10-K405

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
                 Annual Report Pursuant to Section 13 or 15 (d)
                     of the Securities Exchange Act of 1934

                   For the Fiscal Year Ended December 31, 2000

                         Commission File Number: 0-22319

                            Patient InfoSystems, Inc.
             (Exact Name of Registrant as Specified in its Charter)

                 Delaware                        16-1476509
                 --------                        ----------
       (State or Other Jurisdiction of (IRS Employer Identification No.)
         incorporation or organization)

                    46 Prince Street
                   Rochester, New York                   14607
                ------------------------                -------
              (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (716) 242-7200
  Securities registered pursuant to Section 12(b) of the Exchange Act of 1934:

                                      None.

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

                     Common Stock, par value $.01 per share
                                (Title of Class)


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: X Yes __ No

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


    The aggregate market value of the voting and nonvoting common equity held
            by nonaffiliates of the registrant as of March 22, 2001:

        COMMON STOCK, PAR VALUE, $.01 PER SHARE- Approximately $1 million

                The number of shares outstanding of the issuer's
                       common stock as of March 22, 2001:

               COMMON STOCK, PAR VALUE, $.01 PER SHARE - 8,220,202

                      DOCUMENTS INCORPORATED BY REFERENCE:

            Portions of the Proxy Statement for the Registrant's 2001
               Annual Meeting of Stockholders to be filed prior to
            April 30, 2001 are incorporated by reference in Part III.



                                     PART I

Item 1. Description of Business.

General


     Patient  Infosystems,  Inc. (the  "Company" or "Patient  Infosystems")  was
incorporated  in the State of Delaware on February  22, 1995 under the name DSMI
Corp., changed its name to Disease State Management, Inc.  on October 13,  1995,
and then changed its name to Patient  Infosystems, Inc.  on June 28,  1996.  The
Company's   principal  executive  offices  are  located  at  46  Prince  Street,
Rochester, New York 14607 and its telephone number is 716-242-7200.

     Patient   Infosystems  is  a  health  management   solutions  company  that
integrates  clinical  expertise with advanced  Internet,  call center,  and data
management  capabilities.  Founded in 1995 as a disease management company,  the
Company has evolved to offer a comprehensive  portfolio of products and services
designed to improve patient clinical outcomes and quality of life, reduce health
care costs, and facilitate patient-provider-payor communication. The Company has
three major product lines.

1)   Population Management.  Systems to collect,  analyze, and report data about
     an overall  target patient  population.  These systems  utilize  telephone,
     Internet,  electronic  or print media as input  sources and may be used for
     risk  identification  and  stratification,  obtaining  information  on care
     quality and patient/member  satisfaction,  and the provision of patient and
     provider education.

2)   Disease Management. Patient-centered disease management and case management
     support  systems  designed to improve  patient  compliance  with prescribed
     treatment  protocols  and to improve  the  process  of  patient  management
     outside  the  traditional  "office  visit".  The  system  utilizes  trained
     telephone operators and computerized  interactive voice response technology
     to communicate via telephone and gather relevant  information directly from
     the  patient.  This  data is  subsequently  automatically  transmitted  via
     electronic or print media to health care payors, providers and patients, as
     appropriate. These services are also available via the Internet.

3)   Demand  Management.  Services to facilitate the  appropriate  deployment of
     costly health care resources.  These systems provide enrolled patients with
     24-hour  access to a registered  nurse for management of their care between
     episodes of medical intervention.

     The   Company   markets   its   services  to  a  broad  range  of  clients:
pharmaceutical and medical equipment and device manufacturers;  pharmacy benefit
managers  ("PBMs");  health  care  payors,  such as managed  care  organizations
("MCOs"),  insurance companies,  and employer groups; and health care providers,
including integrated delivery networks ("IDN's").

     During  its first two  years of  operations,  the  Company  emphasized  the
development of disease  management  programs,  which accounted for a substantial
portion of its  revenue  through  1997.  However,  since  1998,  the Company has
devoted  resources to the  development of other  applications  of its technology
platform,  including demand management,  patient surveys,  outcomes analysis and
Internet-based  capabilities.  These additional  products account for 62% of the
total revenue of the Company during the 12-month period ended December 31, 2000.


Recent Developments

     In  September  2000,  the  Company  executed  a letter of intent to acquire
substantially  all the  assets  of  Health  Data  Solutions  and its  affiliate,
American Care Source (collectively known as "HDS").  Negotiations with HDS ended
in January 2001, with the parties failing to reach mutually acceptable terms for
the proposed acquisition,  but resolving to enter into a marketing agreement. On
March 6, 2001,  the  Company and HDS entered  into a Strategic  Partnership  and
Marketing Agreement  establishing the terms under which both companies may offer
their  combined  products and  services to their  respective  clients.  While no
assurances  can be given that the Company will  generate new revenues  from this
relationship,  the Company  will use this  relationship  to  validate  strategic
marketing initiatives.


Information Capture, Delivery and Analysis Technologies Utilizing the Internet

     The Company's  technology platform integrates an advanced voice recognition
telephone  system,  high-speed data processing and analysis  capability,  demand
publishing   and   information    distribution    capabilities    and   behavior
modification-based  compliance  algorithms  with a real  time  Internet  on-line
communication  system.  The system  utilizes  trained  telephone  operators  and
computerized  interactive voice response technology to communicate via telephone
directly  with the patient at home as well as with payors and providers in order
to gather and deliver  relevant  patient data. In order to minimize  costly live
operator interaction,  a computer initiates each call to the patient, which call
is  automatically  transferred to an operator and finally routed to an automated
speech  application.  Patients  respond to the recorded  speech  application  by
speaking  normally.  This  approach  is  designed  to enable a wider  variety of
possible  responses than is achievable  via telephone key pad.  Depending on the
patient's response,  situation-specific  algorithms are applied to modify future
questions and thus help customize the collection of data.

     The Company's  system analyzes and prepares the captured data for automatic
delivery  to the payor,  provider  and  patient  using the  Internet  and demand
publishing   capabilities.   The  Company's  Internet  capabilities  enable  the
Company's  systems to interface on a real-time  basis with patients,  payors and
providers.   Demand  publishing   technology  enables  the  creation  of  highly
individualized  reports by inserting  stored graphic images and text that can be
customized for race,  gender and age.  These reports are also  customized to the
patient's specific situation,  and the system utilizes the information  received
during contacts with the patient to further customize the content of the report.
The data relevant to the separate  report for health care providers is formatted
in a customized report to be automatically transmitted via mail, fax or on-line.

     Each  contact  with  a  patient  contributes  to  the  establishment  of  a
longitudinal  database,  which can be  analyzed  to  provide  information  about
treatment modalities for patients, providers and payors. The Company's system is
designed to analyze  patient  compliance  to prescribed  treatment  regimens and
gather additional clinical information so that improvements in such regimens can
be developed.


Internet Capabilities

     In 1999, the Company  acquired  substantially  all the assets of HealthDesk
Corporation ("HealthDesk"),  a consumer healthcare software company that focuses
on general  health and  chronic  disease  management  through  ongoing  targeted
support for  patients,  families and  caregivers.  The acquired  assets  include
HealthDesk OnLine and HealthDesk OnLine for Diabetes,  which are both accessible
through the Internet and on CD-ROM. The Company also acquired  HealthDesk's Care
Team  Connect  product,  which is  accessible  over the  Internet and provides a
communication mechanism between patients and their caregivers.  The Company uses
the core  technologies  associated  with these products to support the Company's
other  programs,  which  include the case  management  support  system,  disease
management, demand management, patient surveys and clinical studies.


Integrated Disease Management System

     The Company's primary application of its integrated information capture and
delivery  technology is its integrated disease management system. This system is
designed to provide caregivers with the ability to monitor,  on a cost-effective
basis,  patient  condition and behavior  while the patient is between  physician
consultations.  The Company believes that this system will permit  caregivers to
improve patient compliance and, as a consequence, improve patient outcomes.

     The  Company's  disease  management  programs  are  developed  for targeted
diseases on both a customized  or  standardized  basis.  The  Company's  disease
management system has four major components.

     First, using a panel of medical and clinical experts,  the Company develops
a disease-specific  patient  intervention and compliance program that includes a
template for the integration of each patient's  history,  current medical status
and treatment protocol.  The panel identifies  guidelines for generally accepted
treatment  protocols and diagnostic  interventions  for particular  diseases and
then uses these  guidelines to determine what information is to be gathered from
the patient.

     Second,  when a  patient  is  enrolled,  a  patient  history  is  obtained,
including  the  histories  of the chronic  illness,  medications,  and  surgical
procedures as well as other information deemed relevant by the  disease-specific
compliance  program.  This information is included in the Company's database for
each patient and is used to create  customized  reports for  distribution to the
patient's health care provider and payor as well as the patient.

     Third,  the  Company  establishes  periodic  telephone  contacts  with each
patient to monitor the patient's compliance with prescribed therapies as well as
the  patient's  treatment  progress.  Contacts  are  made in  accordance  with a
designated  patient  contact  schedule,  which is  established  for each disease
management  program.  The  frequency  varies  depending  upon the disease  under
management and the goal of the applicable treatment.

     Fourth, the data gathered from the patient during each contact is processed
and  stored in the  Company's  database.  Using the  information  obtained  from
patient contacts and other available  information  regarding the patient and his
or  her  treatment,   such  as  physician  records  and  pharmacy   information,
personalized reports are prepared, typically following each patient contact, for
evaluation by the patient,  the patient's health care provider and, on a routine
basis, payors.

     The  Company's  disease  management  programs are further  supported by the
Company's demand publishing  technology.  This technology enables the Company to
provide personalized behavior modification and educational materials to patients
in addition to individual patient reports, which may include pictures,  diagrams
and informative  discussions relating to the treatment course intended to modify
or reinforce certain behaviors. At the same time, individual patient reports are
provided to the health care  provider.  These reports are more factual in nature
and contain the  relevant  clinical  and  behavioral  information  that has been
gathered. On a routine basis, the Company can provide summary information to the
patient's health care payor with respect to patient progress and activity.


Patient Infosystems Products

     The Company's product offerings fall into four major categories:

o    "CareSense" disease management and compliance programs
o    "ForeQuest" patient survey programs
o    "Nurse 411" demand management programs
o    Internet-based products and services


"CareSense" disease management and compliance programs

     The Company  develops  customized  disease  management and risk  assessment
programs in  conjunction  with a number of  customers,  as well as  standardized
disease  management  programs for a variety of customers.  Each of the Company's
customer agreements for its customized programs  traditionally provides for some
form of  development  fees to be paid to the  Company  upon the  achievement  of
certain  milestones.   In  addition,   the  agreements  for  customized  disease
management  programs  may provide for some form of  exclusivity  period,  during
which the Company is prohibited from engaging or participating in other projects
involving the specific  disease target that is the subject of that program.  The
exclusivity  periods extend until, in general,  a certain date or certain period
following  the  achievement  of a  specified  milestone  in the  development  or
implementation  of  the  program.   As  the  Company's  products  have  matured,
development fees have declined and the need to grant  exclusivity has decreased.
The  Company  enrolled  its first  patients in a disease  management  program in
October  1996,  and has enrolled  more than 473,000  patients in those  programs
through the end of 2000. The Company and its customers have had limited  success
in sustaining enrollment of substantial numbers of patients.

     Traditionally  the  Company's  customer  agreements,  which  are  typically
terminable  without  cause by either  party,  require  payment to the Company of
operational  fees.  The amount of the  program  operational  fee varies with the
length,  complexity  and  frequency  of  patient  contacts  as  dictated  by the
respective  program  protocols.  Patient  enrollment  in each  of the  Company's
programs  will  depend upon the  identification  and  referral by the  Company's
customers of patients to the Company's  system,  which will vary from program to
program.

     The Company's "CareSense" programs are:


     Asthma

     The  Company  has  developed  disease  management  programs  for  asthmatic
patients that have been marketed to payors and other  participants in the health
care  industry,  and such programs  have been  provided to patients  since 1997.
Through  January  2001,  the  Company  has  had  approximately  15,000  patients
participate in these programs  through  separate  service  agreements  with nine
different health care companies


     Congestive Heart Failure

     The Company has services  agreements with Bristol-Myers and Astra-Zeneca to
develop,  implement  and  operate  disease  management  programs  to  aid in the
treatment of patients  suffering from congestive heart failure.  The Company has
completed the  development of the program in the English and Spanish  languages.
These programs have been provided to patients  since 1997,  and through  January
2001,  the Company has had  approximately  12,200  patients  participate  in the
programs.


     Diabetes

     The Company has developed disease management programs for diabetic patients
that have been  marketed  to payors and other  participants  in the health  care
industry.  Bristol-Myers,  along with four other  entities,  have  retained  the
Company to provide  disease  management  programs for patients who are suffering
from diabetes and are enrolled in health care programs for which these companies
provide services.  These programs have been provided to patients since 1997, and
through  January  2001,  the  Company  has  had  approximately   5,500  patients
participate in these programs.


     Secondary Cardiovascular Disease

     The Company has entered into a services  agreement  with  Bristol-Myers  to
develop,  implement  and operate a disease  management  program  relating to the
prevention of cardiovascular  sequelae in patients who have recently experienced
certain  cardiovascular  illnesses or treatments such as angina,  cardiac bypass
surgery or myocardial  infarction.  The Company has completed the development of
this  program in both the English and Spanish  languages.  This program has been
provided to patients since 1997,  and through  January 2001, the Company has had
approximately 500 patients participate in this program.


     Hypertension

     The  Company  has   developed  a  compliance   program  for  patients  with
hypertension  that has been  marketed  to payors and other  participants  in the
health care industry. Bristol-Myers and RxAmerica have each retained the Company
to  provide  this  compliance  program  for  patients  who  are  suffering  from
hypertension  and are enrolled in health care programs for which these companies
provide  services.   Through  January  2001,  approximately  830  patients  have
participated in this program.


     Depression

     The Company has entered into a services agreement with RxAmerica to develop
and operate a disease management  program to utilize a clinically  accepted tool
to assess  changes in severity of  depression  in  relation to  compliance  with
therapeutic  regimens,  and to support  patients  in  achieving  a high level of
compliance.  Patients are  expected to be enrolled in this program  beginning in
May 2001.


Additional Disease Targets

     The  Company  has  identified  additional  opportunities  in large  chronic
disease  markets,  including  the  treatment  of chronic  obstructive  pulmonary
disease, cancer, osteoporosis, arthritis, HIV infection and high-risk pregnancy.
Each of these targets has been  identified as having  characteristics  that make
them attractive candidates for the Company's programs.  The Company is currently
involved in  discussions  with  customers for the  development  of programs in a
variety of these areas.


Pharmaceutical and Medical Equipment Support Programs

     The  Company has  delivered  custom  programs  sold to  pharmaceutical  and
medical device  manufacturers  that are intended to add value to their direct to
consumer  marketing  efforts.  The Company has been  retained by  Bristol-Myers,
Astra-Zeneca,  Janssen and Abbott to develop and operate  programs  that support
specific products in the areas of diabetes, anxiety, prostatis and others. As of
January 2001, approximately 31,000 patients have participated in these programs.
In October,  2000,  the Company was  retained by  Urologix,  Inc. to develop and
operate a Prostate Care Center to provide  telephonic  and Internet  support for
their  direct  to  consumer  advertising  campaign.  Approximately  700 men have
participated in this program during its pilot phase since December 2000.


"Nurse 411" demand management programs

     Demand  management  involves  assisting  providers  in  evaluating  patient
treatment  needs to identify  those  patients  who may not require  immediate or
intensive services.  The goal of demand management is to reduce the need for and
use of costly,  often  clinically  unnecessary,  medical  services and arbitrary
managed-care  interventions  while  improving  the  overall  quality  of life of
patients.  The Company believes that its system can be used to provide automated
or semi-automated demand management services. During 2000, the parent company of
Kentucky  Medicaid  (CHA HMO),  a customer  of the Company  since  1997,  made a
strategic decision to leave the Medicaid market sector. The Company continues to
provide and expand service to CHA HMO for commercial  insurance.  The Company is
currently providing demand management to approximately 100,000 enrollees for CHA
HMO, Inc., Health Right and McClellan Air Force Base.


"ForeQuest" patient survey programs

     Organizations  in many different  areas of the health care industry  survey
users regarding  their products and services for a variety of reasons  including
regulatory,  marketing and research purposes. The Company's information systems,
with their ability to proactively  contact patients in a cost-efficient  manner,
may be used for this type of application.  The Company has developed a series of
automated  surveys ranging from general health to disease specific  instruments.
The product line includes  surveys for NCQA,  CAHPS;  reminder surveys for HEDIS
measures;  SF-12;  child health  questionnaire;  patient  satisfaction;  asthma;
diabetes;  back  pain;  depression;  maternity;  and the Pra  Plus  for  elderly
populations.   Through  January  2001,   approximately   408,000  patients  have
participated in these survey programs.


Internet-based products and services

     The Company's Case Management  Support System ("CMSS") is an Internet-based
software product that is used by case management  organizations.  The customer's
case managers access the system using an approved  browser and Internet  Service
Provider  ("ISP")  connection.  (Browser  and ISP are not  supplied  by  Patient
Infosystems.)  The system enables care managers to effectively  interface  with,
and utilize,  Patient  Infosystems'  "CareSense"  and  "ForeQuest"  intervention
programs for patient care  planning and  implementation  improves  case managers
efficiency and productivity. Additionally, the CMSS provides the case management
organization's  management  with a reporting  tool and a case  distribution  and
documentation tool that can be used to better monitor and manage case management
activity.  Patient Infosystems  licenses it's CMSS software and operating system
to customers  who agree to an initial  license fee plus ongoing user and support
fees.  Through  January 2001,  the Company has sold two CMSS contracts that have
two-year and four-year terms respectively.


Other Applications of the Integrated Information Capture and Delivery Technology


Outcomes Analysis

     The Company expects to utilize information  gathered from patients enrolled
in its programs to serve two purposes.  First,  information  regarding treatment
results,  success of the  compliance  program and patient  reaction to differing
treatments or compliance protocols may be used by the Company to further improve
each disease-specific  compliance program.  Second, this information may be used
by payors,  pharmaceutical  companies and health care providers to assist in the
development  of  improved  treatment  modalities.   The  Company  has  developed
analytical methodologies using database management and information technologies.
The Company intends to use these data analysis  technologies to predict the best
treatment methodologies for patients.


Clinical Studies

     Many  pharmaceutical  companies  and contract  research  organizations  are
seeking more  economical,  efficient  and  reliable  methods for  compiling  and
analyzing clinical data in conducting  clinical trials.  Furthermore,  many drug
development  protocols have begun to emphasize  subjective criteria and outcomes
information.  The  Company  believes  that its  system  will allow it to develop
programs tailored to the measurement of outcomes data relating to the conduct of
later  stage  clinical  trials.  The Company  believes  that its system can also
assist  pharmaceutical  companies  in studying and  documenting  the efficacy of
approved  products in order to provide ongoing  information to the Food and Drug
Administration or for marketing purposes.


Case Management

     Patients who are  prescribed  complex or high-cost  treatment  regimens may
require  a  higher  level  of   monitoring,   interaction,   care  planning  and
reassessment than patients with less complicated treatment regimens. The Company
believes that its system is capable of providing these enhanced services to such
patients to eliminate or minimize the  unnecessary  costs and medical  attention
that result from a patient's  lack of  compliance  with a  prescribed  treatment
regimen.

Sales and Marketing

     Through 1997, the Company's efforts focused primarily on the development of
disease management  programs.  Beginning in 1998, the Company began aggressively
marketing the other services that its technology  platform can provide including
demand management, patient surveys, pharmaceutical support programs and outcomes
analysis.  The  Company  markets its  integrated  disease  management  system to
organizations within the health care industry that are involved in the treatment
of disease or payment of medical  services for  patients who require  complex or
long-term medical therapies.  These industry organizations include five distinct
groups:   pharmaceutical  and  medical  equipment  manufacturers,   health  care
providers,  pharmacy benefits managers,  health care payors and employer groups.
As of July  2000,  the  Company  has also  entered  into an  agreement  with USI
Administrators,  Inc., USI Care Management,  Inc., York HealthNet  (collectively
known  as  "USI"),  one of the  country's  largest  third  party  administrators
(TPA's),  to co-market  its products  and services to USI's  potential  employer
client base. A similar agreement has been executed with Health Data Solutions, a
company that provides claims processing  services and ancillary network referral
services  to provider  networks,  managed  care  organizations,  and TPA's.  The
Company  currently  employs a sales and marketing staff of two persons to market
the  Company's  systems.  In  addition,  the  senior  members  of the  Company's
management are actively engaged in marketing the Company's programs.

     The Company has conducted  patient surveys and clinical studies designed to
document the clinical and cost benefits that result from the  application of its
integrated information capture and delivery system. The results of these studies
are being used to  supplement  the  Company's  marketing  efforts.  The  Company
intends to continue to promote the benefits of its products through  publication
in clinical journals and presentations at scientific conferences referencing the
favorable  near  term-results  of these  studies.  To date,  these  studies have
pertained to the Company's asthma and diabetes programs.


Research and Development

     Research and development expenses consist primarily of salaries and related
benefits  and  administrative  costs  allocated  to the  Company's  research and
development  personnel.  These personnel are actively involved in the conversion
of the Company's technology platform to a fully web-enabled design. Research and
development costs have decreased as the Company has completed the development of
its primary disease management  programs.  The Company anticipates that research
and development expenses will increase slightly in future periods as an internal
process to update these products has recently been initiated.

     The  development  and  maintenance of the  telecommunications  and computer
publishing systems through which the Company operates its integrated information
capture  and  delivery  system  is  a  major  component  of  its  business.  The
communications  and information  technology  industries are subject to rapid and
significant  technological change, and the ability of the Company to operate and
compete is  dependent in  significant  part on its ability to update and enhance
its system continuously.  In order to do so, the Company must be able to utilize
effectively  its  research  and  development   capabilities  and  implement  new
technology in order to enhance its systems.  At the same time,  the Company must
not  jeopardize  its  ability to contact  patients  and to process  and  publish
patient  information or adapt to customer  preferences or needs. There can be no
assurance  that the Company will be able to develop and implement  technological
changes to its system.  The Company  maintains a  significant  investment in its
technology, and therefore is subject to the risk of technological  obsolescence.
If the Company's  technology were rendered obsolete,  the Company's business and
operating results would be materially adversely affected.



                                  RISK FACTORS

     An investment in the Company's  Common Stock is  speculative  in nature and
involves a high degree of risk.  No  investment  in the  Company's  Common Stock
should be made by any person who is not in a position to lose the entire  amount
of such investment.


Working Capital Shortfalls;  Urgent Need for Working Capital, Possible Cessation
of Operations, Qualified Auditors' Opinion;

     The  Company  has never  earned  profits  and has been  dependent  upon its
initial public offering and private placements of its equity securities, through
which the  Company  has raised  over $20  million to date,  to fund its  working
capital requirements. The Company incurred an operating loss of approximately $6
million  for the year  ended  December  31,  2000 and had an  approximate  $3.89
million  deficit in working capital at December 31, 2000. The Company has had to
seek private financing repeatedly in order to continue its operations.  Although
the Company has secured  limited  working  capital through debt, it anticipates,
based on currently  proposed  plans and  assumptions  relating to its operations
that, with available  resources,  the Company's  contemplated  cash requirements
will be  satisfied  for no more than  March  2001.  Since  September  2000,  the
Company's  operations  have been supported  substantially  by loans from certain
directors of the Company.  Although such  directors  have continued to make such
loans,  they are not obligated to do so and may stop at any time. The Company is
seeking additional  capital.  If it is unable to identify  additional sources of
capital,  the Company will be required to cease  operations.  As a result of the
above, the Independent Auditors' Report on the Company's  consolidated financial
statements  appearing at Item 8 includes an emphasis  paragraph  indicating that
the Company's recurring losses from operations raise substantial doubt about its
ability to continue as a going concern. The accompanying  consolidated financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

History of Operating Losses; Limited Patient Enrollment

     The Company has incurred  losses in every  quarter  since its  inception in
February 1995. The Company's ability to operate profitably is dependent upon its
ability to develop and market its products in an economically successful manner.
To date,  the Company has been unable to do so. No assurances  can be given that
the Company will be able to generate revenues or ever operate  profitably in the
future.

