the fair value of its
only reporting unit.

Property and equipment consist of the following:

                                                          December 31,
                                                   ----------------------
                                                     2002          2001
                                                   ---------    ---------

Furniture and fixtures .........................   $ 111,000    $ 103,000
Computer hardware and purchased software .......     542,000      609,000
Leasehold improvements .........................      20,000       29,000
                                                   ---------    ---------
                                                     673,000      741,000
Less property, plant and equipment - accumulated
 depreciation ..................................    (408,000)    (376,000)
                                                   ---------    ---------
                                                   $ 265,000    $ 365,000
                                                   =========    =========

Depreciation  expense  was  $127,000,  $123,000  and $97,000 for the years ended
December 31, 2002, 2001 and 2000, respectively.

The changes in the carrying  amount of goodwill for the year ending December 31,
2002 are as follows:

Balance as of January 1, 2002 .......................   $ 2,369,000
Goodwill written off relating to liability assumed in
 the acquisition ....................................      (130,000)
                                                        -----------

Balance as of December 31, 2002 .....................   $ 2,239,000
                                                        ===========

Goodwill  relates to the  Company's  acquisition  of  Cymedix.  Goodwill  has an
accumulated  amortization  balance of $634,000 for the years ending December 31,
2002 and 2001. Amortization expense was $0, $209,000, and $205,000 for the years
ended December 31, 2002, 2001 and 2000, respectively.

During the third  quarter of 2001,  the Company  discontinued  operation  of its
Automated Design Concepts,  division,  and terminated its license agreement with
ZirMed.com.  As a result,  $1,111,000 of impairment expense has been included in
the consolidated  statements of operations for the year ended December 31, 2001.
This amount represents the unamortized balance of each investment at the time of
discontinuance.

Accrued expenses consists of the following:

                                                    December 31,
                                                -------------------
                                                  2002       2001
                                                --------   --------

Accrued payroll and benefits ................   $256,000   $294,000

Accrued lease abandonment costs .............    374,000       --
Accrued professional fees ...................     36,000     57,000
Accrued license fees ........................     36,000     53,000
Other accrued expenses ......................     23,000     29,000
Accrued interest ............................     11,000     17,000
Accrued payroll taxes, interest and penalties       --      131,000
                                                --------   --------
                                                $736,000   $581,000
                                                ========   ========

During the fourth quarter of 2002, the Company closed its California and Georgia
offices.  In  connection  with these  office  closures  the Company  accrued the
balance of the remaining  lease  commitments  totaling  $374,000 at December 31,
2002, which are included in selling general and  administrative  expenses in the
accompanying financial statements.

At various times during 2001 and 2000, the Company was  delinquent  with payroll
tax deposits. At December 31, 2001 and 2000, $131,000 and $200,000, respectively
was accrued for  estimated  taxes,  interest and  penalties.  During  2001,  the
Company  wrote  off  $100,000  of  previously   recorded   accrued  payroll  tax
liabilities  assumed in the Cymedix  acquisition  as management  determined  the
Company was over  accrued,  and  recorded the  write-offs  as an  adjustment  to
previously recorded goodwill.

**Note 6 - Long-Term Debt**

Long-term debt consists of:
                                                                 December 31,
                                                         ---------------------------
                                                              2002          2001
                                                         ------------- -------------

Notes  payable - finance  company,  interest  accrues at
 7%,  monthly  payments  of  principal  and  interest of
 $23,730 are payable through October 2003.               $     157,000 $     140,000

Notes  payable - finance  company,  interest  accrues at
 7%,  monthly  payments  of  principal  and  interest of
 $1,417 are payable through October 2003.                       18,000        18,000
                                                         ------------- -------------
                                                               175,000       158,000
      Less current portion                                   (175,000)     (158,000)
                                                         ------------- -------------
                                                         $          -  $          -
                                                         ============= =============

Convertible Promissory Notes

The Company entered into a secured  convertible  loan agreement,  dated February
19,  2002,  pursuant to which the Company  borrowed  $1,000,000  from  WellPoint
Health  Networks Inc., in which a member of the Company's  audit  committee is a
related  party.  WellPoint  converted the note into  2,405,216  common shares on
October 9, 2002, which includes  approximately $48,000 of accrued interest.  The
loan was secured by the grant of a security interest in all Medix's intellectual
property, including its patent, copyrights and trademarks. The conversion of the
loan eliminated the aforementioned security interest.

In October  1999,  the Company  raised  approximately  $488,000  net of expenses
through the issuance of a $500,000 14% Convertible  Promissory Note and warrants
to purchase  500,000 shares of the Company's common stock at $.50 per share. The
$500,000 in principal  plus accrued  interest was payable on June 28, 2000.  The
note was convertible  into the Company's  common stock at a conversion  price of
$.50 per share, for the first 90 days outstanding,  and at the lower of $.50 per
share or 80% of the lowest  closing  bid price for the Common  Stock  during the
last five trading days prior to conversion,  for the remaining life of the note.
The note was secured by the intellectual  property of the Company's wholly owned
subsidiary Cymedix Lynx Corporation. The warrants were recorded as a discount on
the debt valued at $238,000 using the  Black-Scholes  option pricing model using
assumptions of life of 3 years,  volatility of 225%, no dividend payment,  and a
risk-free rate of 5.5%.  The discount was fully  amortized at December 31, 1999,
as the remaining debt of $400,000 at December 31, 1999, was converted in January
2000 into 800,000 shares of common stock and the security interest released.