     The Company's  prospects must be considered in light of the numerous risks,
expenses,   delays  and  difficulties  frequently  encountered  in  an  industry
characterized  by  intense  competition,  as well as the risks  inherent  in the
development of new programs and the commercialization of new services. There can
be no assurance that the Company will achieve recurring revenue or profitability
on a consistent basis or at all.

     In October 1996 the Company began  enrolling  patients in its first disease
management program and only began substantial  patient contacts during 1998. The
Company  currently  has  patients  enrolled  in  five  of  its  disease-specific
programs.  Through February 2001, an aggregate of approximately  650,000 persons
have been enrolled in Company programs. However, the Company has never been able
to enroll a sufficient number of patients to cover the cost of its programs. The
participation of patients in the Company's  programs has been limited by several
factors,  including  the limited  ability of clients to provide the Company with
accurate information with respect to the specific patient populations, including
coding errors that necessitated extensive  labor-intensive data processing prior
to program  implementation.  In addition, the Company has encountered resistance
from patients and other sources of information to the Company's systems.


Resignations of Certain Officers and Directors; New Management

     In January 2000, the Company accepted the resignations of Dr. David Nash, a
director of the Company and A. Neal Westermeyer,  Chief Operating Officer of the
Company.  In March 2000, the Company accepted the resignation of John V. Crisan,
Chief  Financial  Officer and a director of the Company and Donald A.  Carlberg,
President, Chief Executive Officer and a director of the Company. In March 2001,
Dr. Barbara  McNeil,  a director of the Company,  resigned  effective April 15th
2001. None of the foregoing  individuals  cited any dispute with the Company and
all such individuals indicated that their reasons for departing from the Company
were personal.

     In March 2000, the Company  appointed  Roger L.  Chaufournier as President,
Chief Executive Officer and director of the Company and appointed Kent Tapper as
Interim  Chief  Financial  Officer.  In August  2000,  Christine  St.  Andre was
appointed Chief Operating Officer of the Company.

     No assurance can be given that the Company's  current or future  members of
management will be able to operate the business of the Company effectively.


Terminability of Agreements; Exclusivity Provisions

     The Company's  current  services  agreements  with its customers  generally
automatically  renew and may be terminated by those customers without cause upon
notice of between 30 and 90 days.  In  addition,  the  Company has agreed not to
engage or  participate  in any project  other than those under  development  for
Bristol-Myers  that  involve  the  development  or  implementation  of a program
similar to those  developed for  Bristol-Myers  for specified  time periods (the
"Exclusivity  Periods").  In  general,  at the  completion  of  the  Exclusivity
Periods,  Bristol-Myers has the right to negotiate an exclusive  arrangement for
these disease  management  programs  provided that a specified minimum number of
patients have  enrolled in the programs or that it agrees to pay an  exclusivity
fee.  Bristol-Myers  has the further right, in the event exclusive  arrangements
cannot be  negotiated,  to match any bona fide  offers  made to the  Company for
disease  management  programs for these  categories  of patients for a period of
time  from  the  conclusion  of  the  Exclusivity  Periods.   These  exclusivity
provisions could restrict the Company's  ability to market its services to other
customers.  In general,  customer contracts may include significant  performance
criteria and implementation  schedules for the Company.  Failure to satisfy such
criteria or meet such schedules could result in termination of the agreements.

New Concept; Uncertainty of Market Acceptance;  Limitations of Commercialization
Strategy

     In  connection  with  the   commercialization   of  the  Company's   health
information system, the Company is marketing relatively new services designed to
link patients,  health care providers and payors in order to provide specialized
disease  management  services for targeted chronic  diseases.  However,  at this
time,  services  of this  type  have  not  gained  general  acceptance  from the
Company's customers.  This is still perceived to be a new business concept in an
industry  characterized  by an  increasing  number of market  entrants  who have
introduced or are developing an array of new services. As is typical in the case
of a new business  concept,  demand and market  acceptance for newly  introduced
services  are  subject  to a high  level of  uncertainty,  and  there  can be no
assurance  as to the  ultimate  level of  market  acceptance  for the  Company's
system,  especially in the health care  industry,  in which the  containment  of
costs is emphasized. Because of the subjective nature of patient compliance, the
Company may be unable, for an extensive period of time, to develop a significant
amount of data to demonstrate to potential  customers the  effectiveness  of its
services.  Even after such time,  no assurance  can be given that the  Company's
data and results will be  convincing or  determinative  as to the success of its
system.  There can be no  assurance  that  increased  marketing  efforts and the
implementation of the Company's  strategies will result in market acceptance for
its services or that a market for the Company's  services will develop or not be
limited.

Unpredictability of Patient Behavior May Affect Success of Programs

     The ability of the Company to monitor and modify  patient  behavior  and to
provide  information to health care providers and payors,  and  consequently the
success of the  Company's  disease  management  system,  is  dependent  upon the
accuracy of information  received from  patients.  The Company has not taken and
does not expect that it will take,  specific  measures to determine the accuracy
of  information  provided  to the Company by patients  regarding  their  medical
histories.  No  assurance  can be given  that the  information  provided  to the
Company by patients  will be accurate.  To the extent that  patients have chosen
not to comply with prescribed treatments, such patients might provide inaccurate
information  to avoid  detection.  Because of the  subjective  nature of medical
treatment,  it will be difficult for the Company to validate or confirm any such
information.  In the event that  patients  enrolled  in the  Company's  programs
provide  inaccurate  information to a significant  degree,  the Company would be
materially and adversely affected.  Furthermore,  there can be no assurance that
patient  interventions  by the Company will be successful  in modifying  patient
behavior,  improving  patient health or reducing  costs in any given case.  Many
potential  customers  may seek data from the Company with respect to the results
of its programs prior to retaining it to develop new disease management or other
health information  programs.  The Company's ability to market its system to new
customers may be limited if it is unable to demonstrate  successful  results for
its programs.

Competition

     The market for health care  information  products and services is intensely
competitive.  Competitors  vary in size and in scope and breadth of products and
services offered, and the Company competes with various companies in each of its
disease target markets.  Many of the Company's  competitors  have  significantly
greater financial,  technical,  product development and marketing resources than
the Company.  Furthermore,  other major  information,  pharmaceutical and health
care companies not presently  offering  disease  management or other health care
information  services  may enter the  markets  in which the  Company  intends to
compete.  In addition,  with sufficient  financial and other resources,  many of
these  competitors may provide  services similar to those of the Company without
substantial  barriers.  The Company does not possess any patents with respect to
its integrated information capture and delivery system.

     The Company's  competitors include specialty health care companies,  health
care   information   system  and  software   vendors,   health  care  management
organizations,  pharmaceutical  companies and other service companies within the
health care  industry.  Many of these  competitors  have  substantial  installed
customer  bases in the health care industry and the ability to fund  significant
product development and acquisition  efforts.  The Company also competes against
other companies that provide statistical and data management services, including
clinical trial services to pharmaceutical companies.

     The Company believes that the principal  competitive  factors in its market
are the ability to link patients,  health care providers and payors, and provide
the relevant  health care  information at an acceptable  cost. In addition,  the
Company  believes  that the  ability to  anticipate  changes in the health  care
industry and identify current needs are important competitive factors. There can
be no assurance  that  competitive  pressures  will not have a material  adverse
effect on the Company.

Substantial Fluctuation in Quarterly Operating Results

     The Company's  results of operations  have  fluctuated  significantly  from
quarter to quarter as a result of a number of factors,  including the volume and
timing of sales and the rate at which customers implement disease management and
other health information programs within their patient populations. Accordingly,
the Company's future  operating  results are likely to be subject to variability
from  quarter to  quarter  and could be  adversely  affected  in any  particular
quarter.

Dependence on Data Processing and Telephone Equipment

     The  business  of the  Company  is  dependent  upon its  ability  to store,
retrieve,  process  and  manage  data  and to  maintain  and  upgrade  its  data
processing  capabilities.  Interruption of data processing  capabilities for any
extended length of time, loss of stored data, programming errors, other computer
problems or  interruptions  of telephone  service could have a material  adverse
effect on the business of the Company.

Quality Control

     The Company has developed  quality control measures designed to insure that
information  obtained  from  patients is  accurately  transcribed,  that reports
covering  each  patient  contact  are  delivered  to health care  providers  and
patients and that the  Company's  personnel  and  technologies  are  interacting
appropriately  with patients and health care providers.  Quality control systems
include random monitoring of telephone calls, patient surveys to confirm patient
participation  and  effectiveness  of the particular  program,  and  supervisory
reviews of telephone agents.

Government Regulation

     The health care  industry,  including the current and proposed  business of
the Company,  is subject to extensive  regulation  by both the Federal and state
governments.  A number of states have extensive  licensing and other  regulatory
requirements   applicable  to  companies  that  provide  health  care  services.
Additionally,  services  provided to health  benefit  plans in certain cases are
subject to the  provisions  of the Employee  Retirement  Income  Security Act of
1974,  as amended  ("ERISA")  and may be  affected  by other  state and  Federal
statutes.  Generally,  state laws  prohibit the practice of medicine and nursing
without a license.  Many  states  interpret  the  practice of nursing to include
health  teaching,  health  counseling,  the  provision of care  supportive to or
restorative  of life  and well  being  and the  execution  of  medical  regimens
prescribed by a physician.  Accordingly,  to the extent that the Company assists
providers in improving patient compliance by publishing educational materials or
providing behavior modification  training to patients,  such activities could be
deemed by a state to be the  practice  of  medicine  or  nursing.  Although  the
Company has not conducted a survey of the  applicable  law in all 50 states,  it
believes  that it is not engaged in the  practice of  medicine.  There can be no
assurance,  however,  that the  Company's  operations  will not be challenged as
constituting the unlicensed practice of medicine.  If such a challenge were made
successfully  in any state,  the Company  could be subject to civil and criminal
penalties  under such  state's  law and could be  required  to  restructure  its
contractual  arrangements  in that  state.  Such  results  or the  inability  to
successfully  restructure  its  contractual  arrangements  could have a material
adverse effect on the Company.

     The  Company  is subject to state laws  governing  the  confidentiality  of
patient  information.  A variety of statutes and regulations exist  safeguarding
privacy and  regulating the  disclosure  and use of medical  information.  State
constitutions  may provide  privacy rights and states may provide private causes
of action for  violations  of an  individual's  "expectation  of privacy."  Tort
liability  may  result  from   unauthorized   access  and  breaches  of  patient
confidence.  The  Company  intends  to comply  with  state  law and  regulations
governing medical information privacy.

     In  addition,  on August 21,  1996  Congress  passed  the Health  Insurance
Portability  and  Accountability  Act of  1996  ("HIPAA"),  P.L.  104-191.  This
legislation  requires  the  Secretary  of the  Department  of  Health  and Human
Services to adopt national standards for electronic health  transactions and the
data  elements  used in such  transactions.  The  Secretary is required to adopt
safeguards  to  ensure  the  integrity  and   confidentiality   of  such  health
information.  Violation of the standards is punishable by fines and, in the case
of  wrongful   disclosure  of  individually   identifiable  health  information,
imprisonment.  The Secretary is in the process of  promulgating  and  publishing
proposed  rules  addressing  the  standards,  however,  no final rules have been
adopted to date.  Final rules may be adopted  during 2001.  Although the Company
intends to comply with all applicable  laws and  regulations  regarding  medical
information  privacy,  failure  to do so could  have an  adverse  effect  on the
Company's business.

     The Company and its  customers may be subject to Federal and state laws and
regulations  that govern  financial  and other  arrangements  among  health care
providers.  These laws prohibit certain fee splitting  arrangements among health
care  providers,  as well as direct and  indirect  payments,  referrals or other
financial  arrangements that are designed to induce or encourage the referral of
patients  to,  or the  recommendation  of, a  particular  provider  for  medical
products and services.  Possible  sanctions for violation of these  restrictions
include civil and criminal penalties.  Specifically,  HIPAA increased the amount
of civil monetary  penalties from $2,000 to $10,000.  Criminal  penalties  range
from  misdemeanors,  which carry fines of not more than $10,000 or  imprisonment
for not more than one year, or both, to felonies,  which carry fines of not more
than $25,000 or  imprisonment  for not more than five years,  or both.  Further,
criminal violations may result in permanent mandatory  exclusions and additional
permissive exclusions from participation in Medicare and Medicaid programs.

     Furthermore,  the Company and its  customers  may be subject to federal and
state laws and regulations  governing the submission of false healthcare  claims
to the government and private payers. Possible sanctions for violations of these
laws and regulations include minimum civil penalties between  $5,000-$10,000 for
each false claim and treble damages.

     Regulation in the health care field is constantly evolving.  The Company is
unable to predict what government  regulations,  if any,  affecting its business
may be  promulgated  in the future.  The Company's  business  could be adversely
affected by the failure to obtain required licenses and governmental  approvals,
comply with applicable regulations or comply with existing or future laws, rules
or regulations or their interpretations.

Significant and Extensive Changes in the Health Care Industry

     The health care  industry is subject to changing  political,  economic  and
regulatory  influences that may affect the procurement  practices and operations
of health care industry participants. Several lawmakers have announced that they
intend to propose programs to reform the U.S. health care system. These programs
may contain proposals to increase governmental involvement in health care, lower
reimbursement  rates and  otherwise  change the  operating  environment  for the
Company and its targeted customers.  Health care industry participants may react
to these proposals and the uncertainty  surrounding such proposals by curtailing
or deferring certain  expenditures,  including those for the Company's programs.
The Company cannot predict what impact,  if any, such changes in the health care
industry  might  have  on its  business,  financial  condition  and  results  of
operations.  In addition, many health care providers are consolidating to create
larger health care delivery enterprises with greater regional market power. As a
result, the remaining enterprises could have greater bargaining power, which may
lead to price erosion of the Company's  programs.  The failure of the Company to
maintain  adequate  price  levels  could have a material  adverse  effect on the
Company.

Significant Customer Concentration

     During 2000, a significant  customer ceased operation of services  supplied
by  the  Company,  which  had a  material  adverse  effect  on  the  results  of
operations.  As of December 31, 2000, the Company now has more customers than it
did at December 31, 1999. While the customer base is more diverse there is still
a  significant  concentration  of the  Company's  business in a small  number of
customers,  with several of the Company's most significant  contracts being with
CHA Health, Astra Zeneca, Bristol-Myers and Independence Blue Cross. The Company
expects  that its sales of services  will be  concentrated  in a small number of
customers for the foreseeable future.  Consequently,  the loss of any one of its
customers  could  have  a  material  adverse  effect  on  the  Company  and  its
operations.  There  can be no  assurance  that  customers  will  maintain  their
agreements  with the  Company,  enroll a  sufficient  number of  patients in the
programs  developed  by the  Company  for the  Company to  achieve  or  maintain
profitability,  or that customers will renew their  contracts upon expiration or
on terms favorable to the Company.

Dependence on Customers for Marketing and Patient Enrollment

     The  Company  has  limited  financial,  personnel  and other  resources  to
undertake extensive marketing activities. One element of the Company's marketing
strategy  involves  marketing   specialized   disease  management   programs  to
pharmaceutical  companies and managed care  organizations,  with the intent that
those  customers will market the program to parties  responsible for the payment
of health care costs, who will enroll patients in the programs. Accordingly, the
Company, will to a degree, be dependent upon its customers,  over whom it has no
control,  for the  marketing  and  implementation  of its  programs  and for the
receipt  of  valid  patient  information.  The  timing  and  extent  of  patient
enrollment is  completely  within the control of the  Company's  customers.  The
Company has faced  difficulty in receiving  reliable  patient  information  from
certain  customers,  which has hampered  its ability to complete  certain of its
projects.  To the extent that an adequate number of patients are not enrolled in
the program,  or enrollment of initial patients by a customer is delayed for any
reason, the Company's revenue may be insufficient to support its activities.

Control of the Company

     The Company is controlled by the executive officers,  directors and certain
stockholders of the Company who beneficially own in the aggregate  approximately
65% of the  outstanding  Common  Stock.  As a result  of such  ownership,  these
stockholders,  in the event  they act in  concert,  will have  control  over the
management  policies of the Company  and all matters  requiring  approval by the
stockholders of the Company, including the election of directors.

Potential Liability and Insurance

     The Company will provide  information  to health care providers and managed
care  organizations  upon which  determinations  affecting  medical care will be
made, and it could share in potential  liabilities for resulting adverse medical
consequences  to patients.  In addition,  the Company could have potential legal
liability  in the  event it fails to  record or  disseminate  correctly  patient
information. The Company maintains an errors and omissions insurance policy with
coverage of $5 million in the aggregate and per occurrence. Although the Company
does not believe  that it will  directly  engage in the  practice of medicine or
direct  delivery  of  medical  services  and has not  been a party  to any  such
litigation,  it maintains a  professional  liability  policy with coverage of $5
million in the aggregate and per occurrence.  There can be no assurance that the
Company's procedures for limiting liability have been or will be effective, that
the Company  will not be subject to  litigation  that may  adversely  affect the
Company's results of operations, that appropriate insurance will be available to
it in the future at acceptable  cost or at all or that any insurance  maintained
by the Company  will cover,  as to scope or amount,  any claims that may be made
against the Company.

Intellectual Property

     The Company  considers  its  methodologies,  processes  and  know-how to be
proprietary.  The Company seeks to protect its proprietary  information  through
confidentiality  agreements with its employees.  The Company's policy is to have
employees   enter  into   confidentiality   agreements   containing   provisions
prohibiting  the  disclosure of  confidential  information to anyone outside the
Company,  requiring  employees  to  acknowledge,  and, if  requested,  assist in
confirming the Company's ownership of any new ideas,  developments,  discoveries
or inventions  conceived  during  employment,  and  requiring  assignment to the
Company of proprietary  rights to such matters that are related to the Company's
business.

Employees

     As of February 28, 2001, the Company had 54 full and part-time employees.

Financial Information

     For  financial  information  concerning  the  Company,  see  the  financial
statements and the notes thereto included elsewhere herein.

Item 2. Description of Properties.

     The Company's executive and corporate offices are located in Rochester, New
York in  approximately  7,000  square  feet of  leased  office  space  under  an
operating lease that expires on December 31, 2001.

     The Company  believes its plants and  facilities are suitable and adequate,
and have sufficient productive capacity, to meet its current needs.

Item 3. Legal Proceedings.

     Neither the Company nor any of its  subsidiaries is a party to any material
legal proceedings.

Item 4. Submission of Matters To A Vote Of Security Holders.

     No matters were  submitted to a vote of security  holders during the fourth
quarter ended December 31, 2000.



                                     PART II

Item 5. Market Price of and  Dividends  on the  Registrant's  Common  Equity and
     Related Stockholder Matters.

(a) Market Information

     The following table sets forth, for the periods indicated, the range of the
high and low closing sale price for the Company's  Common  Stock.  The Company's
stock was traded on the NASDAQ  National  Market until September 14, 2000 and is
now traded on the OTC Bulletin Board market.


                                                      High              Low

                                                                  
       1998
       First Quarter                                  $4.50             $2.63
       Second Quarter                                 $5.00             $2.50
       Third Quarter                                  $3.44             $1.81
       Fourth Quarter                                 $1.88             $1.00

       1999
       First Quarter                                  $2.81             $1.31
       Second Quarter                                 $2.88             $2.13
       Third Quarter                                  $3.00             $1.88
       Fourth Quarter                                 $3.00             $1.38

       2000
       First Quarter                                  $4.81             $1.25
       Second Quarter                                 $2.13             $0.53
       Third Quarter                                  $0.97             $0.28
       Fourth Quarter                                 $0.56             $0.13

(b) Holders

     The approximate  record number of holders of the Company's  common stock as
of February  28, 2000 is 69.  However,  the Company  believes  that there are in
excess of 750 beneficial holders of Common Stock of the Company.

(c) Dividends

     The Company is paying 9%  cumulative  dividends on its Series C Convertible
Preferred Stock that was issued March 31, 2000. The Company  anticipates payment
of dividends on this class of stock annually and expects that it may be required
to pay additional dividends on any classes of preferred stock that may be issued
to raise working capital.

(d)  Recent sales of unregistered securities

     On March 31,  2000,  the Company  completed a private  placement of 100,000
shares  of newly  issued  Series C 9%  Cumulative  Convertible  Preferred  Stock
("Series C"), raising $1,000,000 in total proceeds. The shares were sold to four
accredited investors,  under an exemption from registration pursuant to Rule 506
of the Securities Act of 1933.  There was no placement  agent and no commissions
were paid to any party.  These  shares can be  converted  into Common Stock at a
rate of 8 shares of Common  Stock to 1 share of Series C Preferred  Stock.  Each
Series C share has voting rights equivalent to 8 shares of Common Stock (800,000
shares).  John Pappajohn and Derace Schaffer,  members of the Board of Directors
of  the  Company,   purchased  50,000  and  25,000  shares  of  Series  C  Stock
respectively.  The  proceeds  from this  issuance  have been used to support the
Company's operations.

     Between  August  20,  2000  and  December  31,  2000 the  Company  borrowed
$1,171,000  from  Messers.  Pappajohn  and  Schaffer in the form of demand notes
intended to be secured by the assets of the  Company.  The  Company  anticipates
that it will need to  borrow  additional  funds  before  it can  secure  capital
through the  issuance of  additional  securities.  From  January 1, 2001 through
March 31, 2001,  an additional  $660,000 has been  borrowed  from Mr.  Pappajohn
under  substantially  the same terms.  The Company's  current  directors have no
obligation to continue to provide funds.  There can be no assurances  given that
the Company  can borrow the  additional  amounts  needed or that the Company can
sell additional securities.



Item 6. Selected Financial Data.


                                                                   Year Ended December 31,
                                        ------------------------------------------------------------------------------
                                                2000            1999           1998            1997           1996
Statement of Operations Data:

                                                                                                    
Revenues ..............................   $  2,139,262    $  3,545,207    $  2,344,072    $  2,062,373    $    845,412

Costs and expenses:
  Cost of sales .......................      4,332,048       5,614,128       4,011,710       2,574,214         748,322
  Sales and marketing .................      1,047,511       2,445,425       1,929,525       1,853,224         913,547
  General and administrative ..........      2,282,026       1,885,566       1,490,210       1,244,287       1,760,760
  Research and development ............        305,543         967,365         298,686         489,115         310,552

    Total costs and expenses ..........      7,967,128      10,912,484       7,730,131       6,160,840       3,733,181

Operating loss ........................     (5,827,866)     (7,367,277)     (5,386,059)     (4,098,467)     (2,887,769)

Other (expenses) income ...............       (211,340)       (250,897)        556,592         835,116          81,333

NET LOSS ..............................     (6,039,206)     (7,618,174)     (4,829,467)     (3,263,351)     (2,806,437)

  Convertible preferred stock dividends       (617,500)           --              --              --              --

NET LOSS ATTRIBUTABLE TO
 COMMON SHAREHOLDERS ..................   ($ 6,656,706)   ($ 7,618,174)   ($ 4,829,467)   ($ 3,263,351)   ($ 2,806,437)

Net loss per share - basic and diluted    ($      0.82)   ($      0.95)   ($      0.60)   ($      0.41)   ($      0.44)

Weighted average
  common shares outstanding ...........      8,135,635       8,032,533       8,018,398       7,980,094       6,347,716




                                                               Year Ended December 31,
                                    -----------------------------------------------------------------------
                                           2000           1999          1998           1997          1996
Balance Sheet Data:

                                                                                        
Cash and cash equivalents ..........   $    28,231    $   489,521   $ 6,316,955   $   779,317   $15,666,609
Working capital ....................    (1,375,391)       414,132     7,992,894    13,242,387    14,591,700
Total assets .......................     2,292,244      3,844,395    10,519,727    15,036,473    17,085,387
Long term obligations ..............     2,500,000        500,000          --            --            --
Total liabilities ..................     4,481,225      1,427,732       894,339       587,728     1,631,650
Total stockholders' (deficit) equity    (2,188,981)     2,416,663     9,625,388    14,448,745    15,453,737






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

     Management's  discussion  and analysis  provides a review of the  Company's
operating  results for the years ended December 31, 2000, 1999 and 1998, and its
financial  condition at December  31,  2000.  The focus of this review is on the
underlying  business  reasons for significant  changes and trends  affecting the
revenues, net losses, and financial condition of the Company. This review should
be read in conjunction with the accompanying consolidated financial statements.