Convertible Note Payable Credit Facility

In December 2000, the Company obtained a credit facility under which it issued a
convertible promissory note and common stock purchase warrants.  During the draw
down periods,  the Company drew $1,500,000 under the convertible note.  Advances
under the  convertible  note bear  interest at an annual rate of 10% and provide
for semi-annual  payments on July 10, 2001 and January 10, 2002. All outstanding
balances  under this  arrangement  were  converted or redeemed  during 2001 into
common shares. The note payable balance was convertible at $.90 per share for up
to the first $750,000 and any remaining  balance at $1.00 per share. The initial
$750,000 draw on this  arrangement has an imputed discount  recorded,  which was
valued  at  $75,000  for the  "in-the-money"  conversion  feature  of the  first
advance.  In addition,  the noteholder can force a redemption of the note or any
portion thereof,  for either cash or stock at the option of the Company,  but if
for stock, at a redemption  price of eighty (80%) percent of the Volume Weighted
Market Price (as defined) per common share during the twenty Trading Days ending
on the day of the notice delivered by the holder.

In  connection  with this  credit  facility,  the  Company  also agreed to issue
warrants to purchase  common stock to the holder of the  convertible  promissory
note. The Company issued 750,000 warrants in connection with drawdowns under the
convertible  note. The warrants have an exercise price of $1.75 and terms of two
years from the date of  issuance.  The Company  also issued  54,168  warrants to
purchase common stock to two finders assisting with the transaction.  The finder
warrants also have terms of two years and an exercise price of $1.75.

The Company has imputed values for the 750,000 and 54,168 warrants issued to the
provider of the credit facility and the finders using the  Black-Scholes  Option
pricing model.  The first 500,000  warrants issued to the provider of the credit
facility were valued at $249,000 and have been treated as a discount on the debt
to be amortized over its remaining  life. The related 54,168  warrants issued to
finders  which have been  recorded  as debt issue costs and  amortized  over the
remaining  life of the debt. In connection  with the final draw under the credit
facility in May,  the Company  issued  250,000  warrants to the  provider of the
credit  facility.  The  250,000  warrants  issued to the  provider of the credit
facility were valued at $209,000 using the Black-Scholes  pricing model and have
been treated as a discount on the debt to be amortized over its remaining  life.
In connection with the final draw under the credit facility,  The Company issued
warrants to purchase  25,000  shares  issued to the  finders.  The total  finder
warrants  have been  valued at $48,000  using the  Black-Scholes  option-pricing
model,  and have been treated as a discount on the debt to be amortized over its
remaining  life.  The values of all  warrants  issued under this  facility  were
determined using the following assumptions;  lives of two years, exercise prices
of $1.75, volatility of 117%, no dividend payment and a risk-free rate of 5.5%.

During  February  2001,  $100,000 of the  convertible  note was  converted  into
111,111  shares of common  stock.  During the period  April  through  September,
$900,000 of the note was  redeemed.  These  redemptions  were  satisfied  by the
issuance of 1,384,661 shares of common stock. During October 2001, the remaining
$500,000  convertible  note was redeemed by the issuance of 1,069,368  shares of
common  stock.  During July 2001,  52,928  shares of common  stock was issued as
payment of accrued  interest of $40,000  through July 10,  2001.  As a result of
conversions  and  redemptions  at  modified   conversion  prices  $1,286,000  of
financing  costs  were  recorded  reflecting  the  intrinsic  value of the share
differences from issuable shares at the date the advances were received.

During March 2001,  the Company,  under an  amendment  to its  convertible  note
payable credit facility, received $350,000 from the credit facility provider for
the  issuance  of  636,364  shares of its  common  stock as a private  placement
transaction.  As a part  of this  common  stock  issuance,  the  Company  issued
warrants to  purchase  636,364  shares of common  stock at $.80 per share with a
term of two  years  from  the  date of  issuance.  As a  result  of the  warrant
issuance,  the  Company  has  recorded  financing  expense  of  $262,000  in the
accompanying financial statements, using the Black-Scholes option-pricing model.
The Company also issued  warrants to purchase  63,636  shares of common stock at
$.80  per  share  with a  term  of  two  years  to  two  finders  assisting  the
transaction.  The  finders  warrants  have  been  valued  at  $40,000  using the
Black-Scholes  pricing  model and have been  included as financing  costs in the
accompanying financial statements. The calculated values were computed using the
following assumptions:  lives of 2 years, exercise prices of $.80, volatility of
117%, no dividend payments and a risk free rate of 5.5%.