     In an effort to give investors a well-rounded view of the Company's current
condition  and future  opportunities,  this Annual  Report on Form 10-K includes
forecasts by the  Company's  management  about future  performance  and results.
Because they are forward-looking,  these forecasts involve  uncertainties.  They
include risks of market  acceptance of or preference  for the Company's  systems
and  services,  competitive  forces,  the impact of, and changes in,  government
regulations,  general  economic  factors in the healthcare  industry,  and other
factors  discussed in the  Company's  filings with the  Securities  and Exchange
Commission.

Overview

     The Company  was formed on  February  22,  1995.  Although  the Company has
completed the  development  of its integrated  information  capture and delivery
system and has  developed  several  disease  management  programs  for  specific
diseases,  the  Company is  continuing  to refine its  products  for  additional
applications.  In October 1996 the Company began enrolling patients in its first
disease management  program and began substantial  patient contacts during 1998.
Also in 1998,  the  Company  expanded  its  products  offered to include  demand
management  and health  related  surveys.  The Company  currently  has  patients
enrolled in more than 20 of its  disease-specific,  demand  management or survey
programs.  Through February 2001, an aggregate of over 650,000 persons have been
enrolled or participated  in Company  programs.  However,  the Company has never
been able to enroll a  sufficient  number of  patients  to cover the cost of its
programs.  The enrollment of patients in the Company's programs has been limited
by several  factors,  including  the  limited  ability of clients to provide the
Company  with  accurate   information  with  respect  to  the  specific  patient
populations, including coding errors that necessitated extensive labor-intensive
data processing prior to program  implementation.  In addition,  the Company has
encountered  resistance  from sources of information  largely due to uncertainty
concerning legal liability for patient confidential information.

     In  response  to these  market  dynamics,  the  Company  has taken  several
tactical and strategic steps including, formal designation of internal personnel
at customer sites to assist clients with  implementation;  closer integration of
Company  systems  personnel with clients to facilitate  accurate data transfers;
promotion  of a broader  product line to enable  clients to enter the  Company's
disease  management  programs  through a variety of channels and  providing  the
customers  access and  control  over their  patient's  confidential  information
though  targeted use of Internet  technology.  The Company's  demand  management
services  and  automated  surveys  (general  health and  disease-specific),  can
provide mechanisms for enrollment to the Company's disease management  programs.
The Company continues to develop  capabilities or relationships that will enable
its  customers  to more  effectively  leverage  the data stored in their  legacy
systems. Nevertheless, no assurance can be given that the Company's efforts will
succeed in increasing patient enrollment in Company programs.

     The Company has entered into services agreements to develop,  implement and
operate  programs  for:  (i)  patients  who have  recently  experienced  certain
cardiovascular  events;  (ii)  patients  who have been  diagnosed  with  primary
congestive heart failure;  (iii) patients  suffering from asthma;  (iv) patients
suffering from diabetes, (v) patients who are suffering from hypertension,  (vi)
demand  management,  which provides  access to nurses,  and (vii) various survey
initiatives  which  assess,  among other  things:  satisfaction,  compliance  of
providers  or payors to national  standards,  health  status or risk of specific
health related events.  These  contracts  provide for fees paid by its customers
based upon the number of patients participating in each of its programs, as well
as initial program implementation and set-up fees from customers.  To the extent
that the Company has had limited  enrollment  of patients in its  programs,  the
Company's  operations  revenue has been, and may continue to be limited.  During
1999 and 2000,  the Company has  committed  increased  resources  to  developing
strategic  upgrades of its  information and  telecommunications  technologies to
leverage the emerging capabilities of the Internet. Moreover, as the Company has
completed  the  development  of its  primary  disease  management  programs,  it
anticipates  that  development  revenue will  continue to be minimal  unless and
until the Company enters into new development agreements.  The Company's program
development  contracts  typically  require payment from the customer at the time
that  the  contract  is  executed,  with  additional  payments  made as  certain
development  milestones are met. Development contract revenue is recognized on a
percentage  of  completion   basis,  in  accordance  with  the  ratio  of  total
development  cost  incurred to the  estimated  total  development  costs for the
entire  project.  Losses,  if  any,  related  to  program  development  will  be
recognized in full as identified.  The Company's  contracts typically call for a
fee to be paid by the customer for each patient enrolled for a series of program
services,  pay for those services  incrementally  as they are delivered or pay a
fixed fee per  patient or member each month for bundled  program  services.  The
timing of  customer  payments  for the  delivery of program  services  varies by
contract. Revenues from program operations are recognized ratably as the program
services are delivered. The amount of the per patient fee varies from program to
program depending upon the number of patient contacts  required,  the complexity
of the  interventions,  the cost of the  resources  used and the  detail  of the
reports  generated.  The Company has not  capitalized  any costs  related to the
development  of software for use in its programs  since all of such software has
been developed for internal use.

     Revenues from  Operations,  which includes fees received by the Company for
operating its programs is the most significant source of the Company's revenues.
The Company is continuing to devote significant  marketing efforts to increasing
the number of programs that are in operation as well as development resources to
expand  its  products  that  include  licensing  of  Internet-based  technology.
Nevertheless,  the Company is still supporting a substantial  infrastructure  in
maintaining  the  capacity  necessary  to deliver its  services and to offer its
services to new customers.  Therefore,  the Company will be required to increase
substantially  the number of patient  contacts and management  programs to cover
the costs necessary to maintain the capability to service its customers. In that
the Company began  substantial  patient  contacts  during 1998 and has still, to
this  date,  increased  contacts  at a  relatively  slow  rate,  the  Company is
continually  examining its costing  structures to determine the levels that will
be necessary to achieve profitability.

     During the latter part of 2000, the Company made reductions in cost through
structural  changes in its operation:  closing of two  facilities,  closure of a
third  facility as of February 28, 2001, and a reduction of staff from 120 to 54
persons.  These changes have reduced the Company's loss before  depreciation and
amortization  from about $1.8 million for the 3-month  period ended December 31,
1999 to  approximately  $0.9  million  for the same  period  of 2000.  Some cost
savings from actions taken in November and December of 2000 will not be realized
until after January 1, 2001.

     The sales cycle for the  Company's  programs may be extensive  from initial
contact to contract  execution.  During  these  periods,  the Company may expend
substantial  time, effort and funds to prepare a contract proposal and negotiate
the contract. The Company may be unable to consummate a commercial  relationship
after the expenditure of such time, effort and financial resources.

     In February 1999, the Company, through a wholly-owned  subsidiary,  Patient
Infosystems  Acquisition  Corp.,  acquired  substantially  all of the  assets of
HealthDesk  Corporation,  a  consumer  healthcare  software  company,  primarily
engaged in the business of designing and developing  Internet-based  products in
the healthcare,  wellness and disease  management  industries for $761,463.  The
Company  obtained funds for the HealthDesk  acquisition from its available cash.
The assets that were acquired by the Company  included  inventory,  intellectual
property,  hardware  and  software.  In  August  2000,  the  Company's  board of
directors  approved a merger of Patient  Infosystems  Acquisition Corp. into the
Company.

     During  2000,  the  Company  felt the  pressure of severe  working  capital
shortfalls.  The  Company's  available  cash had been  reduced  to a level  that
substantially  limits its operations.  Although the Company established lines of
credit in the amount of $2.5 million,  raised $1 million in equity and issued an
additional  $1.17  million in demand  notes,  the Company is continuing to incur
losses  and  must  identify  substantial   additional  capital  to  sustain  its
operations.  The Company's  operations are currently being funded by loans being
made on a monthly  basis by a director  of the  Company.  This  director  is not
obligated to continue to loan the company  additional  funds and may stop at any
time.  In such  instance,  if the Company is unable to identify  any  additional
sources of capital, it will likely be forced to cease operations. As a result of
the  above,  the  Independent  Auditors'  Report on the  Company's  consolidated
financial  statements  appearing  at  Item  8  includes  an  emphasis  paragraph
indicating that the Company's recurring losses from operations raise substantial
doubt  about  the  Company's  ability  to  continue  as  a  going  concern.  The
accompanying  consolidated  financial  statements do not include any adjustments
that might result from the outcome of this uncertainty.

     In December  1999, the Company  established a credit  facility with Norwest
Bank Iowa,  National  Association,  now Wells Fargo Bank,  ("Norwest")  for $1.5
million  (the  "Original  Line of  Credit").  The  Original  Line of  Credit  is
guaranteed  by two of the  Company's  directors:  John  Pappajohn  and Derace L.
Schaffer (the "Original Guarantees"). In March 2000, the Original Line of Credit
was  increased  to a total  of $2.5  million  (the  "line of  Credit")  and also
guaranteed by Messrs. Pappajohn and Schaffer (the "Additional Guarantees").

     Interest under the Line of Credit is the prime rate of interest established
by Norwest or, at the Company's  election,  the LIBOR Rate Option. The principal
and any unpaid  interest  under the line of Credit are due and  payable on March
31,  2002.  There is a  commitment  fee of 0.25% per annum on the average  daily
unused  amount of the Line of Credit to be paid  quarterly in arrears  beginning
June 30, 2001. In conjunction  with the Line of Credit,  the Company  granted to
Norwest a security interest in all of the Company's assets.

     In consideration of the Original Guarantees, the Company granted to each of
Messers.  Pappajohn  and  Schaffer  warrants to purchase  187,500  shares of the
Company's Common Stock at an exercise price of $1.5625 per share,  which was the
closing  price  of  the  Company's   Common  Stock  on  December  28,  1999.  In
consideration of the Additional Guarantees, the Company intends to grant to each
of Messers.  Pappajohn and Schaffer  warrants to purchase  125,000 shares of the
Company's  Common Stock at an exercise price of $2.375 per share,  which was the
closing price of the Company's Common Stock on March 21, 2000.

     On March 31,  2000,  the Company  completed a private  placement of 100,000
shares  of newly  issued  Series C 9%  Cumulative  Convertible  Preferred  Stock
("Series  C"),  raising  $1,000,000  in  total  proceeds.  These  shares  can be
converted  into Common Stock at a rate of 8 shares of Common Stock to 1 share of
Series C Preferred Stock.  Each Series C share has voting rights equivalent to 8
shares  of  Common  Stock  (800,000  shares).  Messers  Pappajohn  and  Schaffer
purchased 50,000 and 25,000 shares of Series C Stock, respectively. The proceeds
from this issuance have been used to support the Company's operations.

     Between  August  20,  2000  and  December  31,  2000 the  Company  borrowed
$1,171,000  from  Messers.  Pappajohn  and  Schaffer in the form of demand notes
intended to be secured by the assets of the  Company.  The  Company  anticipates
that it will need to borrow  additional  funds  before it can secure  additional
capital through the issuance of additional  securities.  Between January 1, 2001
and March 31, 2001, an additional  $660,000 has been borrowed from Mr. Pappajohn
under  substantially  the same terms.  The Company's  current  directors have no
obligation to continue to provide funds.  There can be no assurances  given that
the Company  can borrow the  additional  amounts  needed or that the Company can
sell additional securities.

     In  September  2000,  the  Company  executed  a letter of intent to acquire
substantially  all the  assets  of  Health  Data  Solutions  and its  affiliate,
American Care Source (collectively known as "HDS").  Negotiations with HDS ended
in January 2001, with the parties failing to reach mutually acceptable terms for
the proposed acquisition,  but resolving to enter into a marketing agreement. On
March 6, 2001,  the  Company and HDS entered  into a Strategic  Partnership  and
Marketing Agreement  establishing the terms under which both companies may offer
their  combined  products and  services to their  respective  clients.  While no
assurances  can be given that the Company will  generate new revenues  from this
relationship,  the Company  will use this  relationship  to  validate  strategic
marketing initiatives.


Results of Operations

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

     Revenues

     Revenues are comprised of revenues from operations  fees,  development fees
and licensing fees.  Revenues decreased 39.7% from $3,545,207 for the year ended
December 31, 1999 to $2,139,262  for the year ended December 31, 2000. A summary
of these revenues by category, is as follows for the years ended December 31:



Revenues                   2000           1999

                                      
Operations Fees      $ 1,941,810    $ 3,270,900
Development Fees          81,626        227,307
Licensing Fees           115,826         47,000
                     -----------    -----------
Total Revenues       $ 2,139,262    $ 3,545,207


     Revenues from  operations fees decreased 40.6% from $3,270,900 for the year
ended  December  31, 1999 to  $1,941,810  for the year ended  December 31, 2000.
Operations  revenues  are  generated  as the  Company  provides  services to its
customers for their  disease-specific  programs,  patient  surveys,  health risk
assessments,  patient  satisfaction  surveys,  physician  education programs and
marketing support programs.  Operations revenues decreased significantly in 2000
due to  termination  of  Medicare  by two of the  Company's  key  customers  and
completion of two pharma projects.

     Revenues from  development  fees decreased 64.1% from $227,307 for the year
ended  December 31, 1999 to $81,626 for the year ended  December  31,  2000.  In
1999, the Company received  development revenues from a variety of customers for
creation of or  modification  to specific  programs.  The Company has  completed
substantially  all services under these  agreements  and is primarily  receiving
revenues  in  connection  with  the   enhancement  of  its  existing   programs.
Development  revenues  include  clinical,  technical and  operational  design or
modification of the Company's primary disease management  programs.  Development
revenues have declined from year to year since the year ended December 31, 1997,
as the Company  reduced the amount of development  work it has performed for its
customers.  The Company  anticipates  that  revenue from  development  fees will
continue to decline unless the Company enters into new development agreements.

     Revenues from  licensing  fees  increased  146.4% from $47,000 for the year
ended  December  31,  1999 to $115,826  for the year ended  December  31,  2000.
Licensing  revenue  represents  amounts that the Company  charges its customers,
either on a one-time only or continuing  basis, for the right to enroll patients
in or the right to license other entities certain of its programs, primarily the
Company's  Internet-based  Case  Management  Support  System  product line.  The
Company  had  licensing  fees of  $115,826  from the sale of its  Internet-based
products in 2000.

     Costs and Expenses

     Cost of sales includes salaries and related benefits,  services provided by
third  parties,  and  other  expenses  associated  with the  development  of the
Company's customized disease state management programs, as well as the operation
of each of its disease state management programs.

     Cost of sales  decreased  22.8% from $5,614,128 for the year ended December
31, 1999 to  $4,332,048  for the year ended  December 31, 2000.  The decrease in
these costs  primarily  reflects a decreased  level of program  development  and
operational activities.

     Sales and marketing  expenses  decreased 57.2% from $2,445,425 for the year
ended  December  31, 1999 to  $1,047,511  for the year ended  December 31, 2000.
These costs consist  primarily of salaries,  related  benefits and travel costs,
sales materials and other marketing related expenses. Decreased spending in this
area is attributable to the Company's efforts to reduce costs and to its limited
available  capital,  resulting in a smaller sales and marketing staff during the
year ended  December 31, 2000. It is  anticipated  that the Company will need to
invest heavily in the sales and marketing process in future periods if funds are
available.  To the extent that the Company has limited funds available for sales
and  marketing,  it will likely be unable to invest in the  necessary  marketing
activities to generate substantially greater sales.

     General  and  administrative   expenses  include  the  costs  of  corporate
operations,  finance and accounting, human resources and other general operating
expenses of the Company.  General and administrative expenses increased 21% from
$1,885,566 for the year ended December 31, 1999 to $2,282,026 for the year ended
December 31, 2000. The increase in these costs was caused by the amortization of
$664,750 in debt issuance  costs related to funding  operations and the addition
of required  administrative  personnel.  Without the debt issuance cost, general
and  administrative  expense would have decreased  14.2% from $1,885,566 for the
year ended December 31, 1999 to $1,617,276 for the year ended December 31, 2000.
The Company  expects that general and  administrative  expenses will decrease in
future   periods  as  expense   controls  and   infrastructure   reductions  are
implemented.

     Research and development expenses consist primarily of salaries and related
benefits  and  administrative  costs  allocated  to the  Company's  research and
development  personnel for  development of certain  components of its integrated
information  capture and delivery system, its  Internet-based  software products
and its standardized disease state management programs. Research and development
expenses  decreased  68.4% from $967,365 for the year ended December 31, 1999 to
$305,543  for the year ended  December  31,  2000.  The decrease in research and
development  expenses  reflects the transition of the Company's  investment into
Internet technology during 1999 into operational systems during 2000.

     Other  Income/Expense  is  comprised  of  interest  income  and  losses  on
investments. The net totals are as follows for the years ended December 31:



                                    2000             1999
                            ----------------- ----------------
                                                    
Interest (expense) income         $ (190,997)        $166,164
Loss on investment
  PATI Canada                         (7,700)       (167,063)
  PATI US                            (12,643)           -
  Pulse Group                                       (250,000)
                            ----------------- ---------------

Total Income/(Expense)            $ (211,340)      $ (250,897)
                            ----------------- ---------------


     Interest  expense is due to debt.  Interest  income is generated  primarily
from cash balances and short-term money market  investments.  Interest decreased
to an expense of $190,997 for the year ended December 31, 2000 from an income of
$166,164 for the year ended December 31, 1999.  The decrease in interest  income
reflects the use by the Company of its available  cash and increased  borrowings
required to fund operations.

     The loss in  investments  for the year ended  December  31,  2000  includes
variations  in  Canadian  currency  ("CN$")  for  PATI  Canada  and the  sale or
insurance recovery of certain fixed assets of the Company. The financial records
of PATI Canada,  a wholly owned  subsidiary,  are  maintained  in United  States
Dollars ("US$").  Receivables or accruals which are CN$ are booked in equivalent
US$ at an exchange rate for the month the  transaction is booked.  If there is a
difference between the exchange rate at the time of a cash receipt or payment of
the accrued expense, the differential is realized as an investment gain or loss.
In June  2000,  the  Company  consolidated  operational  locations  and  sold or
abandoned  certain  fixed  assets which were no longer  required  resulting in a
loss, net of an insurance recovery, of $12,643.

     For the year ended  December 31,  2000,  the Company  declared  $617,500 in
dividends  on  convertible  preferred  stock.  On March 31,  2000,  the  Company
completed a private  placement  of 100,000  shares of newly  issued  Series C 9%
Cumulative Convertible Preferred Stock ("Series C"), raising $1,000,000 in total
proceeds.  These shares can be converted into Common Stock at a rate of 8 shares
of Common Stock to 1 share of Series C Preferred Stock.  Each Series C share has
voting  rights  equivalent  to 8 shares of Common Stock  (800,000  shares).  The
proceeds from this issuance have been used to support the Company's operations.

     The fair market value of the Company's Common Stock at the time of issuance
of Series C Stock  was  $1.9375  per  share.  The  Series C  Preferred  Stock is
convertible  as a price equal to $1.25 per share of Common Stock  resulting in a
discount,   or  beneficial   conversion  feature,  of  $0.6875  per  share.  The
incremental  fair value of $550,000 for the 100,000 shares of Series C Preferred
issued is deemed to be the equivalent of a preferred stock dividend. The Company
recorded the deemed  dividend at the date of issuance by offsetting  charges and
credits to additional  paid in capital of $550,000,  without any effect on total
stockholders'  equity. In addition,  the Company has accrued $67,500 in dividend
expense,  which will become  payable to the Series C  stockholders  on March 31,
2001.

     The Company had a net loss attributable to common stockholders of
$6,656,706 for the year ended December 31, 2000, compared to $7,618,174 for the
year ended December 31, 1999. This represents a loss of $.82 per share for 2000
and $.95 for 1999.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

     Revenues

     Revenues are comprised of revenues from operations fees, development fees
and licensing fees. Revenues increased 51% from $2,344,072 for the year ended
December 31, 1998 to $3,545,207 for the year ended December 31, 1999. A summary
of these revenues by category is as follows for the years ended December 31:



Revenues                 1999              1998

                               
Operations Fees    $ 3,270,900       $ 1,385,720
Development Fees       227,307           689,157
Licensing Fees          47,000           269,195
                   -----------       -----------
Total Revenues     $ 3,545,207       $ 2,344,072


     Revenues from  operations  fees increased 136% from $1,385,720 for the year
ended  December  31, 1998 to  $3,270,900  for the year ended  December 31, 1999.
Operations  revenues  are  generated  as the  Company  provides  services to its
customers for their  disease-specific  programs.  Operations  revenues increased
significantly  in 1999,  as the Company  continued  to increase  the  membership
levels in the  Company's  disease  management  programs  and  demand  management
programs.

     Revenues  from  development  fees  decreased 67% from $689,157 for the year
ended  December 31, 1998 to $227,307 for the year ended  December 31, 1999.  The
Company  received  $689,157 in development  revenues for the year ended December
31, 1998,  related almost  entirely to fees from  Bristol-Myers  ("BMS") for the
development  of  disease  state  management  agreements.  In 1999,  the  Company
received  development revenues from a variety of other customers (including BMS)
related  to  other   disease-specific   programs.   The  Company  has  completed
substantially  all services under these  agreements  and is currently  receiving
revenues in connection with the development of only three programs.  Development
revenues include clinical,  technical and operational  design or modification of
the Company's primary disease  management  programs.  Development  revenues have
declined  from year to year  since the year  ended  December  31,  1997,  as the
Company  reduced  the  amount  of  development  work  it has  performed  for its
customers.  The Company  anticipates  that  revenue from  development  fees will
continue to decline unless the Company enters into new development agreements.

     Revenues from licensing fees decreased 83% from $269,195 for the year ended
December 31, 1998 to $47,000 for the year ended  December  31,  1999.  Licensing
revenue represents  amounts that the Company charges its customers,  either on a
one-time only or continuing  basis,  for the right to enroll  patients in or the
right to license  other  entities  certain of its  programs,  primarily  but not
limited to, the Company's  Internet-based Case Management Support System product
line or its standardized asthma and diabetes programs. The Company had licensing
fees of $47,000 from the sale of its Internet-based products in 1999.

     The Company also  provides  other  services to customers in the  healthcare
industry that involve new  applications of its information  capture and delivery
system. These services include patient surveys, health risk assessments, patient
satisfaction  surveys,   physician  education  programs  and  marketing  support
functions.

     Costs and Expenses

     Cost of sales include salaries and related  benefits,  services provided by
third  parties,  and  other  expenses  associated  with the  development  of the
Company's customized disease state management programs, as well as the operation
of each of its disease state management programs.

     Cost of sales increased 40% from $4,011,710 for the year ended December 31,
1998 to $5,614,128  for the year ended  December 31, 1999. The increase in these
costs  primarily  reflects  an  increased  level  of  program   development  and
operational  activities,  as  well as the  Company's  creation  of the  capacity
necessary to handle  anticipated  increases in the number of individuals to whom
the Company provides services.

     Sales and marketing  expenses  increased 27% from  $1,929,525  for the year
ended  December  31, 1998 to  $2,445,425  for the year ended  December 31, 1999.
These costs consist  primarily of salaries,  related  benefits and travel costs,
sales materials and other marketing related expenses. Increased spending in this
area is attributable to the Company's  efforts to expand its sales and marketing
staff  during the year ended  December  31,  1999.  It is  anticipated  that the
Company will continue to invest  heavily in the sales and  marketing  process in
future periods, though at somewhat lower levels.

     General  and  administrative   expenses  include  the  costs  of  corporate
operations,  finance and accounting, human resources and other general operating
expenses of the Company.  General and administrative expenses increased 27% from
$1,490,210 for the year ended December 31, 1998 to $1,885,566 for the year ended
December 31, 1999.  These  expenditures  were  incurred to develop the corporate
infrastructure   necessary  to  support   anticipated  program  development  and
operations  growth. The increase in these costs was caused by an increase in the
Company's level of business activity and the addition of required administrative
personnel.  The Company  expects that general and  administrative  expenses will
decrease in future periods as expense controls and infrastructure reductions are
implemented.

     Research and development expenses consist primarily of salaries and related
benefits  and  administrative  costs  allocated  to the  Company's  research and
development  personnel for  development of certain  components of its integrated
information  capture and delivery system, its  Internet-based  software products
and its standardized disease state management programs. Research and development
expenses  increased  224% from $298,686 for the year ended  December 31, 1998 to
$967,365  for the year ended  December  31,  1999.  The increase in research and
development  expenses  reflects  the  Company's  acquisition  of  Healthdesk  in
February 1999, which became the Company's Internet Technology  development group
devoting most of its efforts to the development of the Company's  Internet-based
software products.

     Other  Income/Expense  is  comprised  of  interest  income  and  losses  on
investments. The net totals are as follows for the years ended December 31:



                                     1999             1998
                           ----------------- ---------------
                                              
Interest (expense) income           $166,164        $556,592
Loss on investment
  PATI Canada                      (167,063)            -
  Pulse Group                      (250,000)            -
                           ----------------- ---------------

Total Income/(Expense)           $ (250,897)        $556,592
                           ----------------- ---------------


     Interest  income is generated  primarily  from cash balances and short-term
money market  investments.  Interest  income  decreased to $166,164 for the year
ended  December 31, 1999 from $556,592 for the year ended December 31, 1998. The
decrease in interest  income  reflects  the use by the Company of its  available
cash and the reduction of proceeds that can earn interest.

     Losses on investments are associated with two unrelated  investments by the
Company:  (1) Patient Infosystems Canada, Inc. ("PATI Canada") and (2) the Pulse
Group.  At the end of 1998, the Company  entered into a joint venture  agreement
with MacLean Hunter Publishing Limited to market and sell, on an exclusive basis
in Canada, products and services developed by the Company and to jointly manage,
finance and operate the business  entity PATI Canada.  The venture was dedicated
to the  development  of a  commercially  viable  business built around the sale,
marketing and service of the Company's products and services in Canada. The loss
of  $167,063  reported  for  1999  represents  the  Company's  share of the loss
incurred by the venture.  On October 1, 1999, the Company  acquired 100% control
of the venture and the results of operations  from that day forward are included
in  the  Company's  consolidated   financial  statements.   The  Company's  1997
investment  in the Pulse Group was deemed to be no longer  realizable as of June
30,  1999,  and the initial  total  investment  of $250,000  was  recorded as an
investment loss.

     The Company had a net loss of  $7,618,174  for the year ended  December 31,
1999,  compared  to  $4,829,467  for the year  ended  December  31,  1998.  This
represents a loss of $.95 per share for 1999 and $.60 for 1998.

     Liquidity and Capital Resources

     At  December  31,  2000  the  Company  had a  working  capital  deficit  of
$1,375,391 as compared to working capital of $414,132 at December 31, 1999. Also
at December 31, 2000,  the Company had a  stockholders'  deficit of  $2,188,981.
Through  December 31, 2000 these  amounts  reflect the effects of the  Company's
continuing losses, issuance of demand notes totaling $1,171,000 due to directors
of the  Company  and long term  borrowings  of  $2,500,000  against  its line of
credit.  The  Company has never  earned  profits  and since its  inception,  the
Company has primarily  funded its operations,  working capital needs and capital
expenditures  from the sale of  equity  securities.  The  Company  is  currently
maintaining it operations only through the receipt of continuing  loans from one
of its  directors.  If these loans or additional  funds are not  available,  the
Company would likely be required to cease operations.

     In December 1999, the Company  established a credit facility for $1,500,000
guaranteed by Derace Schaffer and John Pappajohn,  two directors of the Company.
In consideration for their  guarantees,  the Company granted to Dr. Schaffer and
Mr.  Pappajohn  warrants to purchase an  aggregate  of 375,000  shares of common
stock for $1.5625 per share.  In March  2000,  the  facility  was  increased  by
$1,000,000 under substantially the same terms, also guaranteed by the same Board
members.  Additional  warrants  to purchase an  aggregate  of 250,000  shares of
Common Stock for $2.325 per share,  were granted to Dr. Derace  Schaffer and Mr.
John Pappajohn for their guarantee of this additional line of credit.

     On March 31,  2000,  the Company  completed a private  placement of 100,000
shares  of newly  issued  Series C 9%  Cumulative  Convertible  Preferred  Stock
("Series  C"),  raising  $1,000,000  in total  proceeds.  Messers  Pappajohn and
Schaffer purchased 50,000 and 25,000 shares of Series C Stock respectively.  The
proceeds from this issuance have been used to support the Company's operations.

     The  Company has  expended  significant  amounts to expand its  operational
capabilities  including increasing its administrative and technical costs. While
the Company has curtailed its spending  levels in recent  months,  to the extent
that revenues do not increase substantially,  the Company's losses will continue
and its available  capital will diminish further.  The Company's  operations are
currently  being funded by loans being made on a monthly  basis by a director of
the  Company.  This  director is not  obligated  to continue to loan the company
additional  funds and may stop at any time. In such instance,  if the Company is
unable to identify any additional  sources of capital,  it will likely be forced
to cease operations.  As a result of the above, the Independent Auditors' Report
on the Company's  consolidated financial statements appearing at Item 8 includes
an  emphasis  paragraph  indicating  that the  Company's  recurring  losses from
operations raise  substantial doubt about the Company's ability to continue as a
going concern. The accompanying consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

     Capital  expenditures during 2000 were $16,404, as compared to expenditures
of $433,598 during 1999 and $594,663 during 1998. The expenditures  during these
periods  represented  the  purchase  of  the  significant   technology  platform
components of the integrated information capture and delivery systems as well as
purchases  required to support the  Company's  growth in employees  during those
periods.

     Nasdaq Listing Status

     The  Company's  securities  were delisted  from the Nasdaq  National  Stock
Market effective  September 14, 2000. The Company's  securities were immediately
eligible to trade on the OTC Bulletin Board.

     Inflation

     Inflation did not have a significant  impact on the Company's  costs during
2000, 1999 or 1998. The Company  continues to monitor the impact of inflation in
order  to  minimize  its  effects  through  pricing   strategies,   productivity
improvements and cost reductions.

     Recent Accounting Pronouncements

     In June 1998, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards ("SFAS") No. 133,  "Accounting for
Derivative  Instruments and Hedging  Activities".  In June 2000, the FASB issued
SFAS No. 138,  which  amends  certain  provisions  of SFAS 133 to clarify  areas
causing difficulties in implementation.  SFAS No. 133, as amended,  requires the
Company to recognize all derivatives on the  consolidated  balance sheet at fair
value.  Derivatives  that  are not  hedges  of  underlying  transaction  must be
adjusted to fair value through income.  If the derivative is a hedge,  depending
on the nature of the hedge,  changes in the value of derivatives  will either be
offset  against the change in fair value of the hedged  assets,  liabilities  or
firm commitments  through earnings or recognized in other  comprehensive  income
until the hedged item is recognized in earnings.  The  ineffective  portion of a
derivative's  change in fair value will be  immediately  recognized in earnings.
The Company has completed the process of evaluating  the impact of SFAS No. 133,
as  amended.  The  Company  has not  identified  any  derivatives  that meet the
criteria for a derivative  instrument  and does not  participate  in any hedging
activities.  As a result,  there was no  effect  on the  Company's  consolidated
financial  position,  results of  operations  or cash flows  resulting  from the
adoption of SFAS No. 133, as amended, during the first quarter of 2001.

     In December 1999, the  Securities  and Exchange  Commission  ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in the Financial
Statements",  which  provides  guidance  on the  recognition,  presentation  and
disclosure of revenue in financial  statements files with the SEC. The Company's
adoption  of SAB No. 101  during  the fourth  quarter of 2000 did not impact the
Company's consolidated financial position, results of operations or cash flows.

     In September 2000, the Financial Accounting Standards Board issued SFAS No.
140,   "Accounting   for  Transfers  and  Servicing  of  Financial   Assets  and
Extinguishment of Liabilities,"  which supercedes SFAS No. 125,  "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."
This standard is effective for transfers  occurring  after March 31, 2001,  with
certain disclosure requirements effective for the year ending December 31, 2000.
The  Company  does  not  believe  the  adoption  of this  standard  will  have a
significant impact on the Company's condensed  consolidated  financial position,
results of operations or cash flows.

     Year 2000 Issues

     The Company  suffered no ill effects from Year 2000  related  technological
issues.

     Forward-Looking Statements

     When used in this and in future  filings by the Company with the Securities
and Exchange Commission,  in the Company's press releases and in oral statements
made with the approval of an authorized  executive  officer of the Company,  the
words or phrases "will likely result,"  "expects," "plans," "will continue," "is
anticipated,"  "estimated,"  "project,"  or  "outlook"  or  similar  expressions
(including  confirmations by an authorized  executive  officer of the Company of
any such  expressions  made by a third party with  respect to the  Company)  are
intended  to  identify  "forward-looking  statements"  within the meaning of the
Private Securities  Litigation Reform Act of 1995. The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements, each
of which speak only as of the date made.  Such statements are subject to certain
risks and  uncertainties  that could cause actual  results to differ  materially
from  historical  earnings and those  presently  anticipated  or projected.  The
Company has no obligation to publicly  release the result of any revisions  that
may  be  made  to any  forward-looking  statements  to  reflect  anticipated  or
unanticipated  events  or  circumstances   occurring  after  the  date  of  such
statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

     The Company is exposed to changes in interest rates,  primarily in its cash
transactions.  The  Company is exposed to changes in foreign  currency  exchange
rates through  receivables and expense  accruals of its Canadian  subsidiary.  A
discussion of the Company's  accounting  policies for financial  instruments  is
included in the Summary of Significant  Accounting  Policies in the Notes to the
Consolidated  Financial  Statements.  While the Company's current  international
operations  are  limited  to  Canada,  it does not  invest  its cash in  foreign
currency  instruments  nor does it maintain  cash in Canada except to facilitate
inter-country  transactions.  The  balances  the  Company  has in  cash  or cash
equivalents are generally  available without legal restrictions to fund ordinary
business operations.  The Company historically invested excess operating cash in
certificates  of  deposit  and U.S.  government  bonds and other  bonds that are
subject to changes in short-term  interest rates.  The Company  currently has no
such investments. The Company made purchases of available-for-sale securities of
$0 in 2000 and $21,073 in 1999.







Item 8.  Financial Statements And Supplemental Data





         Index to Financial Statements                      Page

                                                          
         Independent Auditors' Report                        29
         Consolidated Balance Sheets                         30
         Consolidated Statements of Operations               31
         Consolidated Statements of Stockholders' Equity     32
         Consolidated Statements of Cash Flows               33
         Notes to Consolidated Financial Statements          34












INDEPENDENT AUDITORS' REPORT


To   the Board of  Directors  and  Stockholders  of
     Patient  InfoSystems,  Inc. Rochester, New York


We  have  audited  the  accompanying  consolidated  balance  sheets  of  Patient
InfoSystems,  Inc.  and  subsidiary  as of December  31, 2000 and 1999,  and the
related consolidated  statements of operations,  stockholders'  equity, and cash
flows for each of the three years in the period ended  December  31,  2000.  Our
audits also included the financial  statement  schedule listed in Item 14. These
financial  statements and financial statement schedule are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements and financial statement schedule 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 financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the  financial  position of Patient  InfoSystems,  Inc. and
subsidiary  at December 31, 2000 and 1999,  and the results of their  operations
and their cash flows for each of the three  years in the period  ended  December
31, 2000 in conformity  with  accounting  principles  generally  accepted in the
United  States of  America.  Also,  in our  opinion,  such  financial  statement
schedule,  when  considered  in  relation  to the basic  consolidated  financial
statements  taken as a whole,  presents  fairly  in all  material  respects  the
information set forth therein.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 9 to the
consolidated   financial   statements,   the  Company's  recurring  losses  from
operations and  stockholders'  deficit raise substantial doubt about its ability
to continue as a going concern.  Management's  plans  concerning this matter are
also described in Note 9. The consolidated  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.



Deloitte & Touche LLP
Rochester, New York
January 26, 2001
(March 28, 2001 as to Note 3)





PATIENT INFOSYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999



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


ASSETS                                                                            2000            1999

CURRENT ASSETS:
                                                                                            
  Cash and cash equivalents                                                        $28,231        $489,521
  Accounts receivable (net of doubtful accounts allowance of $48,122 and           411,436         650,279
$50,000)
  Prepaid expenses and other current assets                                        136,111         126,613
  Employee notes receivable                                                         30,056          75,451
                                                                           --------------------------------
        Total current assets                                                       605,834       1,341,864

PROPERTY AND EQUIPMENT, net                                                        827,050       1,291,351

Debt issuance costs (net of accumulated amortization of $664,750 and $0)           192,750         382,500
Intangible assets (net of accumulated amortization of $156,113 and                 466,610         584,669
$38,055)
Other assets                                                                       200,000         244,011
                                                                           --------------------------------

TOTAL ASSETS                                                                    $2,292,244      $3,844,395
                                                                           --------------------------------

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                                 233,545         496,533
  Accrued salaries and wages                                                       176,158         190,232
  Accrued expenses                                                                 238,561          22,767
  Borrowings from directors                                                      1,171,000               -
  Deferred revenue                                                                 161,961         218,200
                                                                           --------------------------------
        Total current liabilities                                                1,981,225         927,732

LINE OF CREDIT                                                                   2,500,000         500,000

COMMITMENTS  (Note 7)

STOCKHOLDERS' (DEFICIT) EQUITY:
  Common stock - $.01 par value:  shares - authorized:
    20,000,000; issued and outstanding:  2000 - 8,220,202
    1999 - 8,040,202                                                                82,202          80,402
  Preferred stock - $.01 par value:  shares authorized: 5,000,000
    Series C, 9% cumulative, convertible
      issued and outstanding: 2000 - 100,000                                         1,000               -
  Additional paid-in capital                                                    24,016,798      21,968,536
  Accumulated other comprehensive income                                             1,805           1,805
  Accumulated deficit                                                         (26,290,786)    (19,634,080)
                                                                           --------------------------------
        Total stockholders' (deficit) equity                                   (2,188,981)       2,416,663
                                                                           --------------------------------


TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY                            $2,292,244      $3,844,395
                                                                           --------------------------------


See notes to consolidated financial statements.






PATIENT INFOSYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


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

                                                                2000              1999               1998


REVENUES                                                         $2,139,262        $3,545,207         $2,344,072
                                                         --------------------------------------------------------

COSTS AND EXPENSES:
                                                                                              
  Cost of revenue                                                 4,332,048         5,614,128          4,011,710
  Sales and marketing                                             1,047,511         2,445,425          1,929,525
  General and administrative                                      2,282,026         1,885,566          1,490,210
  Research and development                                          305,543           967,365            298,686
                                                         --------------------------------------------------------

        Total costs and expenses                                  7,967,128        10,912,484          7,730,131
                                                         --------------------------------------------------------

OPERATING LOSS                                                  (5,827,866)       (7,367,277)        (5,386,059)

Other income (expense)                                            (211,340)         (250,897)            556,592
                                                         --------------------------------------------------------


NET LOSS                                                       ($6,039,206)      ($7,618,174)       ($4,829,467)

  CONVERTIBLE PREFERRED STOCK DIVIDENDS                           (617,500)              -                     -
                                                         --------------------------------------------------------

NET LOSS ATTRIBUTABLE TO
 COMMON STOCKHOLDERS                                           ($6,656,706)      ($7,618,174)       ($4,829,467)
                                                         ========================================================

NET LOSS PER SHARE - BASIC
   AND DILUTED                                                      ($0.82)           ($0.95)            ($0.60)
                                                         --------------------------------------------------------

WEIGHTED AVERAGE COMMON
   SHARES OUTSTANDING                                             8,135,635         8,032,533          8,018,398
                                                         --------------------------------------------------------


See notes to consolidated financial statements.





PATIENT INFOSYSTEMS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


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

                                                                         Additional   Accum'd    Other       Total        Total
                                        Common Stock    Preferred Stock    Paid-in Comprehensive Accum'd Stockholder Comprehensive
                                      Shares   Amount   Shares  Amount     Capital    Income     Deficit     Equity        Loss



                                                                                                   
Balances, January 1, 1998            8,011,522  $80,115                  $21,550,009  $5,060 ($7,186,439)  $14,448,745

Compensation expense related
to issuance of stock warrants             -                                    7,388    -           -            7,388
                                                      -

Exercise of stock options                8,520                                 3,697    -           -            3,782
                                                     85

Unrealized loss on investments
available-for-sale                        -        -                            -    (5,060)        -           (5,060)   ($5,060)

Net loss for the year end
      December 31, 1998                   -                                     -       -    (4,829,467)    (4,829,467) (4,829,467)
                                    -----------------------------------------------------------------------------------------------

                                                                                                                       ($4,834,527)
                                                                                                                     ==============

Balances, December 31, 1998          8,020,042                            21,561,094    -    (12,015,906)    9,625,388
                                                 80,200

Compensation expense related to
  issuance of  stock warrants and         -                                   13,443    -           -           13,443
options                                               -
Debt issuance costs in the form of
 stock warrants                                                              382,500                           382,500

Exercise of stock options and           20,160                                11,499    -           -           11,701
warrants                                            202

Foreign currency translation              -                                     -      1,805        -            1,805       $1,805
adjustment                                            -

Net loss for the year end
      December 31, 1999                   -                                     -       -    (7,618,174)    (7,618,174) (7,618,174)
                                                      -
                                    -----------------------------------------------------------------------------------------------

                                                                                                                       ($7,616,369)
                                                                                                                     ==============

Balances, December 31, 1999          8,040,202                            21,968,536   1,805 (19,634,080)    2,416,663
                                                 80,402

Compensation expense related to
  issuance of  stock warrants and         -        -                           1,042    -           -            1,042
options
Debt issuance costs in the form of stock warrans                             475,000                           475,000
Issuance of Series C Preferred Stock                              $1,000     999,000                         1,000,000
Beneficial conversion feature of
  Series C Convertible Preferred Stock                                       550,000           (550,000)          -

Exercise of stock options              180,000                                23,220    -           -           25,020
                                                  1,800

Dividends accrued for holders of
  Series C Convertible Preferred Stock                                                          (67,500)      (67,500)

Net loss for the year end
      December 31, 2000                   -        -                            -       -    (6,039,206)    (6,039,206)($6,039,206)
                                    -----------------------------------------------------------------------------------------------
                                                                                                                       ($6,039,206)
                                                                                                                       ============
Balances, December 31, 2000          8,220,202  $82,202  100,000  $1,000 $24,016,798  $1,805 ($26,290,786) ($2,188,981)
                                    -----------------------------------------------------------------------------------


See notes to consolidated financial statements.





PATIENT INFOSYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


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

                                                                      2000          1999           1998

OPERATING :
                                                                                       
  Net loss                                                         ($6,039,206)  ($7,618,174)   ($4,829,467)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
      Depreciation and amortization                                   1,222,153       503,341        366,474
      Loss on sale of property                                           21,337          -             1,350
      Loss on investments                                                  -          250,000            -
      Amortization of premiums and discounts on                            -             -         (142,054)
           available-for-sale securities
      Compensation expense related to issuance of stock                   1,042        13,443          7,388
warrants and options
      Decrease (increase) in accounts receivable                        238,843       670,347      (907,670)
      Decrease in prepaid expenses and other current assets              35,897        17,914        185,529
      (Decrease) increase in accounts payable                         (262,988)       192,097        214,762
      Decrease in accrued salaries and wages                           (14,074)      (87,699)       (42,341)
      Increase (decrease) in accrued expenses                           148,294      (36,137)       (20,332)
      (Decrease) increase in deferred revenue                          (56,239)      (34,868)        185,519
      Decrease in accrued loss on development contracts                    -             -          (30,997)
                                                                 --------------------------------------------

            Net cash used in operating activities                   (4,704,941)   (6,129,736)    (5,011,839)
                                                                 --------------------------------------------

INVESTING:
  Property and equipment additions                                     (16,404)     (433,598)      (594,663)
  Proceeds from sale of property                                         20,024          -            3,310
  Purchases of available-for-sale securities                               -         (21,073)    (7,826,910)
  Maturities of available-for-sale securities                              -        1,050,747    19,166,565
  Purchase of HealthDesk Assets                                            -        (761,463)          -
  Decrease (increase) in other assets                                    44,011      (44,012)      (202,607)
                                                                 --------------------------------------------

          Net cash provided by (used in) investing activities            47,631     (209,399)    10,545,695
                                                                 --------------------------------------------

FINANCING:
  Proceeds from issuance of common and preferred stock, net           1,025,020        11,701         3,782
  Borrowings from directors                                           1,171,000          -             -
  Proceeds from line of credit                                        (500,000)       500,000          -
                                                                 --------------------------------------------

            Net cash provided by financing activities                 1,696,020       511,701         3,782
                                                                 --------------------------------------------

NET (DECREASE) INCREASE IN CASH AND CASH  EQUIVALENTS               (2,961,290)   (5,827,434)     5,537,638

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                          489,521     6,316,955       779,317
                                                                 --------------------------------------------

CASH AND CASH EQUIVALENTS AT END OF YEAR                           ($2,471,769)      $489,521    $6,316,955
                                                                 --------------------------------------------

Supplemental disclosures of cash flow information
   Cash paid and received for income taxes, net                        $  -           $36,361       $43,701

Supplemental disclosures of non-cash information Fair value of
    stock purchase warrants issued in conjunction with
    guarantees by certain board members of borrowings on the
    line of credit                                                    $475,000      $382,500
                                                                      ========      ========
  Dividends declared on Class C Convertible Preferred Stock            $67,500
                                                                      ========
  Value of beneficial conversion feature on Class C Convertible
    Preferred Stock recognized as a dividend                          $550,000
                                                                      ========


See notes to consolidated financial statements.






PATIENT INFOSYSTEMS, INC.


NOTES TO consolidated FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


1.   BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

     Organization  - Patient  Infosystems,  Inc.  ("the  Company")  designs  and
     develops health care  information  systems and services to manage,  collect
     and analyze patient-related  information to improve patient compliance with
     prescribed  treatment  protocols.  Through its various  patient  compliance
     programs  for disease  state  management,  the Company  provides  important
     benefits for the patient, the health care provider and the payor.

     The consolidated  financial  statements include the accounts of the Company
     and its wholly owned subsidiary, Patient Infosystems Canada, Inc. (see Note
     8). Significant intercompany transactions and balances have been eliminated
     in consolidation.