During the period May through  December  2001,  the Company  received  $850,000,
under a second amendment to the credit  facility,  for the issuance of 1,235,944
shares of its common stock, in additional private placement  transactions.  As a
part of these common stock  issuances,  the Company issued  warrants to purchase
168,919  shares of common stock at $1.00 per share with a term of two years from
the date of  issuance.  The Company has recorded  financing  expense of $113,000
related to the warrant issuance in the accompanying financial statements,  using
the  Black-Scholes  option-pricing  model.  The calculated  values were computed
using the  following  assumptions:  lives of 2 years,  exercise  prices of $.80,
volatility of 117%, no dividend payments and a risk free rate of 5.5%.

As a result of  shares  issued  under the  private  placements  at below  market
prices,  which have been  treated as a discount  on the debt based on their fair
market values at issuance, financing costs of $448,000 have been recorded.

**Note 7 - Commitments and Contingencies**Operating Leases

The Company leases office facilities in New York, New Jersey, Georgia,  Colorado
and California and various equipment under  non-cancelable  operating leases. We
have closed our California and Colorado offices, and we are actively pursuing an
exit to our leases in Georgia  and  California.  Obligations  for the New Jersey
lease ended July of 2002.

Rent expense for these leases was:

Year Ending December 31,
------------------------

        2002                                             $     610,000
        2001                                             $     396,000
        2000                                             $     315,000

Future minimum lease payments under these leases are approximately as follows:

Year Ending December 31,
------------------------
        2003                                             $     371,000
        2004                                                   325,000
        2005                                                    34,000
                                                         -------------
                                                         $     730,000
                                                         =============

Litigation

In the normal course of business,  the Company is party to litigation  from time
to time. The Company  maintains  insurance to cover certain actions and believes
that resolution of such  litigation  will not have a material  adverse effect on
the Company.

In February of 2000,  the Company  reached a settlement  on certain  outstanding
litigation and issued a warrant to purchase 35,000 of the Company's common stock
at $3.96 per share.  The  Company  recorded  expense of  approximately  $137,000
related to the issuance of the warrant,  which has been  included in the results
of  discontinued  operations.  The warrants were valued using the  Black-Scholes
pricing model, using assumptions of volatility of 273%, no dividend payments and
a risk free rate of 5.5%.

In November of 2000, a settlement  agreement was reached between the Company and
a plaintiff on  outstanding  litigation  whereby the Company paid the  plaintiff
$66,000 cash,  and issued an option to purchase  50,000 of the Company's  common
stock at $.25 per share. The Company recorded expense of approximately  $102,000
related to the  issuance  of the option.  The  warrants  were  valued  using the
Black-Scholes  pricing  model,  using  assumptions  of  volatility  of 273%,  no
dividend payments and a risk free rate of 5.5%.

In June of  2001,  the  Company  settled  an  outstanding  claim by  paying  the
plaintiff  $35,000 and issuing to him 2 year warrants to purchase 195,000 shares
of the Company's  common stock at $.50 per share. The settlement was approved by
the court on July 6,  2001.  The case has been  dismissed  with  prejudice.  The
warrants  issued in this  settlement  have been  valued  at  $137,000  using the
Black-Scholes  pricing  model,  using  assumptions  of  volatility  of 132%,  no
dividend  payments and a risk-free  rate of 5.5%,  and have been  included as an
increase to goodwill in the accompanying financial statements, as a result of an
unrecorded liability that existed at the time of the Cymedix merger.

In May of 2001, the Company agreed to settle another outstanding legal action by
paying the plaintiff $20,000 and issuing him a three year warrant (issued over a
18 month period) to purchase  137,500  shares of the  Company's  common stock at
$.50 per share.  The  warrants  issued in this  settlement  have been  valued at
$64,000 using the Black-Scholes  pricing model,  using assumptions of volatility
of 132%,  no  dividend  payments,  and a risk-free  rate of 5.5%,  and have been
included as an expense in the consolidated statement of operations.

In 2001, the Company also settled certain litigation by issuing to one plaintiff
90,000 shares of the Company's  common stock,  valued at $51,000,  and extending
the exercise  period of the warrants of the other  plaintiff  until December 31,
2003, valued at $33,000.  The shares and warrants issued in this settlement have
been  valued  at  $84,000  using  the  Black-Scholes   pricing  model,  for  the
modification to the warrant,  using assumptions of a life of two years, exercise
price of $1.00, volatility of 132%, no dividend payments and a risk-free rate of
5.5%,  and have been  included as an expense in the  consolidated  statement  of
operations.

In August 2002, the Company reached an agreement in principal with a plantiff to
settle  certain  litigation by paying  $25,000 with no admission of liability on
the Company's part. This settlement was signed and paid during September 2002.

In August 2002, the Company  reached an agreement in principal with a company to
settle certain litigation by paying $55,000,  to be paid over three months. This
settlement was signed and the balance paid as of December 31, 2002.