     Use  of  Estimates  in  the  Preparation  of  Financial  Statements  -  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  and disclosure of contingent  assets and
     liabilities  at the  date of the  financial  statements  and  the  reported
     amounts of  revenues  and  expenses  during the  reporting  period.  Actual
     amounts could differ from those estimates.

     Fair Value of Financial  Instruments - The Company's financial  instruments
     consist of cash and cash  equivalents,  notes and the line of  credit.  The
     fair value of instruments is determined by reference to various market data
     and other valuation techniques, as appropriate. Unless otherwise disclosed,
     the fair value of short-term instruments approximates their recorded values
     due to the short-term nature of the instruments.

     Revenue  Recognition and Deferred Revenue - The Company's  principal source
     of  revenue to date has been from  contracts  with  various  pharmaceutical
     companies and managed care  organizations for the development and operation
     of disease  management  programs for chronic diseases,  disease  management
     programs and other health care information  system  applications.  Deferred
     revenue  represents  amounts  billed in advance  of  delivery  under  these
     contracts.  Revenue is recorded  when  billed,  amounts not yet paid in are
     carried on the Consolidated  Balance Sheet as Accounts Receivable net of an
     allowance for bad debt.

     Development   Contracts  -  The  Company's  program  development  contracts
     typically  require  payment from the customer at the time that the contract
     is  executed,   with  additional   payments  made  as  certain  development
     milestones  are  met.  Development  contract  revenue  is  recognized  on a
     percentage  of  completion  basis,  in  accordance  with the ratio of total
     development cost incurred to the estimated total  development costs for the
     entire project. Losses, if any, are recognized in full as identified.

     Program  Operations - The Company's program operation  contracts call for a
     per-enrolled patient fee to be paid by the customer for a series of program
     services as defined in the contract. The timing of customer payments varies
     by contract,  but typically  occurs in advance of the  associated  services
     being provided.  Revenues from program operations are recognized ratably as
     the program services are delivered.

     Licenses - Revenue  derived from software  license fees is recognized  when
     the criteria  established by Statement of Position 97-2,  Software  Revenue
     Recognition,   is   satisfied.   License  fees   associated   with  hosting
     arrangements  (e.g.  arrangements that include the right of the customer to
     use the software stored on the Company's hardware),  are recognized ratably
     over the hosting period when such fees are fixed and determinable.  Hosting
     fees with payment terms  extending past one year are recognized as payments
     become due.

     Cash and Cash  Equivalents - Cash and cash  equivalents  include all highly
     liquid debt instruments with original maturities of three months or less.

     Concentrations  of Credit Risk - Financial  instruments,  which potentially
     subject the Company to concentration of credit risk, consist principally of
     cash and cash equivalents and accounts  receivable.  The Company places its
     cash and cash equivalents with high credit quality institutions.


     The Company operates in only one business segment and its current contracts
     are concentrated in a small number of customers,  consequently, the loss of
     any one of its  customers  could  have a  material  adverse  effect  on the
     Company and its operations.  During the years ended December 31, 2000, 1999
     and 1998,  approximately  $1,030,139  (48%),  $1,200,841 (34%) and $626,697
     (28%) respectively, of the Company's revenues arose from contracts with two
     customers.  At December  31, 2000 and 1999,  accounts  receivable  included
     balances of $164,920 and $68,088,  respectively,  from contracts with these
     customers.

     Property  and  Equipment  -  Property  and  equipment  are  stated at cost.
     Depreciation is computed using the straight-line  method over the estimated
     useful lives of the assets, which range from 3 to 10 years.

     The Company regularly  assesses all of its long lived assets for impairment
     and  recognizes a loss when the carrying value of an asset exceeds its fair
     value.  The Company  determined  that no impairment loss need be recognized
     for applicable assets in 2000, 1999 or 1998.

     Intangible Assets - Intangible  assets represent the intellectual  property
     (i.e.:  tradenames,  trademarks,  licenses and  brandnames)  acquired  from
     HealthDesk Corporation (see Note 8) which was being amortized over 15 years
     using the straight-line method. As a result of a further evaluation of this
     asset, it has been decided to alter the amortization based upon a remaining
     life of 4 years starting April 1, 2000.  Accordingly,  the Company recorded
     additional  amortization  expense in 2000 which had an impact of $76,543 on
     losses net of tax and $0.01 net loss per share  basic and  diluted  for the
     year ended December 31, 2000.

     Debt  Issuance  Costs  - Debt  issuance  costs  are  amortized,  using  the
     straight-line method over the term of the line of credit.

     Research  and  Development  -  Research  and   development   costs  consist
     principally of  compensation  and benefits paid to Company  employees.  All
     research and development costs are expensed as incurred.

     Income Taxes - Deferred  income tax assets and  liabilities  are recognized
     for the future tax  consequences  attributable  to differences  between the
     financial statement carrying amounts of existing assets and liabilities and
     their   respective  tax  bases  and  net  operating  loss  and  tax  credit
     carryforwards.

     Net Loss Per Share - The  calculations  for the basic and diluted  loss per
     share were based on loss available to common  stockholders of $(6,656,706),
     $(7,618,174)  and  $(4,829,467)  and a  weighted  average  number of common
     shares  outstanding  of  8,135,635,  8,032,533  and 8,018,398 for the years
     ended December 31, 2000, 1999 and 1998  respectively.  Options and warrants
     to  purchase  852,272,  15,120  and  23,400  shares  of common  stock  were
     outstanding  but not included in the  computation of diluted loss per share
     in  2000,  1999  and  1998,  respectively,  because  the  effect  would  be
     antidilutive due to the net loss in those years.

     Retirement  Plan - The Company has a retirement  plan that qualifies  under
     Section 401(k) of the Internal  Revenue Code.  This  retirement plan allows
     eligible  employees  to  contribute  1% to 15% of their  income on a pretax
     basis to the plan. The Company's annual  contribution to the plan is at the
     discretion of the Board of Directors.  The Company made no contributions to
     this plan in 2000, 1999 and 1998.

     Accumulated Other Comprehensive Income - Comprehensive income is defined as
     the  change  in  equity  of a  business  enterprise  during a  period  from
     transactions  and other events and  circumstances  from  nonowner  sources.
     Items  considered  comprehensive  income include  foreign  currency  items,
     minimum pension  liability  adjustments and unrealized  gains and losses on
     certain investments in debt and equity securities. The Company's components
     of  comprehensive  income include net loss,  foreign  currency  translation
     adjustments and for 1998, unrealized gains and losses on investments.

     Statement of Financial  Accounting  Standards ("SFAS") No. 133 and 138 - In
     June  1998,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
     Statement of Financial  Accounting  Standards ("SFAS") No. 133, "Accounting
     for Derivative Instruments and Hedging Activities".  In June 2000, the FASB
     issued SFAS No. 138, which amends certain provisions of SFAS 133 to clarify
     areas causing  difficulties  in  implementation.  SFAS No. 133, as amended,
     requires  the Company to  recognize  all  derivatives  on the  consolidated
     balance sheet at fair value.  Derivatives that are not hedges of underlying
     transaction  must  be  adjusted  to  fair  value  through  income.  If  the
     derivative is a hedge, depending on the nature of the hedge, changes in the
     value of derivatives will either be offset against the change in fair value
     of the hedged assets,  liabilities or firm commitments  through earnings or
     recognized  in  other  comprehensive   income  until  the  hedged  item  is
     recognized in earnings. The ineffective portion of a derivative's change in
     fair value will be  immediately  recognized  in  earnings.  The Company has
     completed the process of evaluating the impact of SFAS No. 133, as amended.
     The Company has not identified any derivatives that meet the criteria for a
     derivative  instrument and does not participate in any hedging  activities.
     As a result,  there was no effect on the Company's  consolidated  financial
     position,  results of operations or cash flows  resulting from the adoption
     of SFAS No. 133, as amended, during the first quarter of 2001.


     Staff  Accounting  Bulletin  ("SAB")  No.  101  -  In  December  1999,  the
     Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin
     ("SAB") No. 101, "Revenue Recognition in the Financial  Statements",  which
     provides  guidance  on the  recognition,  presentation  and  disclosure  of
     revenue in  financial  statements.  The  Company's  adoption of SAB No. 101
     during the fourth quarter of 2000 did not impact the Company's consolidated
     financial position, results of operations or cash flows.

     Statement of Financial Accounting Standards ("SFAS") No. 140 - In September
     2000,  the  Financial  Accounting  Standards  Board  issued  SFAS No.  140,
     "Accounting   for  Transfers   and   Servicing  of  Financial   Assets  and
     Extinguishment of Liabilities," which supercedes SFAS No. 125,  "Accounting
     for  Transfers  and Servicing of Financial  Assets and  Extinguishments  of
     Liabilities."  This  standard is effective for  transfers  occurring  after
     March 31, 2001, with certain disclosure requirements effective for the year
     ending December 31, 2000. The Company does not believe the adoption of this
     standard  will  have  a  significant  impact  on  the  Company's  condensed
     consolidated financial position, results of operations or cash flows.

     Reclassifications  - Certain prior years amounts have been  reclassified to
     conform with 2000 presentations.

2.   PROPERTY AND EQUIPMENT

     Property and equipment are summarized as follows at December 31:



                                        2000             1999

                                                
Computer software                     $663,353         $661,473
Computer equipment                   1,156,264        1,164,596
Telephone equipment                    362,887          358,306
Leasehold improvements                  41,504           43,979
Office furniture and equipment         354,329          395,789
                                --------------------------------
                                     2,578,337        2,624,143

Less accumulated depreciation        1,751,287        1,332,792
                                --------------------------------

Property and equipment, net           $827,050       $1,291,351
                                --------------------------------


3.   Debt

     Line of  Credit  - In  December  1999,  the  Company  established  a credit
     facility for $1,500,000  guaranteed by Derace  Schaffer and John Pappajohn,
     two directors of the Company.  In consideration for their  guarantees,  the
     Company granted to Dr. Schaffer and Mr.  Pappajohn  warrants to purchase an
     aggregate of 375,000 shares of common stock for $1.5625 per share. In March
     2000, the facility was increased by $1,000,000 under substantially the same
     terms and also  guaranteed by the same Board  members  resulting in a total
     amount due of  $2,500,000 as of December 31, 2000.  Additional  warrants to
     purchase  an  aggregate  of 250,000  shares of Common  Stock for $2.325 per
     share,  were granted to Dr. Schaffer and Mr.  Pappajohn for their guarantee
     of this  additional  line of credit.  The warrants are included in the debt
     issuance costs in the  consolidated  balance sheets.  The value ascribed to
     the  warrants  granted  in 1999  and  2000  were  calculated  based  on the
     application of the Black Scholes  option  pricing model which  incorporates
     current stock price,  expected stock price  volatility,  expected  interest
     rates, and the expected holding period of the warrant.

     On March, 28 2001 this line of credit was amended and is due and payable on
     March 31, 2002. Accordingly, the amount outstanding at December 31, 2000 is
     reported  as a  long-term  liability.  Interest  is due and payable at note
     maturity at a floating rate based upon LIBOR plus 1.75%  (effective rate at
     December 31, 2001 was  8.18813%).  There is a  commitment  fee of 0.25% per
     annum on the average  daily unused  amount of the Line of Credit to be paid
     quarterly in arrears beginning June 30, 2001. The line of credit is secured
     by substantially all of the Company's assets.

     Borrowings  from directors - Between August 20, 2000 and December 31, 2000,
     the Company borrowed $823,500 from Mr. Pappajohn. Proceeds from these loans
     were used to support the Company's operations.  The interest on these loans
     is 9.5% per year. The Company has borrowed an additional  $660,000 from Mr.
     Pappajohn subsequent to January 1, 2001.

     Between  September  4, 2000 and December  31,  2000,  the Company  borrowed
     $347,500 from Dr. Schaffer.  Proceeds from these loans were used to support
     the Company's operations. The interest on these loans is 9.5% per year.

     The loans from Mr.  Pappajohn and Dr. Schaffer are demand notes which total
     $1,171,000  as of  December  31,  2000 and are secured by the assets of the
     Company.


4.   INCOME TAXES

     Income tax expense for the years ended  December  31,  2000,  1999 and 1998
     were: $13,422, $36,361 and $43,701,  respectively.  These amounts represent
     state  and  local  income  taxes  only  and are  included  in  general  and
     administrative expenses.

     Income tax expense (benefit) for the years ended December 31 differed from
     the U.S. federal income tax rate of 34% as a result of the following:



                                                        2000          1999           1998

                                                                       
Computed "expected" tax benefit                    ($2,050,624)   ($2,577,816)  ($1,627,160)

Change in the valuation allowance
    for deferred tax assets                           2,435,000      3,148,000     1,974,000

State and local income taxes at statutory rates,
    net of federal income tax benefit                 (372,069)      (450,360)     (284,275)

Other, net                                                1,115       (83,463)      (18,864)
                                                 --------------------------------------------

                                                        $13,422        $36,361       $43,701
                                                 --------------------------------------------


     The tax  effects of  temporary  differences  that give rise to  significant
     portions  of the  deferred  income  tax  assets  and  deferred  income  tax
     liabilities at December 31, are presented below.



Deferred income tax assets:                          2000            1999

                                                           
Accounts receivable, principally due
  to allowance for doubtful accounts                 $19,000         $20,000
Deferred revenue                                      64,000         129,000
Compensation                                          30,000          41,000
Net operating loss carryforwards                  10,220,000       7,710,000
Tax credit carryforwards                              75,000          75,000
Other                                                12,000           4,000
     Total gross deferred income tax assets       10,420,000       7,979,000

     Less valuation allowance                   (10,294,000)     (7,859,000)

     Net deferred income tax assets                 126,000         120,000

Deferred income tax liabilities:

Property and equipment, principally due to
differences in depreciation and amortization        (91,000)        (81,000)
Other                                               (35,000)        (39,000)
     Total gross deferred income tax liability     (126,000)       (120,000)

     Net deferred income taxes                      $  -            $  -
                                               ------------------------------


     At December 31, 2000 the Company has net operating loss  carryforwards  for
     federal  income  tax  purposes  of  approximately  $25,900,500,  which  are
     available to offset future federal  taxable income,  if any,  through 2019.
     The Company also has investment tax credit carryforwards for federal income
     tax purposes of approximately $75,000, which are available to reduce future
     federal income taxes, if any, through 2019.

5.   PREFERRED STOCK

     On March 31,  2000,  the Company  completed a private  placement of 100,000
     shares of newly issued Series C 9% Cumulative  Convertible  Preferred Stock
     ("Series C"),  raising  $1,000,000 in total  proceeds.  These shares can be
     converted  into  Common  Stock at a rate of 8 shares of  Common  Stock to 1
     share of Series C Preferred  Stock.  Each Series C share has voting  rights
     equivalent to 8 shares of Common Stock (800,000 shares).

     The fair market value of the Company's Common Stock at the time of issuance
     of Series C Stock was  $1.9375 per share.  The Series C Preferred  Stock is
     convertible  as a price equal to $1.25 per share of Common Stock  resulting
     in a discount,  or beneficial conversion feature, of $0.6875 per share. The
     incremental  fair  value of  $550,000  for the  100,000  shares of Series C
     Preferred  issued is  deemed  to be the  equivalent  of a  preferred  stock
     dividend.  The Company recorded the deemed dividend at the date of issuance
     by  offsetting  charges  and  credits  to  additional  paid in  capital  of
     $550,000,  without any effect on total  stockholders'  equity. In addition,
     the  Company has accrued  $67,500 in  dividend  expense,  which will become
     payable to the Series C stockholders on March 31, 2001.

6.   STOCK OPTIONS AND WARRANTS

     The Company has an Employee Stock Option Plan (the "Stock Option Plan") for
     the benefit of certain employees, non-employee directors, and key advisors.
     The Company has adopted  the  disclosures-only  provision  of SFAS No. 123,
     "Accounting for Stock-Based  Compensation".  No compensation  cost has been
     recognized  for the Stock Option Plan as it relates to employees  since the
     exercise price of the options on the date of grant approximated fair market
     value.  Had  compensation  cost for the  Company's  stock  option plan been
     determined  based  on the  fair  value  at the  date of  grant  for  awards
     consistent  with the provisions of SFAS No. 123, the Company's net loss and
     net loss per share  would  have  been  increased  to the pro forma  amounts
     indicated below:



                                        2000          1999          1998
                                                      
Net loss attributable to common
shareholders - as reported         ($6,656,706)  ($7,618,174)  ($4,829,467)

Net loss - pro forma               ($6,929,601)  ($7,921,103)  ($4,949,320)

Net loss per share - basic
  and diluted - as reported             ($0.82)       ($0.95)       ($0.60)

Net loss per share - basic
  and diluted - pro forma               ($0.85)       ($0.99)       ($0.62)


     The fair value of each option grant is estimated on the date of grant using
     the Black-Scholes  option-pricing model using an assumed risk-free interest
     rates of 5.28% for the year ended  December 31, 2000,  5.89% for year ended
     December  31,  1999 and  5.32%  for year  ended  December  31,  1998 and an
     expected life of 7 years. The Company has used a volatility  factor of 1.33
     for the year ended  December 31, 2000, .74 for year ended December 31, 1999
     and .94 for year  ended  December  31,  1998.  For  purposes  of pro  forma
     disclosure, the estimated fair value of each option is amortized to expense
     over that option's vesting period.

     The Stock  Option Plan  authorizes  1,680,000  shares of common stock to be
     issued.  On May 2, 2000, the Company filed a Form S-8  registering  all the
     Stock Option Plan shares. Stock options granted under the Stock Option Plan
     may be of two types: (1) incentive stock options and (2) nonqualified stock
     options. The option price of such grants shall be determined by a Committee
     of the Board of Directors (the "Committee"), but shall not be less than the
     estimated  fair market  value of the common stock at the date the option is
     granted.  The  Committee  shall fix the terms of the grants  with no option
     term lasting  longer than ten years.  The ability to exercise  such options
     shall be determined by the Committee  when the options are granted.  All of
     the currently outstanding options vest at the rate of 20% per year.

     A summary of stock option activity follows:



                                                             Outstanding      Weighted-Average
                                                               Options         Exercise Price
                                                                             
Options outstanding at December 31, 1997                          798,060          $2.21
Options granted during the year ended December 31, 1998
  (weighted average fair value of $1.38)                          399,200          $1.38
Options forfeited by holders during the year
  ended December 31, 1998                                       (320,820)          $3.15

Options exercised during the year ended December 31, 1998         (8,520)          $0.44
                                                            --------------
Options outstanding at December 31, 1998                          867,920          $0.91
Options granted during the year ended December 31, 1999
  (weighted average fair value of $2.05)                          695,100          $2.05
Options forfeited by holders during the year
  ended December 31, 1999                                       (246,300)          $1.65

Options exercised during the year ended December 31, 1999        (12,960)          $0.14
                                                            --------------
Options outstanding at December 31, 1999                        1,303,760          $1.39
Options granted during the year ended December 31, 2000
  (weighted average fair value of $1.44)                          387,000          $1.44

Options forfeited by holders during the year
  ended December 31, 2000                                       (806,380)          $1.78

Options exercised during the year ended December 31, 2000       (180,000)          $0.14
                                                            --------------
Options outstanding at December 31, 2000                          704,380          $1.28
                                                            --------------
Options exercisable at December 31, 2000                          227,272          $0.82
                                                            --------------
Options available for grant at December 31, 2000                  712,940
                                                            --------------


     The following  table  summarizes  information  concerning  outstanding  and
     exercisable options at December 31, 2000:




                             Options Outstanding            Options Exercisable
              ----------------------------------------  --------------------------
                                    Weighted
                                   Average    Weighted           Weighted
                                  Remaining   Average                     Average
   Range of       Number         Contractual  Exercise      Number        Exercise
Exercise Price  Outstanding         Life       Price      Exercisable      Price

                                                             
  $.14 - $.99          294,000     7.18        $0.46        144,000         $0.42

 $1.00 - $1.99         165,580     7.34        $1.47         73,872         $1.38

 $2.00 - $2.75         244,800     9.07        $2.14          9,400         $2.54

                       704,380                              227,272


     The Company also has  outstanding  stock  purchase  warrants  entitling the
     holders to purchase a total of 625,000 shares of common stock at a price of
     $1.868 per share (weighted  average exercise price).  At December 31, 2000,
     all of these warrants are currently vested.

7.   COMMITMENTS

     The  Company  leases  office  space  for  its  operating  facilities  under
     operating  lease  agreements  that expire at varying dates  through  August
     2002.  Rent  expense  under  these  operating  leases  for the years  ended
     December  31,  2000,  1999 and 1998 was  $189,648,  $302,194  and  $210,375
     respectively.

     At December 31, 2000,  future minimum lease payments under these leases are
     summarized as follows:


            
2001           $181,866
2002             43,808
               --------
               $225,674



     On January 24, 2001, the Company entered into a Lease Termination Agreement
     on the leased office space in Paoli, PA, which becomes  effective  February
     28, 2001. This reduces the future  obligation for 2001 to $142,704 and 2002
     to $4,800 for a total 3-year commitment of $147,504.

8.   ACQUISITIONS

     On February 28, 1999, the Company,  through its newly formed,  wholly-owned
     subsidiary,  Patient Infosystems  Acquisition Corp., acquired substantially
     all the assets of HealthDesk  Corporation,  a consumer  healthcare software
     company  primarily  engaged in the  business of  designing  and  developing
     Internet-based products in the healthcare,  wellness and disease management
     industries.  The acquired assets include inventory,  intellectual property,
     hardware and  software.  The  consideration  paid for the  transaction  was
     $761,463 in cash. The results of operations of HealthDesk  Corporation  for
     the  full  year of 1999  are not  material  to the  Company's  consolidated
     financial statements.


     The following  unaudited pro forma results of operations for the year ended
     December 31, 1998 have been  prepared as if an  acquisition  of  HealthDesk
     Corporation had occurred as of the beginning of 1998:



                                                 Pro Forma
                                                 Combined
                                             ----------------
                                              
Revenues                                         $2,400,530
Net loss                                         (6,948,179)
                                             ----------------
Net loss per share - basic and diluted               ($0.87)
                                             ================


     The pro forma  combined  results do not purport to be indicative of results
     that would have occurred had the asset  acquisition  been in effect for the
     period presented,  nor do they purport to be indicative of the results that
     will be obtained in the future.

     On November 12, 1998,  the Company  entered into a joint venture  agreement
     with MacLean Hunter Publishing  Limited to market and sell, on an exclusive
     basis in Canada,  products  and  services  developed  by the Company and to
     jointly manage, finance and operate the business entity Patient Infosystems
     Canada,  Inc.  ("PATI-CN"),  which is  dedicated  to the  development  of a
     commercially  viable business built around the sale,  marketing and service
     of the Company's products and services.

     On October 1, 1999, the Company entered into a "Share  Purchase  Agreement"
     with Rogers Publishing  Limited  ("ROGERS",  formerly called Maclean Hunter
     Publishing Limited) to purchase ROGERS' 50% share in PATI-CN for the sum of
     $1.00 Canadian  funds.  Additionally,  ROGERS  reimbursed  PATI-CN  $41,149
     Canadian  funds for expenses  charged to PATI-CN by ROGERS prior to October
     1, 1999. As of October 1, 1999, PATI-CN became a wholly-owned subsidiary of
     the Company. The results of operations of PATI-CN for the full year of 1998
     and  1999  are  not  material  to  the  Company's   consolidated  financial
     statements.

9.   GOING CONCERN

     The accompanying  consolidated financial statements have been prepared on a
     going concern basis,  which  contemplates the realization of assets and the
     satisfaction  of liabilities in the normal course of business.  As shown in
     the accompanying consolidated financial statements,  the Company incurred a
     net  loss  for  2000 of  $6,039,206  and  had a  stockholders'  deficit  of
     $2,188,981 at December 31, 2000.  These factors,  among others may indicate
     that the  Company  will be  unable to  continue  as a going  concern  for a
     reasonable period of time.