Tufts  Associated  Health  Plans,  Inc. has  threatened  to commence  litigation
against us for allegedly  breaching the Services and Support  Agreement  between
Tufts and the Company.  Tufts has alleged that because of the termination of the
merger agreement between the Company and PocketScript,  the Company is unable to
provide the products and  services as  contemplated  by the Services and Support
Agreement  and is in  "material  breach"  thereunder.  We  disagree  with Tufts'
allegations. At this time, litigation has not been commenced.

**Note 8 - Stockholders' Equity**

On March 20, 2000, the Company  authorized  2,500,000 shares of preferred stock.
As of December  31, 2002,  no  additional  shares of  preferred  stock have been
issued.

In October of 2002, the stockholders  approved an increase of authorized  common
stock to 125,000,000.

1996 Private Placement

In July and September  1996,  the Company  completed a private  placement of 244
units, each unit consisting of a share of convertible  preferred stock,  $10,000
per unit, $1 par value ("1996  Preferred  Stock"),  a warrant to purchase  8,000
shares of the  Company's  common  stock at $2.50  per share and a unit  purchase
option to purchase an additional unit at $10,000 per unit.

During  1998,  18.25  units  were  converted  resulting  in the  issuance  of an
additional 939,320 shares of common stock in 1998.

During  1999 4.5 units  were  converted  into  241,072  shares of common  stock.
Additionally,  the  Company  repurchased  from  another  holder  2.5  units in a
negotiated agreement for $25,000.

The Company has 1.0 remaining  unit of its 1996 preferred  stock  outstanding at
December  31,  2002 and  2001.  The  remaining  unit may be  converted  into the
Company's  common stock including  accrued  dividends at the lesser of $1.25 per
common  share or 75% of the prior  five day  trading  average  of the  Company's
common stock.

1997 Private Placement

In January and  February  1997,  the Company  completed a private  placement  of
167.15 Units, each unit consisting of one share of convertible  preferred stock,
$10,000  per unit,  $1 par  value,  "1997  Preferred  Stock",  and a warrant  to
purchase 10,000 shares of common stock at $1.00 per share.

In 1998, 5.0 units were converted resulting in the issuance of 178,950 shares of
common stock.

During  1999 14.5 units were  converted  into  572,694  shares of common  stock.
During 2000, the remaining 5.0 units were converted into 50,000 shares of common
stock.

1999 Private Placements

During 1999,  the Company  initiated  three  private  placement  offerings  each
consisting  of one share of  preferred  stock (as  designated)  and  warrants to
purchase common stock.  There are no dividends payable on the preferred stock if
a registration statement is filed by a certain date as specified in the offering
agreements  and  remains  effective  for a two year  period.  If  dividends  are
payable,  the preferred stock will provide for a 10% dividend per annum for each
day during which the  registration  statement is not  effective.  The  preferred
shares  are  also  redeemable  at the  option  of the  Company  after  a date as
specified  in the  offering  agreements  for $1,000  per share plus any  accrued
unpaid dividends.  In addition, if a registration  statement is not effective by
the date as specified in the offering  agreements  the shares may be redeemed at
the request of the holder at $1,000 per share plus any accrued unpaid dividends.

The first private placement  consisted of 300 shares of Series A preferred stock
each with 1,000  warrants for $1,000 per unit,  which  raised total  proceeds of
$300,000.  The warrants  included  with each unit entitle the holder to purchase
common  shares at $1.00 per share,  expiring in October 1, 2000.  The  preferred
shares are  currently  convertible  into common  shares at $.25 per common share
through March 1, 2003.  During 1999, 115 shares of Series A preferred stock were
converted  into  460,000  common  shares.  During  2000,  185 shares of Series A
preferred  stock were converted into 740,000 common shares.  All of the warrants
relating to the Series A preferred stock were exercised in 2000.

The second  private  placement  consisted  of 1,832 shares of Series B preferred
stock each with 2,000 warrants for $1,000 per unit,  which raised total proceeds
of  $1,816,500  (net of offering  costs of  $15,500).  The Company also issued a
warrant to purchase 50,000 shares of common stock at $.50,  which expires in May
2002,  for  services  rendered in  connection  with the private  placement.  The
warrants included with each unit entitle the holder to purchase common shares at
$.50 per share,  expiring in October 1, 2003. The preferred shares are currently
convertible into common shares at $.50 per common share through October 1, 2003.
During  1999,  1,015  shares of Series B  preferred  stock were  converted  into
2,030,000  common shares.  During 2000,  767 shares of Series B preferred  stock
were converted into 1,534,000 common shares.  During 2002, 50 shares of Series B
preferred  stock were converted  into 100,000  common  shares.  The warrants are
callable by the Company for $.01 upon thirty days written notice. These warrants
expired in October 2002. Upon cancellation,  the Company extended the expiration
date for 480,000 of these warrants to April 2003.  Using a Black Scholes pricing
model, $58,000 of expense was charged to equity as the value of this repricing.