     The  consolidated  financial  statements  do not  include  any  adjustments
     relating to the  recoverability of assets and classification of liabilities
     that might be necessary should the Company be unable to continue as a going
     concern.  The Company's  continuation  as a going concern is dependant upon
     its ability to generate  sufficient cash flow to meet its obligations  and,
     ultimately, to attain profitability.  Management is currently assessing the
     Company's operating structure for the purpose of reducing ongoing expenses,
     increasing  sources of revenue and is  negotiating  the terms of additional
     debt or equity financing.

10.  Subsequent Event

11.  QUARTERLY RESULTS (UNAUDITED)

     The following is a summary of the unaudited  interim  results of operations
     by quarter:




                                                  First       Second        Third       Fourth
- ------------------------------------------------------------------------------------------------
Year ended December 31, 2000:
                                                                         
Revenues                                         $600,580     $598,740     $433,550     $506,392
Gross margin                                    (677,595)    (607,117)    (549,088)    (358,986)
Net loss                                      (1,634,906)  (1,628,371)  (1,510,767)  (1,265,162)
Net loss attributable to common shareholders  (2,184,906)  (1,650,871)  (1,533,267)  (1,287,662)
Net loss per common share                          (0.27)       (0.20)       (0.19)       (0.16)

Year ended December 31, 1999:
Revenues                                         $833,812   $1,002,943     $875,964     $832,488
Gross margin                                    (616,114)    (351,730)    (571,905)    (529,172)
Net loss                                      (1,713,727)  (2,042,886)  (1,882,535)  (1,979,026)
Net loss per common share                          (0.21)       (0.25)       (0.23)       (0.26)




                                    PART III


Item 10. Directors and Executive Officers of the Registrant.

     Incorporated  by reference to the Company's  Proxy Statement for its Annual
Meeting of Stockholders to be filed with the Securities and Exchange  Commission
within 120 days after the close of the year ended December 31, 2000.

Item 11. Executive Compensation.

Director Compensation

     Incorporated  by  reference to the  Company's  Proxy  Statement  for Annual
Meeting of Stockholders to be filed with the Securities and Exchange  Commission
within 120 days after the close of the year ended December 31, 2000.

Executive Compensation

     Incorporated  by  reference to the  Company's  Proxy  Statement  for Annual
Meeting of Stockholders to be filed with the Securities and Exchange  Commission
within 120 days after the close of the year ended December 31, 2000.

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

     Incorporated  by  reference to the  Company's  Proxy  Statement  for Annual
Meeting of Stockholders to be filed with the Securities and Exchange  Commission
within 120 days after the close of the year ended December 31, 2000.

Item 13. Certain Relationships and Related Transactions

     Incorporated  by  reference to the  Company's  Proxy  Statement  for Annual
Meeting of Stockholders to be filed with the Securities and Exchange  Commission
within 120 days after the close of the year ended December 31, 2000. PART IV

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

(a)  (1) Financial Statements:

     The financial statements of the Company are included in Part II, Item 8.

     (2) Financial Statement Schedules:

     Schedule II Valuation and Qualifying Accounts

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

(b)  Reports on Form 8 - K:

     No  reports on Form 8-K were  filed  during the fourth  quarter of the year
     ended December 31, 2000.






(c)  Exhibits:

Exhibit#  Description of Exhibits

(3)  Articles of Incorporation and By-Laws:

     Certificate of Incorporation
     Incorporated herein by reference from Exhibit 3.1 on Form S-1 Registration
     Statement of the Company, filed with the Commission on December 17, 1996.

     By-Laws
     Incorporated herein by reference from Exhibit 3.3 on Form S-1 Registration
     Statement of the Company, filed with the Commission on December 17, 1996.

(4)  Instruments defining the rights of holders, incl. Indentures:

     Patient Infosystems, Inc. Amended and Restated Stock Option Plan

     Incorporated herein by reference from Exhibit 4.1 on Form S-8 Registration
     Statement of the Company, filed with the Commission on May 2, 2000.

4.4  Certificate   of   Designations,    Powers,   Preferences   and   Relative,
     Participating,  Optional or Other Special Rights,  and the  Qualifications,
     Limitations Thereof of the Series C Preferred Stock of Patient InfoSystems,
     Inc. - dated April 28, 2000.

(10) Material contracts:

10.15     Asset Purchase Agreement dated as of September 29, 1998 among Patient
          Infosystems Acquisition Corp., the Company and HealthDesk Corporation.
          Incorporated herein by reference from Exhibit 10.15 on Form 10-K 1998
          Annual Report of the Company, filed with the Commission on April 13,
          1999.

10.16     Amendment to Asset Purchase Agreement dated as of December 1, 1998
          among Patient Infosystems Acquisition Corp., the Company and
          HealthDesk Corporation. Incorporated herein by reference from Exhibit
          10.16 on Form 10-K 1998 Annual Report of the Company, filed with the
          Commission on April 13, 1999.

10.17     Second Amendment to Asset Purchase Agreement dated as of February 1,
          1999 among Patient Infosystems Acquisition Corp., the Company and
          HealthDesk Corporation. Incorporated herein by reference from Exhibit
          10.17 on Form 10-K 1998 Annual Report of the Company, filed with the
          Commission on April 13, 1999.

10.19     Consulting  Agreement  dated as of March 8, 1999  between  the Company
          and John V.  Crisan.  Incorporated  herein by  reference  from Exhibit
          10.19 on Form 10-K 1998 Annual  Report of the Company,  filed with the
          Commission on April 13, 1999.

10.20     Lease Agreement dated as of February 22, 1995 between the Company and
          Conifer Prince Street Associates. Incorporated herein by reference
          from Exhibit 10.20 on Form 10-K 1998 Annual Report of the Company,
          filed with the Commission on April 13, 1999.

10.21     First Addendum to Lease Agreement dated as of August 22, 1995 between
          the Company and Conifer Prince Street Associates. Incorporated herein
          by reference from Exhibit 10.21 on Form 10-K 1998 Annual Report of the
          Company, filed with the Commission on April 13, 1999.

10.22     Second Addendum to Lease Agreement dated as of November 17, 1995
          between the Company and Conifer Prince Street Associates. Incorporated
          herein by reference from Exhibit 10.22 on Form 10-K 1998 Annual Report
          of the Company, filed with the Commission on April 13, 1999.

10.23     Third Addendum to Lease Agreement dated as of March 28, 1996 between
          the Company and Conifer Prince Street Associates. Incorporated herein
          by reference from Exhibit 10.23 on Form 10-K 1998 Annual Report of the
          Company, filed with the Commission on April 13, 1999.

10.24     Fourth Addendum to Lease Agreement dated as of October 29, 1996
          between the Company and Conifer Prince Street Associates. Incorporated
          herein by reference from Exhibit 10.24 on Form 10-K 1998 Annual Report
          of the Company, filed with the Commission on April 13, 1999.

10.25     Fifth Addendum to Lease Agreement dated as of November 30, 1996
          between the Company and Conifer Prince Street Associates. Incorporated
          herein by reference from Exhibit 10.25 on Form 10-K 1998 Annual Report
          of the Company, filed with the Commission on April 13, 1999.

10.26     Sixth Addendum to Lease Agreement dated as of November 24, 1997
          between the Company and Conifer Prince Street Associates. Incorporated
          herein by reference from Exhibit 10.26 on Form 10-K 1998 Annual Report
          of the Company, filed with the Commission on April 13, 1999.

10.30     Seventh Addendum to Lease Agreement dated as of June 16, 1999 between
          the Company and Conifer Prince Street Associates. Incorporated herein
          by reference from Exhibit 10.30 on Form 10-K 1999 Annual Report of the
          Company, filed with the Commission on March 31, 2000.

10.31     Lease Agreement dated as of July 2, 1999 between the Company and
          Cadena Properties Limited. Incorporated herein by reference from
          Exhibit 10.31 on Form 10-K 1999 Annual Report of the Company, filed
          with the Commission on March 31, 2000.

10.32     Lease  Agreement  dated as of August 1, 1999  between  the Company and
          Michele M. Hoey and John E.  Hoey.  Incorporated  herein by  reference
          from  Exhibit  10.32 on Form 10-K 1999 Annual  Report of the  Company,
          filed with the Commission on March 31, 2000.

10.33     Revolving Note dated as of December 23, 1999 between the Company and
          Norwest Bank Iowa, National Association. Incorporated herein by
          reference from Exhibit 10.33 on Form 10-K 1999 Annual Report of the
          Company, filed with the Commission on March 31, 2000.

10.34     Credit Agreement dated as of December 23, 1999 between the Company and
          Norwest Bank Iowa, National Association. Incorporated herein by
          reference from Exhibit 10.34 on Form 10-K 1999 Annual Report of the
          Company, filed with the Commission on March 31, 2000.

10.35     Security Agreement dated as of December 23, 1999 between the Company
          and Norwest Bank Iowa, National Association. Incorporated herein by
          reference from Exhibit 10.35 on Form 10-K 1999 Annual Report of the
          Company, filed with the Commission on March 31, 2000.

10.36     Arbitration Agreement dated as of December 23, 1999 between the
          Company and Norwest Bank Iowa, National Association. Incorporated
          herein by reference from Exhibit 10.36 on Form 10-K 1999 Annual Report
          of the Company, filed with the Commission on March 31, 2000.

10.37     Financing Statement executed by the Company and Norwest Bank Iowa,
          National Association. Incorporated herein by reference from Exhibit
          10.37 on Form 10-K 1999 Annual Report of the Company, filed with the
          Commission on March 31, 2000.

10.38     First Amendment to Credit Agreement dated as of March 21, 2000 between
          the Company and Norwest Bank Iowa, National Association. Incorporated
          herein by reference from Exhibit 10.38 on Form 10-K 1999 Annual Report
          of the Company, filed with the Commission on March 31, 2000.

10.39     Note Modification Agreement dated as of March 21, 2000 between the
          Company and Norwest Bank Iowa, National Association. Incorporated
          herein by reference from Exhibit 10.39 on Form 10-K 1999 Annual Report
          of the Company, filed with the Commission on March 31, 2000.

10.41     Form of Subscription Agreement - Dated on or about March 31, 2000
          between the Company and John Pappajohn, Derace Schaffer, Gerald Kirke
          and Michael Richards for Series C 9% Cumulative Convertible Preferred
          Stock.

10.42     Form of Registration Rights Agreement - Dated on or about March 31,
          2000 between the Company and John Pappajohn, Derace Schaffer, Gerald
          Kirke and Michael Richards for Series C 9% Cumulative Convertible
          Preferred Stock.

10.43     Eighth Addendum to Lease Agreement dated as of December 8, 2000
          between the Company and Conifer Prince Street Associates.

10.44     Termination  of Lease  Agreement - Dated of January  24, 2001  between
          the Company and Michele M. Hoey and John E. Hoey.

10.45     Amended  and  Restated  Credit  Agreement - dated as of March 28, 2001
          between the Company and Wells Fargo Bank Iowa, National Association.

10.46     Revolving Note - dated as of March 28, 2001 between the Company and
          Wells Fargo Bank Iowa, National Association.

10.47     Form of Promissory Notes payable to Dr. Schaffer and Mr. Pappajohn.

10.48     Form of Security Agreements with Dr. Schaffer and Mr. Pappajohn.




(21) Subsidiaries

                                   EXHIBIT 21
                                  Subsidiaries



Name                                 Jurisdiction   Trade Name of Organization
- ---------------------------------  ---------------  -------------------------------

                                              
PATI Acquisition Corp.                 Delaware     PATI Acquisition Corp.

Patient Infosystems Canada, Inc.   Ontario, Canada  Patient Infosystems Canada, Inc.



All other  exhibits are omitted  because they are not applicable or the required
information is shown elsewhere in this Annual Report on Form 10-K.


Schedule II

                            Patient InfoSystems, Inc.
                        Valuation and Qualifying Accounts
              For the Years Ended December 31, 2000, 1999 and 1998




                                    Balance at                             Balance at
                                     Beginning                               End of
                                      of Year       Additions  Deductions    Year
Allowance for Doubtful Accounts:
                                                           
                                  2000     $50,000     $92,852   $94,730      $48,122
                                  1999     $50,000     $  -      $  -         $50,000
                                  1998     $  -        $50,000   $  -         $50,000

Deferred Tax Assets Valuation
  Allowance:
                                  2000  $7,859,000  $2,435,000   $  -     $10,294,000
                                  1999  $4,711,000  $3,196,000   $48,000   $7,859,000
                                  1998  $2,414,000  $2,297,000   $  -      $4,711,000






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.


PATIENT INFOSYSTEMS, INC.


By:     /s/ Roger L. Chaufournier                     April 2, 2001
   -----------------------------------                -------------
    Roger L. Chaufournier                             Date
    Director, President, and Chief Executive Officer



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


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

By:     /s/ Kent A. Tapper                            April 2, 2001
   -----------------------------------                -------------
    Kent A. Tapper                                    Date
    Vice President Financial Planning
    (Principal Financial and Accounting Officer)

By:     /s/ Derace L. Schaffer, M.D.                  April 2, 2001
   -----------------------------------                -------------
    Derace L. Schaffer, M.D.                          Date
    Chairman of the Board


By:     /s/ John Pappajohn                            April 2, 2001
   -----------------------------------                -------------
    John Pappajohn                                    Date
    Director


By:     /s/ Barbara J. McNeil, M.D., Ph.D.            April 2, 2001
   -----------------------------------                -------------
    Barbara J. McNeil, M.D., Ph.D.                    Date
    Director


By:     /s/ Carl F. Kohrt, Ph.D.                      April 2, 2001
   -----------------------------------                -------------
    Carl F. Kohrt, Ph.D.                              Date
    Director

EX-4

              CERTIFICATE OF DESIGNATIONS, POWERS, PREFERENCES AND
               RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
               RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS THEREOF
                                     OF THE
                            SERIES C PREFERRED STOCK
                                       OF
                            PATIENT INFOSYSTEMS, INC.


     Pursuant  to Section  151 of the  General  Corporation  Law of the State of
Delaware,

     Patient Infosystems,  Inc. a Delaware corporation ("Corporation") certifies
that,  pursuant to the authority  contained in paragraph 4 of its Certificate of
Incorporation,  and in  accordance  with the  provisions  of Section  151 of the
General  Corporation  Law of the State of Delaware,  its Board of Directors  has
adopted  the  following  resolution  creating a series of its Series C Preferred
Stock, par value $.01 per share, designated as Series C Preferred Stock:

          RESOLVED,  that a series  of the  class of  authorized  $.01 par value
     Preferred  Stock  of the  Corporation  be  hereby  created,  and  that  the
     designation  and the amount thereof and the voting powers,  preferences and
     relative, participating, optional and other special rights of the shares of
     such series, and the  qualifications,  limitations or restrictions  thereof
     are as follows:

     Section 1.  Designation  and  Amount.  The shares of such  series  shall be
designated as "Series C Preferred  Stock" and the number of shares  constituting
such series shall be 500,000.

     Section 2. Voting Rights. Except as otherwise provided by law, the Series C
Preferred Stock and the Common Stock shall vote together as a single class, with
each share of Series C Preferred  Stock  being  entitled to that number of votes
equal to the number of shares of Common  Stock into which it is  convertible  at
the record date for determining  Shareholders  entitled to vote, or if no record
date has been  fixed,  as of the date the vote is taken or the  written  consent
therefore is solicited. Holders of the Series C Preferred Stock are not entitled
to cumulative voting. Without the affirmative vote of at least two-thirds of the
votes  attributable to the issued and outstanding  Series C Preferred Stock, the
Corporation  may not (1)  authorize  or create any class of stock  senior to the
Series C Preferred Stock as to dividends or liquidation preference, (2) make any
changes to the Certificate of  Incorporation  which would  adversely  affect the
voting powers or other rights and  preferences of the Series C Preferred  Stock,
or (3) increase the number of authorized  shares of Preferred  Stock;  provided,
however,  that out of the  existing  authorized  Preferred  Stock,  the Board of
Directors may designate  classes of Preferred  Stock that is pari passu with the
Series C Preferred Stock.

     Section  3.  Liquidation  Preference.  In the  event  of  any  liquidation,
dissolution or winding up of the Corporation,  whether voluntary or involuntary,
the holders of the Series C Preferred Stock shall be entitled to be paid in full
in an amount equal to (i) a per share price for each share of Series C Preferred
Stock outstanding plus (ii) an amount equal to a cumulative,  unpaid dividend at
a 9% rate per  annum  plus  (iii) an amount  equal to all  declared  but  unpaid
dividends on each such share accrued up to such date of distribution  before any
payment  of any amount to holders of Common  Stock or  Preferred  Stock  ranking
junior to the Series C  Preferred  Stock.  For  purposes  of  calculating  these
preference  payments,  the per  share  price  will be  $10.00  for the  Series C
Preferred Stock . If the assets  available for  distribution are insufficient to
pay the  holders of Series C Preferred  Stock and the  holders of all  Preferred
Stock that is pari passu with the Series C  Preferred  Stock the full  amount to
which  they  are  entitled,  then  such  holders  shall  share  ratably  in  any
distribution  of the assets of the Corporation in proportion to the amounts that
would have been payable with respect to their shares if all amounts payable with
respect to such shares were paid in full.

     Section 4. Dividends. Holders of Series C Preferred Stock shall be entitled
to  Cumulative  9% dividends on an annual basis on the  anniversary  date of the
Offering.  The holders of shares of Series C Preferred Stock will be entitled to
receive  dividends out of any assets legally available  therefore,  prior and in
preference  to any  declaration  of any dividend  (payable  other than in Common
Stock or other  securities and rights  convertible  into or entitling the holder
thereof to receive, directly or indirectly, additional shares of Common Stock of
the  Corporation)  on the Common Stock, or any series of Preferred Stock ranking
junior to the Series C Preferred  Stock,  in an amount no less than that paid on
any other outstanding  shares of the Corporation,  payable annually when, as and
if declared by the Board of Directors of the Corporation.

     Section 5. Conversion Rights.  Holders of the Series C Preferred Stock will
have the right at any time to convert  their  shares into shares of Common Stock
at the rate of eight  (8)  shares of  Common  Stock  for each  share of Series C
Preferred Stock (the "Conversion Rate"), subject to adjustment of the Conversion
Rate as provided herein.

     Section 5.1 Exchange of Share  Certificates.  Before any holder of Series C
Preferred  Stock shall be entitled to convert such Series C Preferred Stock into
Common Stock,  such holder shall surrender the stock certificate or certificates
therefore,  duly endorsed,  at the office of the  Corporation or of any transfer
agent for its capital stock,  accompanied by a written notice or its election to
convert the same and the number of shares of Series C  Preferred  Stock to be so
converted.  Upon receipt of such stock  certificate(s) and notice where required
the Corporation  shall forthwith issue and deliver at such office to such holder
of Series C Preferred Stock a stock  certificate or certificates  for the number
of shares of Common Stock to which it shall be entitled  pursuant  hereto.  Each
conversion shall be deemed to have been made  immediately  prior to the close of
business  of the  Corporation  on the  date of the  voluntary  surrender  to the
Corporation  of the shares of Preferred  Stock to be converted and the person or
persons  entitled  to receive  the  shares of Common  Stock  issuable  upon such
conversion  shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.

     Section 5.2 Protection Against Dilution.
                 ---------------------------

     (a) If, at any time or from time to time while the Series C Preferred Stock
is outstanding,  the Corporation shall distribute to the holders of Common Stock
(i)  securities  other than  Common  Stock,  or (ii)  property  other than cash,
without payment  therefore,  with respect to the Common Stock, then, and in each
such case, a holder of Series C Preferred  Stock,  upon the conversion  thereof,
shall  thereafter be entitled to receive the securities and properties which the
holder would hold on the date of conversion if the holder had been the holder of
record of the number of shares of Common  Stock  issuable  upon such  conversion
immediately  prior to the date of such an event and, during the period from such
date to and including the date of  conversion,  had retained such shares and the
securities and properties receivable by the holder during such period.

     (b) If, at any time or from time to time while the Series C Preferred Stock
is outstanding,  the Corporation  shall (i) pay a dividend in Common Stock, (ii)
subdivide its outstanding Common Stock into a greater number of shares, or (iii)
combine its outstanding  Common Stock into a smaller number of shares,  then and
in such case, the Conversion  Rate shall be adjusted so that any share of Series
C Preferred Stock  surrendered for conversion  immediately  thereafter  would be
entitled to receive the number of shares of Common  Stock which the holder would
have  owned  immediately  following  such  action  had such  share  of  Series C
Preferred  Stock been converted  immediately  prior thereto.  An adjustment made
pursuant to this Paragraph 5.2(b) shall become effective  immediately  after the
record date in the case of a dividend  and shall  become  effective  immediately
after the effective date in the case of a subdivision or combination.

     (c) If, at any time or from time to time while the Series C Preferred Stock
is  outstanding,  the  Corporation  shall (i) make a distribution  on its Common
Stock in shares of capital stock or (ii) issue by reclassification of its Common
Stock any shares of capital  stock of the  Corporation,  then,  and in each such
case, a holder of Series C Preferred Stock, upon the conversion  thereof,  shall
thereafter  have the right to  receive  the kind and  amount of Common  Stock or
other  securities which the holder would have owned  immediately  following such
action had such share of Series C  Preferred  Stock been  converted  immediately
prior thereto.

     (d) In case of any  consolidation  or merger to which the  Corporation is a
party,  other than a merger or  consolidation  in which the  Corporation  is the
continuing  corporation,  or in case of any sale or conveyance to another entity
of the  property  of the  Corporation  as an  entirety  or  substantially  as an
entirety, or in the case of any statutory exchange effected in connection with a
merger  of a third  corporation  into  the  Corporation,  a holder  of  Series C
Preferred  Stock  shall  thereafter  have the  right  to  convert  the  Series C
Preferred  Stock into the kind and amount of securities,  cash or other property
which the holder would have owned or have been  entitled to receive  immediately
after such  consolidation,  merger,  sale,  conveyance or statutory exchange had
such Series C Preferred Stock been converted  immediately prior to the effective
date of such consolidation,  merger, sale,  conveyance or statutory exchange and
in any such case,  if  necessary,  appropriate  adjustment  shall be made in the
application  of the  provisions  set forth in this Section 5 with respect to the
rights and interests  thereafter  of the holders of Series C Preferred  Stock to
the end  that  the  provisions  set  forth in this  Section  5 shall  thereafter
correspondingly be made applicable,  as nearly as may reasonably be, in relation
to any shares of stock or other securities or property thereafter deliverable on
the  conversion of the Series C Preferred  Stock.  The above  provisions of this
Section  5.2(d) shall  similarly  apply to successive  consolidations,  mergers,
sales,  conveyances or statutory  exchanges.  Notices of any such consolidation,
merger,  sale,  conveyance  or  statutory  exchange  and of said  provisions  so
proposed to be made,  shall be mailed to the holders of Series C Preferred Stock
not less than 30 days prior to such event;  provided,  however,  that failure to
give such notice  shall not affect the validity of such  consolidation,  merger,
sale, conveyance or statutory exchange.

     (e) If at the  time,  the  Company  proposes  to offer  and sell  shares of
Preferred  Stock having a  conversion  rate that is less than $1.25 per share of
Common  Stock,  then the  Conversion  Rate set forth in Section 5 above shall be
adjusted  so that the Series C  Preferred  Stock will be  convertible  into such
number of shares of Common Stock that equals  $10.00  divided by the  conversion
rate of the new shares of Preferred Stock to be offered and sold.