The third  private  placement  consisted  of 1,995  shares of Series C preferred
stock each with 4,000 warrants for $1,000 per unit,  which raised total proceeds
of  $1,995,000.  The warrants,  included with each unit,  entitled the holder to
purchase  common  shares  at $.50 per  share,  expiring  in April 1,  2003.  The
preferred  shares are convertible  beginning April 1, 2000 into common shares at
$.50 per common share through April 1, 2003. During 2000, 1,120 shares of Series
C preferred stock were converted into 2,240,000 common shares.  During 2001, 500
shares of Series C  preferred  stock were  converted  into  1,000,000  shares of
common stock. During 2002, 300 shares of Series C preferred stock were converted
into  600,000  shares of common  stock.  After April 1, 2000,  the  warrants are
callable by the Company for $.01 upon thirty days  written  notice.  The Company
has not called any of these warrants as of the date hereof.

2002 Private Placement

During 2002,  the Company  initiated  three  private  placement  offerings  each
consisting  of one share of common stock and warrants to purchase  common stock.
The exercise  price of the offering was $.40 per share.  The warrants,  included
with each unit, entitled the holder to purchase common shares at $.50 per share,
expiring five years after offering date.  Over the three  offerings,  $5,491,000
was raised in total  proceeds,  net of offering  costs of $290,000,  through the
issuance of 13,702,500  shares of common  stock.  At December 31, 2002 a $76,000
subscription receivable remained which was collected in January 2003.

Equity Line

The Company entered into an Equity Line of Credit Agreement dated as of June 12,
2001,  which  provided  that the  Company  can put to the  provider,  subject to
certain  conditions,  the  purchase  of common  stock of the  Company  at prices
calculated from a formula as defined in the agreement.

During the period August to December 2001, the Company received $1,510,000,  net
of commissions and escrow fees from nine equity line advances,  resulting in the
issuance of  2,748,522  shares of common  stock.  The 542,847  shares  issued to
finders in  connection  with the equity line,  described  below,  were valued at
$407,000,  additionally  the  incremental  differences of shares issued at below
market prices on the line totaled $391,000, both of which have been presented as
a reduction to net proceeds from the advances received.

During the period January to April 2002, the Company received  $972,000,  net of
commissions  and escrow fees from eight equity line  advances,  resulting in the
issuance of 1,954,719  shares of common stock.  This agreement was terminated in
April 2002.

The principal conditions to any such advance were as follows:

o    There must have been  thirteen  stock  market  trading days between any two
     requests for advances made by the Company.

o    The Company  could only request an advance if the volume  weighted  average
     price of the common stock as reported by Bloomberg  L.P. for the day before
     the  request  is made was  equal to or  greater  than the  volume  weighted
     average price as reported by Bloomberg  L.P. for the 22 trading days before
     a request was made.

o    The Company  was not be able to receive an advance  amount that was greater
     than 175% of the  average  daily  volume of its  common  stock  over the 40
     trading days prior to the advance request multiplied by the purchase price.

The  purchase  price for each  advance  was be equal to 91% of the three  lowest
daily volume weighted average prices during the 22 trading days before a request
was made.

The Company  received the amount  requested as an advance  within 10 days of its
request,  subject to satisfying  standard  closing  conditions.  The issuance of
shares of common  stock to the  providers  in  connection  with the equity  line
financing was exempt from registration under the Securities Act of 1933 pursuant
to Section 4(2) thereof.  The Company  agreed to register for immediate  re-sale
the shares being issued to the providers of the Equity Line of Credit before any
drawdowns  may occur.  The  Company  registered  9,500,000  shares.  The related
Registration  Statement was declared effective by the SEC on August 6, 2001. The
Company also agreed that its executive officers and directors would not sell any
shares of its common  stock during the ten trading  days  following  any advance
request by the Company.

The Company  paid an aggregate  of 7% of each amount  advanced  under the equity
line financing to two parties  affiliated  with the providers of the Equity Line
of Credit for their services relating thereto.  In addition,  upon the effective
date of this  Registration  Statement  registering  the  securities to be issued
under the Equity Line of Credit, the Company issued to those same two parties an
aggregate of 198,020  shares of common stock,  and on December 9, 2001 (180 days
after the date of the Equity Line of Credit  Agreement)  the  Company  issued to
them an additional  344,827 shares of our common stock shares. In addition,  the
Company paid legal fees in an aggregate amount of $15,000.

Accumulated Deficit

Of the  $43,073,000  cumulative  deficit at December 31, 2002 and $34,059,000 at
December 31, 2001, the approximate  amount relating to the Company's  technology
business  from  inception  is  $27,752,000  and  $21,112,000,  respectively.  In
addition,  a premium of $2,332,000 was paid upon the acquisition of Cymedix Lynx
in 1998,  producing a total  investment of  $30,084,000 at December 31, 2002 and
$23,444,000 at December 31, 2001 in the technology to date.

Stock Options

In 1996,  the Board of  Directors  established  the 1996 Stock  Option Plan (the
"1996 Plan") with terms similar to the 1994 Plan.  The Board of Directors of the
Company  reserved  4,000,000  shares of common stock for issuance under the 1996
Plan.

In August 1999,  the Board of Directors  established  the 1999 Stock Option Plan
(the "1999  Plan"),  which  provides  for the grant of incentive  stock  options
("ISOs")  to officers  and other  employees  of the  Company  and  non-qualified
options to  directors,  officers,  employees  and  consultants  of the  Company.
Options granted under the plan are generally exercisable  immediately and expire
up to ten years after the date of grant. Options are granted at a price equal to
the  market  value  at the  date of  grant.  The  Board  of  Directors  reserved
10,000,000  shares of common stock for granting of options  under the 1999 Plan.
At 2001 Annual Meeting the shareholders approved an increase of 3,000,000 shares
as the amount of total  shares of our Common Stock  reserved for issuance  under
the 1999 Plan.

The following table presents the activity for options outstanding:
                                                                          Weighted
                                                Incentive  Non-qualified   Average
                                                  Stock        Stock      Exercise
                                                 Options      Options       Price
                                              ------------ ------------ ------------

Outstanding - December 31, 1999                  7,517,877      633,000 $       0.32
  Granted                                        2,255,000      110,000         3.82
  Granted                                         (10,000)           -          0.25
  Forfeited/canceled                           (3,900,235)    (139,499)         0.28
                                              ------------ ------------ ------------

Outstanding - December 31, 2000                  5,862,642      603,501         1.62
  Granted                                        2,289,000           -          0.71
  Forfeited/canceled                             (865,000)     (65,834)         3.03
  Exercised                                    (1,267,142)    (173,500)         0.25
                                              ------------ ------------ ------------

Outstanding - December 31, 2001                  6,019,500      364,167         1.40
  Granted                                        4,968,000      860,000         0.67
  Forfeited/canceled                           (1,314,750)    (266,167)         1.15
  Exercised                                      (200,000)    (158,000)         0.40
                                              ------------ ------------ ------------

Outstanding - December 31, 2002                  9,472,750      800,000 $       1.06
                                              ============ ============ ============

The  following   table  presents  the   composition  of  options   outstanding  and
exercisable:

                            Options Outstanding                 Options Exercisable
                         ----------------------- ----------- ----------------------
Range of Exercise Prices    Number      Price*       Life*      Number      Price*
------------------------------------ ----------- ----------- ----------- ---------
      $.25 - .55           2,417,000 $      0.41        5.92   2,197,625 $      0.41
      $.59 - .99           6,619,750        0.69        4.72   3,689,750        0.69
      $1.05 - 4.97         1,236,000        4.34        4.24   1,186,000        4.47
                         ----------- ----------- ----------- ----------- -----------

Total - December 31,
2002                      10,272,750 $      1.06        4.95   7,073,375 $      1.23
                         =========== =========== =========== =========== ===========

*Price and Life  reflects  the  weighted  average  exercise  price and  weighted
average remaining contractual life, respectively.

In fiscal year 2002, the Company has issued 636,000 stock options to consultants
that have been valued at $260,000 and recorded as consulting expense,  using the
Black-Scholes  options pricing model. The assumptions used include lives ranging
from 2 to 5 years,  exercise  prices ranging from $0.38 to $0.70,  volatility of
95%, no dividend payments and a risk free rate of 5.5%.

The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting  Standards  No.  123,  "Accounting  for  Stock-Based   Compensation."
Accordingly,  no  compensation  cost has been  recognized  for the stock  option
plans. Had  compensation  cost for the Company's option been determined based on
the fair value at the grant date for awards  consistent  with the  provisions of
SFAS No. 123, the  Corporation's  net loss and basic loss per common share would
have been changed to the pro forma amounts indicated below:

                                                      For the Years Ended
                                                         December 31,
                                          --------------------------------------
                                               2002           2001          2000
                                          -------------- -----------------------

Net loss - as reported                    $ (9,014,000)  $(10,636,000) $ (5,415,000)
Net loss - pro forma                      (111,198,000)   (12,035,000)  (14,256,000)
Basic loss per common share - as reported        (0.14)         (0.21)        (0.13)
Basic loss per common share - pro forma          (0.18)         (0.24)        (0.34)

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions used:

                                                      For the Years Ended
                                                         December 31,
                                          --------------------------------------
                                               2002           2001          2000
                                          -------------- -----------------------

Approximate risk free rate                    5.50%          5.50%         5.50%
Average expected life                        5 years        5 years      10 years
Dividend yield                                  0%            0%            0%
Volatility                                     95%           132%          273%

Estimated fair value of total options
granted                                     $2,184,000    $1,399,000    $8,841,000