     (f) The adjustments provided in this Section 5.2 shall be cumulative.  Upon
any adjustment as provided in this Section 5.2 and upon any  modification of the
rights of a holder of shares of Series C Preferred Stock in accordance with this
Section  5.2,  the  Corporation  shall  promptly  obtain,  at  its  expense,   a
certificate of a firm of independent public accountants selected by the Board of
Directors (who may be the regular auditors of the Corporation) setting forth the
Conversion  Rate after such  adjustment  or the effect of such  modification,  a
brief statement of the facts  requiring such adjustment or modification  and the
manner of computing the same and cause copies of such  certificate  to be mailed
to the holders of the Series C Preferred Stock.

and be it further

          RESOLVED,  that the  proper  officers  of the  Corporation  are hereby
     authorized,  empowered and directed to take all such further  action and to
     execute,  deliver,  certify and file all  instruments  and documents in the
     name of and on behalf of this  Corporation as such officers  executing same
     shall approve as necessary or advisable to effectuate  and  accomplish  the
     purpose  of the  foregoing  resolution  and the  transactions  contemplated
     thereby,   the  taking  of  such  action  and  the   execution,   delivery,
     certification,  and filing of such  documents to be conclusive  evidence of
     such approval.

IN WITNESS WHEREOF,  said Patient Infosystems,  Inc. has caused this Certificate
of Designations,  Powers, Preferences and Relative,  Participating,  Optional or
Other  Special  Rights,  and the  Qualifications,  Limitations  or  Restrictions
thereof of the Series C Preferred Stock to be duly executed by its President and
attested to by its  Secretary  and has caused its  corporate  seal to be affixed
hereto this 28th day of April, 2000.

PATIENT INFOSYSTEMS, INC.



By:/s/Roger L. Chaufournier
   --------------------------------------------------
      Roger L. Chaufournier, President


(Corporate Seal)


ATTEST:




Secretary

EX-10

                            PATIENT INFOSYSTEMS, INC.

                            (a Delaware corporation)


                             SUBSCRIPTION AGREEMENT

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

THE  SERIES  C  CONVERTIBLE   PREFERRED  STOCK,   $.01  PAR  VALUE,  OF  PATIENT
INFOSYSTEMS,  INC. HAS NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SERIES C CONVERTIBLE PREFERRED
STOCK,  $.01 PAR  VALUE,  CANNOT BE SOLD,  TRANSFERRED,  ASSIGNED  OR  OTHERWISE
DISPOSED OF EXCEPT IN COMPLIANCE  WITH APPLICABLE  FEDERAL AND STATE  SECURITIES
LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.

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

     1.  Subscription.  Subscriber  hereby subscribes for and agrees to purchase
the  amount  of Series C  Convertible  Preferred  Stock,  $.01 par  value,  (the
"Shares")  set forth on the  signature  page hereof  (minimum of $25,000  unless
otherwise accepted by the Company), on the terms and conditions set forth in the
enclosed   Confidential   Private  Placement   Memorandum  (the   "Memorandum").
Additional information concerning the Company can be obtained from its Form 10-Q
as of June 30, 1999, and its Form 10-K as of December 31, 1998,  copies of which
are attached to the Memorandum as Appendix A and Appendix B, respectively.


     2.  Payment and  Delivery  and  Documents.  Subscriber  agrees to tender to
Patient  Infosystems,  Inc. (the  "Company")  the purchase  price for the Shares
subscribed  for  herein  either by check or wire  transfer  in the amount of the
purchase price made payable to "Patient Infosystems,  Inc." and delivered to the
Company.  Payment of the  purchase  price shall be due upon  transmittal  of the
subscription  documents to the Company. The subscription documents shall consist
of the  following:  (i) this  Subscription  Agreement  completed,  executed  and
notarized;   and  (ii)  a  completed   and   executed   Confidential   Purchaser
Questionnaire  in the form attached to the Memorandum as Appendix D.  Subscriber
acknowledges that the Company may request  additional  information in connection
with the subscription.


     3. Acceptance or Rejection of  Subscription.  Subscriber  acknowledges  and
agrees that this  subscription  shall not be effective until accepted in writing
by the  Company,  and  that the  Company  reserves  the  right  to  reject  this
Subscription  in whole or in part,  provided  that no  partial  rejection  shall
result in  Subscriber  purchasing  less than  $25,000 of the  Shares  unless the
requirement is waived by the Company.  Subscriptions may be rejected for failure
to conform to the requirements of the offering, insufficient documentation, over
subscription  of the  offering  or for such  other  reason  as the  Company  may
determine,  in its sole discretion,  to be in the best interests of the Company.
In the event of rejection of this subscription,  Subscriber's  payment,  without
any earnings thereon,  will promptly be returned to Subscriber without deduction
and this Subscription Agreement shall have no further force or effect.

     4. Acceptance of Subscription.  In the event  Subscriber's  subscription is
accepted  by the  Company and the minimum  offering  contingency  is  satisfied,
Subscriber's Shares shall be issued as of the date the Subscriber's subscription
payment will be deposited to the account of the Company (which is expected to be
five (5) days after the Company's acceptance of such Subscription).

     5.  Subscriber's  Representations  and Warranties.  Subscriber  represents,
warrants, acknowledges and agrees that:

          (a)  Subscriber is a resident of the state  indicated on the signature
     page hereof, is legally  competent to execute this Subscription  Agreement,
     and:

               (i) if  Subscriber  is an  individual,  has his or her  principal
          residence in such state;

               (ii) if Subscriber is a corporation,  partnership, trust or other
          form of business organization, has its principal office in such state;
          or

               (iii) if Subscriber is a corporation, partnership, trust or other
          form of business  organization,  Subscriber has not been organized for
          the specific  purpose of acquiring the Shares,  unless otherwise noted
          in  the  Confidential   Purchaser   Questionnaire   submitted  by  the
          Subscriber.

          (b) Subscriber  understands  that the Shares have not been  registered
     under the  Securities  Act of 1933,  as amended,  (the "Act") or applicable
     state  securities  laws,  and are being  offered and sold in reliance  upon
     exemptions  provided  in the  Act and  rules  promulgated  thereunder,  and
     applicable   state   securities  laws  and   regulations,   and  makes  the
     representations, declarations and warranties in this Subscription Agreement
     with  the  intent  that  the  same may be  relied  upon by the  Company  in
     complying with such  exemptions and in determining  the  suitability of the
     undersigned as a purchaser of the Shares.  Subscriber  understands that the
     Company has no obligation or intention to register the Shares,  or file the
     reports or make  public the  information  required  for the use of Rule 144
     under the Act.  Subscriber  further  understands  that no  federal or state
     agency  has  recommended  or  endorsed  the  Shares or made any  finding or
     determination  as  to  the  fairness,   accuracy  or  completeness  of  the
     provisions of the Memorandum or the offering of the Shares.

          (c)  Subscriber has not been offered the Shares by any form of general
     solicitation  or  general  advertising,  including  but not  limited to any
     advertisement,  article,  notice or other  communication  published  in any
     newspaper,  magazine,  or similar  media or broadcast  over  television  or
     radio,  or any seminar or meeting whose  attendees have been invited by any
     general solicitation or general advertising.

          (d) Subscriber has received,  thoroughly  reviewed and understands the
     Memorandum  (including  the  section  entitled  "RISK  FACTORS")  and  this
     Subscription  Agreement  and  confirms  that  Subscriber  and  Subscriber's
     purchaser  representative  (as  defined  in  Section  501 of  Regulation  D
     promulgated  under the Act),  if any,  have been given the  opportunity  to
     review all documents referenced in the Memorandum and all records and books
     pertaining to an investment in the Shares.

          (e) Subscriber  has had access during the course of this  transaction,
     and prior to sale, to all  information  necessary to enable  Subscriber and
     Subscriber's purchaser  representative,  if any, to evaluate the merits and
     risks of a  prospective  investment  in the  Company,  and  Subscriber  and
     Subscriber's purchaser representative,  if any, have had the opportunity to
     ask questions of and receive answers from the officers and directors of the
     Company, or a person or persons acting on its behalf,  concerning the terms
     and conditions of the offering and to obtain any additional information, to
     the extent that the Company  possesses such information or could acquire it
     without unreasonable effort or expense,  necessary to verify the occurrence
     of the  information  contained in and  incorporated in the Memorandum or to
     which Subscriber has had access;  and all questions raised by Subscriber or
     Subscriber's  purchase  representative,  if any,  have been answered to the
     full satisfaction of Subscriber.

          (f) Subscriber:  (i) is acquiring the Shares subscribed for herein for
     Subscriber's  own account,  for investment  only and not with a view to the
     distribution,  resale  or  transfer  thereof,  and as the sole  record  and
     beneficial  holder  thereof;  (ii) is  acquiring  such  Shares  without any
     intention of reselling or  distributing  such Shares  except in  accordance
     with  the  provisions  of the Act and  rules  and  regulations  promulgated
     thereunder and applicable  state  securities laws and regulations and (iii)
     agrees that the Shares shall not be sold, pledged, hypothecated, donated or
     otherwise transferred,  whether or not for consideration, by Subscriber (x)
     unless  they  are  registered  under  the  Act  and  any  applicable  state
     securities  law,  or (y)  except  upon the  issuance  to the  Company  of a
     favorable  opinion of counsel  acceptable to the Company and the submission
     to the  Company  of  such  other  evidence  as may be  satisfactory  to the
     Company,  to the effect that any such transfer shall not be in violation of
     the Act,  applicable  state  securities  laws or any  rules or  regulations
     promulgated  thereunder  including,  in the Company's sole discretion,  the
     written  agreement of any proposed  transferee to be bound by the foregoing
     restrictions on transfer.

          (g)  Subscriber  understands  and agrees  that:  (i) the effect of the
     foregoing  subparagraph  (f) is that  Subscriber  shall be restricted  from
     selling  or  otherwise  transferring  or  disposing  of the  Shares  except
     pursuant  to a  registration  statement  to be  filed  by the  Company  and
     rendered  effective under the Act and applicable  state securities laws, or
     at some indeterminable date in the future, in accordance with an applicable
     exemption  from  registration  which is the  subject of a  favorable  legal
     opinion rendered by counsel  acceptable to the Company;  and (ii) except in
     accordance with the terms and conditions contained in a Registration Rights
     Agreement  between  Subscriber  and the  Company,  the Company has no legal
     obligation to include the Shares in any registration  statement to be filed
     under the Act or applicable state securities laws.

          (h) Subscriber understands and agrees that should Subscriber desire to
     sell,  pledge,  hypothecate,   donate  or  otherwise  transfer  the  Shares
     subscribed for herein,  any attorneys' fees incurred in connection with the
     opinion of counsel  obtained for the Company in connection  therewith shall
     be paid for by Subscriber.

          (i) There are substantial  restrictions on the  transferability of the
     Shares and, accordingly,  Subscriber will need to bear the economic risk of
     the investment in the Shares for an indefinite  period of time and will not
     be readily able to liquidate the investment in case of an emergency.

          (j)  Subscriber  understands  that an  investment in the Shares may be
     subject to substantial risks,, the Shares are a speculative investment that
     involve a high degree of financial  risk,  and there is no assurance of any
     economic, income or tax benefit from such investment.

          (k) In making this  investment,  Subscriber is relying solely upon the
     advice of  Subscriber's  personal  tax  advisors  with  respect  to the tax
     aspects of an investment in the Shares.

          (l) If  Subscriber  is a  corporation,  partnership,  trust,  employee
     benefit plan or other entity,  Subscriber  is  authorized  and qualified to
     become  a  stockholder   of  the  Company  and  the  person   signing  this
     Subscription Agreement on behalf of such entity has been duly authorized by
     such entity to do so.

          (m) Subscriber understands that a notation will be made on the records
     of the Company regarding the restrictions on  transferability of the Shares
     and that the Certificates representing the Shares may bear a legend stating
     that the securities have not been  registered  under the Act and applicable
     state   securities   laws,  and  setting  forth  certain   restrictions  on
     transferability and sale of the securities as follows:

          THE SHARES  EVIDENCED  BY THIS  CERTIFICATE  HAVE NOT BEEN  REGISTERED
          UNDER  THE  SECURITIES  ACT  OF  1933,  AS  AMENDED  (THE  "ACT"),  OR
          APPLICABLE  STATE SECURITIES LAWS, AND HAVE BEEN ISSUED PURSUANT TO AN
          EXEMPTION   THEREFROM.   THE   SHARES   MAY  NOT  BE  SOLD,   PLEDGED,
          HYPOTHECATED,  DONATED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF
          IN  THE  ABSENCE  OF AN  EFFECTIVE  REGISTRATION  UNDER  THE  ACT  AND
          APPLICABLE  STATE  SECURITIES  LAWS,  EXCEPT UPON THE  DELIVERY TO THE
          COMPANY OF AN OPINION OF COUNSEL  ACCEPTABLE  TO THE  COMPANY  AND THE
          SUBMISSION   TO  THE  COMPANY  OF  SUCH  OTHER   EVIDENCE  AS  MAY  BE
          SATISFACTORY  TO THE COMPANY TO THE EFFECT THAT SUCH  REGISTRATION  IS
          NOT REQUIRED, INCLUDING, IN THE COMPANY'S SOLE DISCRETION, THE WRITTEN
          AGREEMENT  OF ANY  PROPOSED  TRANSFEREE  TO BE BOUND BY THE  FOREGOING
          RESTRICTIONS ON TRANSFER.

          (n) No  representations  or  warranties  (except as  contained  in the
     Memorandum,  if any) have been made to  Subscriber  of the  Company  or any
     officer,  employee,  agent or  affiliate of any of them,  and  Subscriber's
     investment   decision   has  been  based  solely  upon   Subscriber's   (or
     Subscriber's   purchaser   representative,   if  any)   evaluation  of  the
     information contained in the Memorandum.

     6.  Representations  and Warranties  Concerning  Suitability and Accredited
Investor Status. Subscriber represents and warrants that

          (a) Subscriber qualifies as an "accredited investor" (as defined under
     Regulation  D as  promulgated  and amended by the  Securities  and Exchange
     Commission pursuant to the Act) on the basis of the representations made by
     Subscriber in the Purchaser  Questionnaire,  which representations shall be
     deemed incorporated herein by this reference.

          (b)   Subscriber,   either  alone  or  with   Subscriber's   purchaser
     representative,  if any, has such knowledge and experience in financial and
     business  matters as to be capable of evaluating the merits and risks of an
     investment in the Company and has obtained sufficient  information from the
     Company to evaluate the merits and risks of an investment in the Company.

          (c) The  individual or entity  specified on the signature  page hereof
     (if any) has acted as Subscriber's  purchaser  representative in connection
     with  evaluating the merits and risks of an investment in the Company,  and
     such purchaser  representative  has completed the purchaser  representative
     questionnaire furnished by the Company.

          (d) Subscriber and Subscriber's purchaser representative, if any, have
     determined  that the  Shares  are a  suitable  investment  for  Subscriber.
     Subscriber  is able to bear  the  economic  risk of the  investment  in the
     Company  (including a complete loss thereof) and has adequate  financial or
     other means for providing for Subscriber's  current needs and contingencies
     and has no need for liquidity in this investment.

          (e) All information contained in Subscriber's  Confidential  Purchaser
     Questionnaire is complete and accurate.

     7.  Indemnification.  Subscriber  recognizes that the offer and sale of the
Shares  to  Subscriber  were  and  will  be  based  upon  the   representations,
warranties,  acknowledgments  and  agreements  of  Subscriber  contained in this
Subscription  Agreement  and hereby  agrees to defend and  indemnify the Company
(and its directors,  officers,  employers,  agents,  and  representatives)  with
respect  to the sale of the  Shares,  and to hold  each  such  person  or entity
harmless from and against all losses, liabilities, costs, or expenses (including
reasonable  attorneys'  fees)  arising  by reason of or in  connection  with any
misrepresentation or any breach of such warranties by Subscriber,  or arising as
a  result  of the sale or  distribution  of the  Shares  by the  undersigned  in
violation of the Act, or any applicable  state  securities laws, or Subscriber's
failure to fulfill any of Subscriber's covenants or agreements set forth herein.
This Subscription Agreement and the representations,  warranties, and agreements
contained  herein  shall be  binding  upon  the  heirs,  legal  representatives,
successors and assigns of Subscriber.

     9. Revocation. Subscriber acknowledges and agrees that Subscriber shall not
and cannot  cancel,  terminate  or revoke  this  Subscription  Agreement  or any
agreement  of  Subscriber  made  hereunder,  except  as  otherwise  provided  by
applicable   state  law,  and  that  (if  Subscriber  is  an  individual)   this
Subscription Agreement shall survive the death,  disability,  or incompetence of
Subscriber.

     10.  Miscellaneous.  This  Subscription  Agreement  shall be  construed  in
accordance  with  and  governed  by the  laws of the  State  of  Delaware.  This
Subscription Agreement constitutes the entire agreement among the parties hereto
with respect to the subject  matter  hereof and may be amended only by a writing
executed by all  parties.  Terms used herein  shall have the same meaning as set
forth in the Memorandum unless the context otherwise requires.

IN WITNESS WHEREOF,  Subscriber has executed this Subscription  Agreement on the
date indicated on the signature page hereof.




                            PATIENT INFOSYSTEMS, INC.
                            (a Delaware corporation)

                      SUBSCRIPTION AGREEMENT SIGNATURE PAGE
            (For Use Only By Individuals, Including Joint Purchasers)

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

                          FORM OF OWNERSHIP (Check One)

================================================================================
___ SEPARATE OR INDIVIDUAL                          ___ TENANTS IN COMMON
    (One Person Must Sign)                              (All Persons Must Sign)
- ----------------------------------------------------------- --------------------
___ JOINT TENANTS WITH RIGHT                        ___ COMMUNITY PROPERTY
    OF SURVIVORSHIP                                     (Both Persons Must Sign)
    (Both Persons Must Sign)
- --------------------------------------------------------------------------------
                      (Please Type or Print All Information

1.       _________________________                  _________________________
         Name of Purchaser                          Name of Joint Purchaser


2.       _________________________                  _________________________
         Address of Purchaser                       Address of Joint Purchaser

         -------------------------                  -------------------------
         City   State   Zip                         City   State   Zip

3.       _________________________                  _________________________
         Social Security Number                     Social Security Number

4.       _________________________                  _________________________
         State of Residence                         State of Residence

5.       NUMBER OF SHARES PURCHASED:_________________ (Minimum of 5,000)

6.       TOTAL SUBSCRIPTION AMOUNT:$ __________________________________________

7.       NAME OF PURCHASER REPRESENTATIVE, IF ANY:_____________________________

8.       DATE:___________________________________________

9.       SIGNATURES (Execute appropriate line:)

         A.  INDIVIDUAL:___________________________________________

         B.  JOINT OWNERSHIP:(i) ________________________________________

                              (ii) ________________________________________
================================================================================




                           ACCEPTANCE OF SUBSCRIPTION

     The foregoing subscription to purchase Series C Convertible Preferred Stock
of Patient Infosystems, Inc. is hereby accepted.

                                                     PATIENT INFOSYSTEMS, INC.


Dated:________________________              By:_______________________________
                                                          Name:
                                                          Title:





                            PATIENT INFOSYSTEMS, INC.
                            (a Delaware corporation)

                      SUBSCRIPTION AGREEMENT SIGNATURE PAGE
         (For Use Only By Corporations, Partnerships or other Entities)

- --------------------------------------------------------------------------------
                          FORM OF OWNERSHIP (Check One)

================================================================================
___ CORPORATION                          ___ TRUST


___ PARTNERSHIP                          ___ OTHER (Specify) __________________

                      (Please Type or Print All Information

1.       NAME OF PURCHASER:   _________________________

2.       ADDRESS OF PURCHASER:_________________________
                              Street

                              -------------------------
                              City   State   Zip

3.       STATE OF PRINCIPAL OFFICE:__________________________________________

4.       TAXPAYER ID NUMBER:_________________________________________________

5.       NUMBER OF SHARES PURCHASED:________________ (Minimum of 5,000)

6.       TOTAL SUBSCRIPTION AMOUNT:$_________________________________________

7.       NAME OF PURCHASER REPRESENTATIVE, IF ANY:___________________________

8.       DATE:____________________________

9.       SIGNATURES (Execute appropriate line:)

         A.  CORPORATION: By:_______________________________________
                             Signature

                             ---------------------------------------
                             Name             Title

         B.  PARTNERSHIP: By:_______________________________________
                             Name             Title

                             ---------------------------------------
                             Name             Title

         C.  TRUST        By: _______________________________________
                              Name             Title
================================================================================






                           ACCEPTANCE OF SUBSCRIPTION

     The foregoing subscription to purchase Series C Convertible Preferred Stock
of Patient Infosystems, Inc. is hereby accepted.

                                                  PATIENT INFOSYSTEMS, INC.


Dated:   ______________________              By:________________________________
                                                Name:
                                                Title:

EX-10

                           PATIENT INFOSYSTEMS, INC.


                          REGISTRATION RIGHTS AGREEMENT


     This  Registration  Rights  Agreement  (this  "Agreement")  is  made  as of
__________  __,  1999  by  and  among  Patient  Infosystems,  Inc.,  a  Delaware
corporation  (the  "Company"),  and each of the persons and  entities  (all such
purchasers  referred to herein as "Purchasers") who have purchased shares of the
Company's Series C Convertible Preferred Stock (the "Series C Preferred" and all
such  Preferred  Stock and the Common Stock into which the Series C Preferred is
convertible referred to herein as "Securities").

                                    RECITALS:


     A. In  connection  with the  issuance  and sale of shares  of the  Series C
Preferred,  the  Company  has  granted,  registration  and  other  rights to the
purchasers of the Preferred Stock.


     B. The  Company  desires  to set forth the rights  and  obligations  of the
parties  herein  in  connection  with  the  completion  of an  equity  financing
involving the sale of the Series C Preferred.

NOW, THEREFORE, in consideration of the foregoing, the parties agree as follows:

                      Transfer Restrictions; Securities Act
                         Compliance; Registration Rights


     1. Certain  Definitions.  As used in this  Agreement,  the following  terms
shall have the following respective meanings:

     "Act" shall mean the Securities Act of 1933, as amended.

     "Commission"   shall  mean  the  United  States   Securities  and  Exchange
     Commission or any other federal agency at the time administering the Act.

     "Common Stock" shall mean the Company's common stock $.01 par value.

     "Conversion  Stock"  shall mean the shares of the  Company's  Common  Stock
     issuable or issued upon conversion or exercise of or otherwise deemed to be
     a part of the Series C Preferred.

     "Holder" shall mean the Purchasers holding  Registrable  Securities and any
     person holding such securities to whom the rights under this Agreement have
     been transferred in accordance with Section 11 hereof. "Initiating Holders"
     shall mean any Holder or Holders who in the  aggregate  hold at least sixty
     percent  (60%) of the  Registrable  Securities  at the time of the relevant
     event.

     "Registrable  Securities" shall mean (i) the Conversion Stock; and (ii) any
     Common Stock issued or issuable with respect to the  Conversion  Stock upon
     any stock split,  stock dividend,  recapitalization,  or similar event and;
     provided, however, that shares of Common Stock or other securities shall no
     longer be treated as Registrable Securities after they have been sold to or
     through a broker or dealer or  underwriter  in a public  distribution  or a
     public securities transaction,  whether in a registered offering,  pursuant
     to Rule 144, or otherwise.

     The  terms  "register,"   "registered"  and   "registration"   refer  to  a
     registration  effected by preparing and filing a registration  statement in
     compliance   with  the  Act,  and  the   declaration  or  ordering  of  the
     effectiveness of such registration statement.