Warrants

The  Company  has an  obligation  to issue  up to  7,000,000  warrants  under an
agreement  with a pharmacy  management  company  for the  Company's  proprietary
software to be interfaced with core medical service  providers,  in which one of
the  Company's  audit  committee  members  is a  related  party to the  pharmacy
management  company.  The  agreement  provides for  3,000,000  warrants  with an
exercise price of $.30,  3,000,000  warrants with an exercise price of $.50, and
1,000,000  warrants  with an exercise  price of $1.75 all expiring  September 8,
2004.  The right to exercise  the  warrants  are earned in  increments  based on
certain performance criteria. At December 31, 2002 a total of 1,850,000 warrants
had been  earned.  In  connection  with the  obligation  to issue the  1,000,000
warrants earned,  the Company  recorded  expense of $1,364,000  valued using the
Black-Scholes  option pricing model,  with  assumptions of 132%  volatility,  no
dividend yield and a risk-free  rate of 5.5%. In connection  with the obligation
to issue the 850,000 warrants  earned,  the Company recorded expense of $590,000
during the third quarter of 2001 valued using the  Black-Scholes  option pricing
model,  with assumptions of 132%  volatility,  no dividend yield and a risk-free
rate of 5.5%. The 850,000 warrants were issued in the first quarter of 2002.

The Company has the obligation to provide  5,150,000  warrants under the Amended
and Restated  Common  Stock  Purchase  Warrant in the future if the  performance
criteria specified are met.

The agreement  provides for a total of 5,150,000  remaining  warrants under five
performance   criteria   categories   which  can  be  earned  in  any  order  or
concurrently. Had all of the remaining performance criteria been met at December
31, 2002,  the fair value of the related  warrants and  resulting  expense would
have been  approximately  $1,848,683,  using the  Black-Scholes  option  pricing
model,  with  assumptions of 95%  volatility,  no dividend yield and a risk-free
rate of 5.5%.

The Company also issued and modified  warrant terms in the settlement of certain
litigation  during 2001 (Note 7).  These  warrants and  modifications  have been
valued  at  $234,000  using  the   Black-Scholes   option  pricing  model.  (See
assumptions used in Note 7).

The following table presents the activity for warrants outstanding:

                                                                          Weighted
                                                                           Average
                                                            Number of     Exercise
                                                            Warrants        Price
                                                         ---------------------------

Outstanding - December 31, 1999                             14,791,126 $        0.53
      Issued                                                    35,000          3.96
      Forfeited/canceled                                      (32,506)          0.71
      Exercised                                            (9,352,620)          0.53
                                                         ---------------------------

Outstanding - December 31, 2000                              5,441,000          0.53
      Issued                                                 2,066,587          1.12
      Forfeited/canceled                                      (36,000)          0.80
      Exercised                                               (22,000)          0.19
                                                         ---------------------------

Outstanding - December 31, 2001                              7,449,587          0.69
      Issued                                                17,493,016          0.51
      Forfeited/canceled                                     (826,000)          0.51
      Exercised                                            (1,388,975)          0.50
                                                         ---------------------------

Outstanding - December 31, 2002                             22,727,628 $        0.58
                                                         ===========================

All of the  outstanding  warrants are  exercisable  and have a weighted  average
remaining contractual life of 3.45 years.

**Note 9 - Income Taxes**
---------------------

As of December 31, 2002, the Company has net operating loss (NOL)  carryforwards
of approximately  $29,105,000,  which expire in the years 2002 through 2022. The
utilization  of the NOL  carryforward  is limited to $469,000 on an annual basis
for net operating loss  carryforwards  generated prior to September 1996, due to
an effective  change in control,  which occurred as a result of the 1996 private
placement.  As a result of the significant  sale of securities  during 1999, the
Company's net operating loss carryforwards will be further limited in the future
to an annual  amount of $231,000  due to those  changes in control.  The Company
also  has  a  deferred  tax  liability  of  approximately  $141,000  related  to
capitalized  software  development  costs.  The  Company  has  concluded  it  is
currently  more likely than not that it will not  realize its net  deferred  tax
asset and  accordingly has  established a valuation  allowance of  approximately
$9,900,000 and $7,400,000,  respectively.  The change in the valuation allowance
for 2002 and 2001 was approximately $2,500,000 and $2,413,000, respectively.

**Note 10 - Employee Benefit Plan**

Employees  are  eligible to  participate  in the  company's  401(k)  retirement.
Payroll  deductions  are taken  out of every  payroll  check  and are  "pre-tax"
dollars.  Employees may elect (in writing) at any time that their  participation
be  "suspended",  however,  they may only  apply  for  re-enrollment  quarterly.
Employees  may elect up to a 15%  contribution.  There  currently is no employer
match policy.

**Note 11 - Related Party Transactions**

Prior to being  elected to the Board of  Directors  of the  Company  in 1999,  a
company affiliated with one of the Company's directors,  entered into agreements
with us to provide  executive search services and sales and marketing service to
us. In connection with those  agreements,  the Company issued a 3-year option to
acquire up to 25,000 shares of the Company's  common stock at an exercise  price
of $.55 per share. An expense of  approximately  $13,000 related to the issuance
of the option was recorded.  The Company paid the related company  approximately
$51,000 and  $152,000  during  2001 and 2000,  respectively.  The  Company  also
entered into an agreement with the affiliated  company for rental space,  use of
clerical  employees  and to pay a portion of utility and telephone  costs.  Rent
expense for 2001 and 2000 was approximately $111,000 and $93,000, respectively.

During  2000,  the Company  paid two  companies  affiliated  with another of the
Company's directors $118,000 for services and related expenses and approximately
$66,000 for software  development and web-site hosting and development  services
and purchase of computer equipment.  The Company also acquired a business from a
director of the Company for $474,000 in 2000.

The Company also has an  obligation to issue  warrants to a pharmacy  management
company in which a member of the Company's  audit  committee is a related party,
if certain performance criterion are met in the future (Note 7).

The Company has a consulting  agreement  with one of the Company's  directors to
assist with marketing of the Company's  products.  The Company paid the director
$20,000,  $0 and $52,000 for such  consulting  services in 2002,  2001 and 2000,
respectively.

During July 2001, the Company received  $136,000 as a short-term  advance from a
related  party,  $50,000 of which was repaid  during  August 2001. An additional
$30,000  and $50,000 was  advanced  to the Company by the related  party  during
September  and  December  2001,  leaving an  outstanding  balance of $166,000 at
December 31, 2001. The entire amount was repaid during February 2002.

During 2002, the Company recorded $130,000 as a liability to a related party for
loans  made to the  Company  during  2002.  The  liability  emerged  a part of a
severance package for compensation and expenses.  The separation agreement calls
for monthly  payments of $5,000  beginning  January 2003 with the entire  amount
being due in May 2003.

**Note 12 - Subsequent Events**

The Company entered into a definitive agreement to acquire  substantially all of
the assets of PocketScripts LLC in December 2002. The acquisition was contingent
upon  certain   closing   conditions   including   approval  by  the   Company's
stockholders.  Through December 31, 2002, the Company paid an initial deposit of
$100,000 in  connection  with the  proposed  merger,  in addition to $209,000 in
advances for working capital  purposes and expenses  relating to the acquisition
which were incurred.  On March 5, 2003,  Medix  announced the termination of the
proposed merger agreement with PocketScript, LLC. As a result of the acquisition
being  terminated,  the Company  expensed the $309,000  incurred during the year
ended December 31, 2002.

On March 7, 2003,  the Company  purchased  the assets of  ePhysician,  Inc.  for
$300,000 and 100,000 shares of our common stock, from Comdisco  Ventures,  Inc.,
an ePhysician creditor.  ePhysician point-of-care technologies enable physicians
to securely access and send  information to pharmacies,  billing  services,  and
practice  management  systems via the Palm  OS(R)-based  handheld device and the
Internet.  The Company  intends to  integrate  various  aspects of  ePhysician's
technologies with their existing products.

**Note 13 - Summarized Quarterly Results (Unaudited)**

The following table presents unaudited operating results for each quarter within
the two most recent years. The Company  believes that all necessary  adjustments
consisting  only of normal  recurring  adjustments,  have been  included  in the
amounts stated below to present fairly the following quarterly results when read
in  conjunction  with the financial  statements.  Results of operations  for any
particular quarter are not necessarily indicative of results of operations for a
full fiscal year.

                                                            Third      Fourth
                                                            ------     ------
                             First Quarter Second QuarterQuarter (2)   Quarter(3)(4)
                            -------------- --------------------------  -------
Footnotes
December 31, 2001
   Revenues                 $    30,000    $        -    $        -     $   (1,000)
   Operating expenses         2,195,000      1,455,000     3,058,000     1,437,000
   Net loss                  (2,259,000)    (1,635,000)   (3,183,000)   (3,559,000)
   Basic loss per share (1)       (0.05)         (0.03)        (0.06)        (0.07)
   Diluted loss per share (1)     (0.05)         (0.03)        (0.06)        (0.07)

December 31, 2002

   Revenues                 $         -    $        -     $        -    $        -
   Operating expenses         1,475,000      1,265,000     1,678,000     3,140,000
   Net loss                  (1,677,000)    (1,309,000)   (1,732,000)   (4,296,000)
   Basic loss per share (1)       (0.03)         (0.02)        (0.03)        (0.05)
   Diluted loss per share(1)      (0.03)         (0.02)        (0.03)        (0.05)

(1)  Earnings per share are computed independently for each quarter and the full
     year based upon respective average shares outstanding.  Therefore,  the sum
     of the  quarterly  net earnings per share  amounts may not equal the annual
     amounts reported.

(2)  Included in third quarter 2001 operating expenses is $1,111,000 of expenses
     related to the impairment of intangible assets. (Note 4)

(3)  Included in fourth  quarter 2001  operating loss is $1,022,000 in financing
     costs. (Notes 6 and 8)

(4)  Included in the fourth  quarter 2002  operating  expenses is  $1,066,000 of
     expenses  related to the write-off of capitalized  software  project costs,
     $374,000  of accrued  lease  abandonment  costs,  and  $309,000 of expenses
     associated with an acquisition which was terminated.
```