     "Registration  Expenses" shall mean all expenses incurred by the Company in
     complying with Sections 5, 6, and 7 hereof, including,  without limitation,
     all registration, qualification, and filing fees, printing expenses, escrow
     fees, fees and disbursements of counsel for the Company,  blue sky fees and
     expenses,  the expense of any special audits incident to or required by any
     such  registration  (but excluding the compensation of regular employees of
     the Company, which shall be paid in any event by the Company). Registration
     Expenses  shall  not  include   expenses  of  the  holders  of  Registrable
     Securities to the extent limited or precluded in applicable  blue sky laws.
     Registration  Expenses shall not include selling commissions,  underwriting
     discounts,  other  compensation  paid to  underwriters  or other  agents or
     brokers to effect the sale,  stock transfer taxes, or counsel of any Holder
     or Holders.

     "Restricted  Securities"  shall mean the securities of the Company required
     to bear the legend set forth in Section 2 hereof.

     "Selling   Expenses"  shall  mean  all  underwriting   discounts,   selling
     commissions,  and stock transfer taxes, and costs of special counsel to the
     Holders  (other  than  as  described  in the  definition  of  "Registration
     Expenses"  above and as limited by Section  8), if any,  applicable  to the
     securities registered by the Holders.


     2. Restrictive  Legend.  Each certificate  representing (i) the Securities,
(ii) the Conversion  Stock, and (iii) any other securities  issued in respect of
the Securities, upon any stock split, stock dividend, recapitalization,  merger,
consolidation  or  similar  event,  shall  (unless  otherwise  permitted  by the
provisions of Section 4 hereof) be stamped or otherwise  imprinted with a legend
in  substantially  the following form (in addition to any legend  required under
applicable  securities  laws of any state or  foreign  jurisdiction),  as and if
appropriate:


          (a) THE SHARES  EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
          UNDER  THE  SECURITIES  ACT  OF  1933,  AS  AMENDED  (THE  "ACT"),  OR
          APPLICABLE  STATE SECURITIES LAWS, AND HAVE BEEN ISSUED PURSUANT TO AN
          EXEMPTION   THEREFROM.   THE   SHARES   MAY  NOT  BE  SOLD,   PLEDGED,
          HYPOTHECATED,  DONATED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF
          IN  THE  ABSENCE  OF AN  EFFECTIVE  REGISTRATION  UNDER  THE  ACT  AND
          APPLICABLE  STATE  SECURITIES  LAWS,  EXCEPT UPON THE  DELIVERY TO THE
          COMPANY OF AN OPINION OF COUNSEL  ACCEPTABLE  TO THE  COMPANY  AND THE
          SUBMISSION   TO  THE  COMPANY  OF  SUCH  OTHER   EVIDENCE  AS  MAY  BE
          SATISFACTORY  TO THE COMPANY TO THE EFFECT THAT SUCH  REGISTRATION  IS
          NOT REQUIRED, INCLUDING, IN THE COMPANY'S SOLE DISCRETION, THE WRITTEN
          AGREEMENT  OF ANY  PROPOSED  TRANSFEREE  TO BE BOUND BY THE  FOREGOING
          RESTRICTIONS ON TRANSFER.


     (b) Each Holder consents to the Company's  making a notation on its records
and giving  instructions to any transfer agent of the Securities,  the Warrants,
the Notes or the  Conversion  Stock in order to implement  the  restrictions  on
transfer established in this Agreement.


3. Notice of Proposed Transfers.


          (a) Each Holder by acceptance of the Restricted  Securities  agrees to
     comply in all respects  with the  provisions  of this Section 3;  provided,
     however,  that the  restrictions  on transfer as set forth  herein shall be
     subject to any superseding  agreement that may exist between the Holder and
     the Company. Prior to any proposed sale, assignment, transfer, or pledge of
     any  Restricted  Securities,  unless  there  is in  effect  a  registration
     statement under the Act covering the proposed transfer,  the Holder thereof
     shall give  written  notice to the Company of such  Holder's  intention  to
     effect such transfer, sale, assignment,  or pledge (the "Transfer Notice").
     The Transfer  Notice shall  describe  the manner and  circumstances  of the
     proposed  transfer,  sale,  assignment,  or  pledge in  sufficient  detail,
     including (i) the number or amount of the Restricted  Securities to be sold
     or  transferred;  (ii) the price for which  the  Holder  proposes  to sell,
     transfer,  or assign the Restricted  Securities;  and (iii) the name of the
     proposed   purchaser  or  transferee.   Each  such  notice  shall  also  be
     accompanied,  if requested by the Company and at such Holder's expense,  by
     an unqualified  written  opinion of legal counsel who shall and whose legal
     opinion  shall be  satisfactory  to the  Company,  which  opinion  shall be
     addressed  to the Company to the effect that the  proposed  transfer of the
     Restricted Securities may be effected without registration under the Act.


          (b) Each certificate  evidencing the Restricted Securities transferred
     as provided  above shall bear,  except if such transfer is made pursuant to
     Rule 144 under the Act, the  appropriate  restrictive  legends set forth in
     Section  2  hereof,  except  that  such  certificate  shall  not  bear  the
     restrictive  legend set forth in Section  2(a)  hereof if in the opinion of
     counsel for such Holder and  counsel  for the  Company,  such legend is not
     required in order to establish compliance with any provision of the Act.


     4. Removal of Restrictions  on Transfer of Securities.  Any legend referred
to in Section 2(a) hereof  stamped or imprinted on a certificate  evidencing (i)
the Securities;  (ii) the Conversion Stock; or (iii) any other securities issued
in respect of the  Securities,  or the  Conversion  Stock upon any stock  split,
stock dividend,  recapitalization,  merger, consolidation, or similar event, and
the stock  transfer  instructions  and  record  notations  with  respect to such
security shall be removed and the Company shall issue a certificate without such
legend to the Holder of such security if such  security is registered  under the
Act or if such Holder provides the Company with an opinion of counsel (which may
be counsel for the  Company),  reasonably  satisfactory  to the Company,  to the
effect  that a public  sale or transfer  of such  security  may be made  without
registration  under the Act or such Holder provides the Company with assurances,
which  may,  at the  option  of the  Company,  include  an  opinion  of  counsel
satisfactory to the Company,  that such security can be sold pursuant to Section
(k) of Rule 144 under the Act.


     5. Demand Registration.


          (a) Request for  Registration.  In case the Company shall receive from
     Initiating   Holders  a  written   request  that  the  Company  effect  any
     registration,  qualification, or compliance with respect to the Registrable
     Securities   held  by  the  Initiating   Holders  in  connection   with  an
     underwritten  public offering of such Registrable  Securities,  the Company
     shall:

               (i)  within  thirty  (30) days of the  Company's  receipt of such
          notice,   give   written   notice   of  the   proposed   registration,
          qualification, or compliance to all other Holders; and

               (ii) as soon as practicable,  use its best efforts to effect such
          registration,   qualification,   or  compliance  (including,   without
          limitation,  appropriate  qualification  under  applicable blue sky or
          other state securities laws and appropriate compliance with applicable
          regulations   issued   under  the  Act  and  any  other   governmental
          requirements  or  regulations)  as may be so  requested  and as  would
          permit or facilitate the sale and  distribution of all or such portion
          of such  Registrable  Securities  as are  specified  in such  request,
          together with all or such portion of the Registrable Securities of any
          Holder or  Holders  joining  in such  request  as are  specified  in a
          written request  received by the Company within twenty (20) days after
          receipt of such written  notice from the Company;  provided,  however,
          that the Company  shall not be  obligated to take any action to effect
          any such registration,  qualification,  or compliance pursuant to this
          Section 5:

                    (1) in any  particular  jurisdiction  in which  the  Company
               would be  required  to  execute a general  consent  to service of
               process  in  effecting  such  registration,   qualification,   or
               compliance  unless the  Company is already  subject to service in
               such jurisdiction and except as may be required by the Act;

                    (2) prior to the first sale of the Company's Common Stock to
               the general public pursuant to a registration statement filed and
               declared effective by the Commission under the Act;

                    (3) prior to the date six months  immediately  following the
               effective  date of any  registration  statement  pertaining to an
               underwritten  public offering of securities of the Company (other
               than a  registration  of securities in a Rule 145  transaction or
               with respect to an employee benefit plan)];

                    (4) after the Company  has  effected  one such  registration
               pursuant to this Section 5(a)(4),  and such registration has been
               declared or ordered effective;

                    (5) at any time during which the Company is qualified to use
               Form S-3 for registration of the Registrable Securities;

                    (6)  if  the  Company   shall  furnish  to  such  Holders  a
               certificate  signed by the President of the Company  stating that
               in the good faith  judgment of the Board of Directors it would be
               seriously  detrimental to the Company or its  stockholders  for a
               registration  statement to be filed in the near future,  then the
               Company's obligation to use its best efforts to register, qualify
               or comply under this Section  5(a)(ii)(6) shall be deferred for a
               period of up to one hundred eighty (180) days; provided, however,
               that the Company  shall not exercise such right more than once in
               any twelve-month period.

          Subject to the  foregoing  clauses (1) through (6), the Company  shall
     file a  registration  statement  covering  the  Registrable  Securities  so
     requested to be  registered  as soon as  practicable  after  receipt of the
     request or requests of the Initiating Holders.


          (b) Underwriting.  The right of any Holder to registration pursuant to
     Section 5 shall be  conditioned  upon such  Holder's  participation  in the
     underwriting  arrangements required by this Section 5(b), and the inclusion
     of such Holder's  Registrable  Securities in the underwriting to the extent
     requested shall be limited to the extent provided herein.

          The Company shall  (together with all Holders  proposing to distribute
     their  securities  through such  underwriting)  enter into an  underwriting
     agreement  in  customary  form with a managing  underwriter  of  recognized
     national  standing  selected  for  such  underwriting  by the  Company  and
     reasonably  acceptable to a majority of the Holders proposing to distribute
     their  securities  through  such  underwriting.  Notwithstanding  any other
     provision  of this  Section  5, if the  managing  underwriter  advises  the
     Initiating  Holders in writing that marketing  factors require a limitation
     on the  number of  shares to be  underwritten,  then the  Company  shall so
     advise all Holders of Registrable  Securities,  and the number of shares of
     Registrable  Securities  that  may  be  included  in the  registration  and
     underwriting   shall  be  allocated  among  all  such  Holders  thereof  in
     proportion,  as  nearly  as  practicable,  to  the  respective  amounts  of
     Registrable  Securities  held by such  Holders  at the time of  filing  the
     registration   statement.  No  Registrable  Securities  excluded  from  the
     underwriting by reason of the underwriter's  marketing  limitation shall be
     included in such  registration.  To facilitate  the allocation of shares in
     accordance with the above  provisions,  the Company or the underwriters may
     round the  number of shares  allocated  to any  Holder to the  nearest  one
     hundred (100) shares.

          If any Holder of  Registrable  Securities  disapproves of the terms of
     the  underwriting,  such Holder may elect to withdraw  therefrom by written
     notice  to the  Company,  the  managing  underwriter,  and  the  Initiating
     Holders.  The Registrable  Securities  and/or other securities so withdrawn
     shall also be withdrawn from registration,  and such Registrable Securities
     shall not be  transferred  in a public  distribution  prior to one  hundred
     eighty (180) days after the effective date of such registration;  provided,
     however, that if by the withdrawal of such Registrable Securities a greater
     number of Registrable  Securities  held by other Holders may be included in
     such  registration  (up to the  maximum  of any  limitation  imposed by the
     underwriters),  then the Company  shall offer to all other Holders who have
     included  Registrable  Securities in the  registration the right to include
     additional   Registrable   Securities  in  the  same   proportion  used  in
     determining the underwriter limitation in this Section 5(b).

          If  the   underwriter  has  not  limited  the  number  of  Registrable
     Securities to be underwritten,  the Company may include  securities for its
     own  account or the account of others if the  underwriter  so agrees and if
     the  number  of  Registrable  Securities  that  would  otherwise  have been
     included  in such  registration  and  underwriting  shall  not  thereby  be
     limited.

     6. Company Registration.


          (a) Notice of Registration.  If at any time or from time-to-time,  the
     Company shall determine to register any of its  securities,  either for its
     own  account  or the  account  of a Holder  or  Holders,  other  than (i) a
     registration relating solely to employee benefit plans; (ii) a registration
     relating  solely  to  a  Commission  Rule  145   transaction;   or  (ii)  a
     registration pursuant to Section 5 hereof, the Company shall:

               (i) promptly give to each Holder written notice thereof; and

               (ii) include in such registration (and any related  qualification
          under  blue  sky laws or other  compliance),  and in any  underwriting
          involved  therein,  all  the  Registrable  Securities  specified  in a
          written  request  or  requests,  made  within  twenty  (20) days after
          receipt of such written notice from the Company, by any Holder.


          (b)  Underwriting.  If the  registration  of which the  Company  gives
     notice is for a registered public offering  involving an underwriting,  the
     Company  shall so advise the Holders as a part of the written  notice given
     pursuant  to Section  6(a)(i).  In such  event,  the right of any Holder to
     registration  pursuant  to this  Section 6 shall be  conditioned  upon such
     Holder's   participation   in  such   underwriting  and  the  inclusion  of
     Registrable  Securities in the  underwriting to the extent provided herein.
     All  Holders   proposing  to  distribute  their  securities   through  such
     underwriting  shall  (together with the Company) enter into an underwriting
     agreement in customary form with the managing underwriter selected for such
     underwriting  by the Company.  Notwithstanding  any other provision of this
     Section 6, if the managing  underwriter  determines that marketing  factors
     require a  limitation  on the  number of  shares  to be  underwritten,  the
     managing  underwriter  may  limit or  exclude  from such  underwriting  the
     Registrable   Securities  and  other   securities  of  the  Holders  to  be
     distributed.  The Company  shall so advise all Holders  distributing  their
     securities  through such  underwriting of such limitation or exclusion and,
     if  applicable,  the number of shares of  Registrable  Securities  that the
     managing  underwriter  determines may be included in the  registration  and
     underwriting shall be allocated among all Holders in proportion,  as nearly
     as practicable, to the respective amounts of Registrable Securities held by
     such  Holders  at  the  time  of  filing  the  registration  statement.  To
     facilitate  the   allocation  of  shares  in  accordance   with  the  above
     provisions,  the  Company may round the number of shares  allocated  to any
     Holder or holder to the nearest one hundred (100) shares.

          If any Holder of  Registrable  Securities  disapproves of the terms of
     the underwriting,  such Holder may elect to withdraw therefrom by providing
     written notice to the Company and the managing underwriter.  Any securities
     excluded or withdrawn from such  underwriting  shall be withdrawn from such
     registration and shall not be transferred in a public distribution prior to
     one hundred eighty (180) days after the effective date of the  registration
     statement relating thereto; provided, however, that if by the withdrawal of
     such Registrable Securities a greater number of Registrable Securities held
     by other Holders may be included in such registration (up to the maximum of
     any limitation imposed by the  underwriters),  then the Company shall offer
     to all  other  Holders  who have  included  Registrable  Securities  in the
     registration the right to include additional  Registrable Securities in the
     same  proportion  used in determining  the  underwriter  limitation in this
     Section 6(b).

               (i) Right to Terminate  Registration.  The Company shall have the
          right to terminate or withdraw any registration  initiated by it under
          this Section 6 prior to the effectiveness of such registration whether
          or  not  any  Holder  has  elected  to  include   securities  in  such
          registration.


     7.  Expenses  of  Registration.   All  Registration  Expenses  incurred  in
connection with registrations pursuant to Sections 5 and 6 shall be borne by the
Company. All Selling Expenses relating to securities registered on behalf of the
Holders  shall  be  borne  by  the  Holders  of  securities   included  in  such
registration  pro rata with the Company and among each other on the basis of the
number of shares so registered.


     8.  Registration  Procedures.  Whenever  required  under this  Agreement to
effect the registration of Registrable Securities, the Company shall:

          (a) Prepare and file with the Commission a registration statement with
     respect  to  such  securities  and use  its  best  efforts  to  cause  such
     registration  statement to become and remain  effective for at least ninety
     (90) days or until the distribution described in the Registration Statement
     has been completed;

          (b)  Prepare  and  file  with  the  Commission   such  amendments  and
     supplements  to such  registration  statement  and the  prospectus  used in
     connection with such  registration  statement as may be necessary to comply
     with the  provisions  of the Act with  respect  to the  disposition  of all
     securities covered by such registration statement;

          (c) Furnish to the Holders  participating in such  registration and to
     the underwriters of the securities being registered such reasonable  number
     of copies of the  registration  statement,  preliminary  prospectus,  final
     prospectus  and such other  documents as such  underwriters  may reasonably
     request in order to facilitate the public offering of such securities;

          (d) Use its best  efforts  to  furnish,  at the  request of any Holder
     requesting   registration  of  Registrable   Securities  pursuant  to  this
     Agreement,  on the date that such  Registrable  Securities are delivered to
     the  underwriters  for sale in connection  with a registration  pursuant to
     this Agreement,  (i) an opinion,  dated such date, of counsel  representing
     the Company for the purposes of such registration, in form and substance as
     is customarily  given to underwriters in an underwritten  public  offering,
     addressed  to the  underwriters,  if  any,  and to the  Holders  requesting
     registration  of Registrable  Securities and (ii) a letter dated such date,
     from the independent  accountants of the Company,  in form and substance as
     is customarily  given by  independent  accountants  to  underwriters  in an
     underwritten public offering, addressed to the underwriters, if any, and to
     the Holders requesting registration of Registrable Securities;

          (e) In the event of any underwritten  public offering,  enter into and
     perform  its  obligations  under an  underwriting  agreement,  in usual and
     customary form, with the managing underwriter of such offering. Each Holder
     participating  in such  underwriting  shall also enter into and perform its
     obligations under such an agreement;

          (f)  Notify  each  Holder of  Registrable  Securities  covered by such
     registration  statement at any time when a prospectus  relating  thereto is
     required to be delivered  under the Act of the  happening of any event as a
     result of which the prospectus included in such registration  statement, as
     then in effect,  includes an untrue  statement of material fact or omits to
     state a material  fact  required to be stated  therein or necessary to make
     the  statements  therein not  misleading in the light of the  circumstances
     then existing;

          (g)  Cooperate  with each seller of  Registrable  Securities  and each
     underwriter or agent  participating  in the disposition of such Registrable
     Securities  and their  respective  counsel in connection  with any required
     filings with the National Association of Securities Dealers, Inc.:

          (h) Cause such Registrable Securities registered pursuant hereunder to
     be listed on each securities exchange or each inter-dealer quotation system
     on which  similar  securities  issued  by the  Company  are then  listed or
     quoted; and

               (i) Provide a transfer  agent and registrar  for all  Registrable
          Securities  registered  pursuant  hereunder and a CUSIP number for all
          such Registrable Securities, in each case not later than the effective
          date of such registration.

     9. Indemnification.

          (a) To the extent  permitted by law, the Company shall  indemnify each
     Holder,  each of its officers,  directors,  and  partners,  and each person
     controlling  such Holder  within the meaning of Section 15 of the Act, with
     respect  to  which  registration,  qualification,  or  compliance  has been
     effected pursuant to this Agreement, and each underwriter, if any, and each
     person who controls any underwriter within the meaning of Section 15 of the
     Act,  against all expenses,  claims,  losses,  damages,  or liabilities (or
     actions in respect  thereof),  including any of the  foregoing  incurred in
     settlement of any  litigation,  commenced or threatened,  arising out of or
     based on any untrue  statement (or alleged untrue  statement) of a material
     fact  contained  in  any  registration  statement,   prospectus,   offering
     circular,  or other  document,  or any  amendment  or  supplement  thereto,
     incident to any such registration, qualification or compliance, or based on
     any  omission  (or  alleged  omission)  to state  therein a  material  fact
     required to be stated therein or necessary to make the statements  therein,
     in light of the  circumstances in which they were made, not misleading,  or
     any  violation  by the  Company  of  the  Act or  any  rule  or  regulation
     promulgated  under  the  Act  or any  state  securities  law or  regulation
     applicable  to the  Company  in  connection  with  any  such  registration,
     qualification,  or  compliance,  and the Company shall  reimburse each such
     Holder, each of its officers, directors,  partners, each person controlling
     such Holder,  each such  underwriter  and each person who controls any such
     underwriter,  for any legal and any other expenses  reasonably  incurred in
     connection  with  investigating,  preparing,  or defending  any such claim,
     loss, damage,  liability, or action; provided that the Company shall not be
     liable in any such case to the extent  that any such claim,  loss,  damage,
     liability  or  expense  arises  out of or is  based  solely  on any  untrue
     statement or omission or alleged untrue statement or omission,  made solely
     in reliance upon and in conformity  with written  information  furnished to
     the Company by an  instrument  duly  executed by such  Holder,  controlling
     person,  or underwriter and stated to be specifically for use therein;  and
     provided  further,  that the Company shall not be liable to any underwriter
     or any person who controls such  underwriter for any claim,  loss,  damage,
     liability  or  expense  that  arises  out of or is based  upon  any  untrue
     statement or omission or alleged  untrue  statement  or omission  made in a
     preliminary  prospectus  on  file  with  the  Commission  at the  time  the
     registration statement becomes effective or in the amended prospectus filed
     with  the  Commission  pursuant  to  Rule  424(b)  of the Act  (the  "Final
     Prospectus")  if a copy of the Final  Prospectus  was not  furnished to the
     person asserting the claim, loss, damage,  liability or expense at or prior
     to the time such action is required by the Act.


          (b) Each Holder shall,  if Registrable  Securities held by such Holder
     are   included   in  the   securities   as  to  which  such   registration,
     qualification, or compliance is being effected, indemnify the Company, each
     of its directors and officers,  each underwriter,  if any, of the Company's
     securities  covered  by such a  registration  statement,  each  person  who
     controls the Company or such  underwriter  within the meaning of Section 15
     of the Act, and each other such Holder,  each of its  officers,  directors,
     and partners and each person  controlling such Holder within the meaning of
     Section 15 of the Act, against all claims,  losses, damages and liabilities
     (or  actions  in  respect  thereof)  arising  out of or based on any untrue
     statement (or alleged untrue statement) of a material fact contained in any
     such  registration  statement,   prospectus,  offering  circular  or  other
     document, or any omission (or alleged omission) to state therein a material
     fact  required to be stated  therein or  necessary  to make the  statements
     therein not misleading, and shall reimburse the Company, such Holders, such
     directors,  officers,  persons,  underwriters,  or control  persons for any
     legal  or  any  other  expenses  reasonably  incurred  in  connection  with
     investigating  or  defending  any such claim,  loss,  damage,  liability or
     action,  in each  case to the  extent,  but only to the  extent,  that such
     untrue  statement  (or alleged  untrue  statement)  or omission (or alleged
     omission)  is made in such  registration  statement,  prospectus,  offering
     circular, or other document in reliance upon and in conformity with written
     information furnished to the Company by an instrument duly executed by such
     Holder and stated to be specifically for use therein.


          (c) Each party entitled to  indemnification  under this Section 9 (the
     "Indemnified  Party")  shall give  notice to the party  required to provide
     indemnification (the "Indemnifying  Party") promptly after such Indemnified
     Party  has  actual  knowledge  of any  claim as to which  indemnity  may be
     sought,  and shall permit the  Indemnifying  Party to assume the defense of
     any such claim or any litigation resulting therefrom, provided that counsel
     for the Indemnifying  Party, who shall conduct the defense of such claim or
     litigation,  shall be approved by the  Indemnified  Party  (whose  approval
     shall  not  unreasonably  be  withheld),  and  the  Indemnified  Party  may
     participate in such defense at such party's  expense,  and provided further
     that the failure of any Indemnified Party to give notice as provided herein
     shall not  relieve the  Indemnifying  Party of its  obligations  under this
     Agreement unless the failure to give such notice is materially  prejudicial
     to an  Indemnifying  Party's  ability to defend  such  action and  provided
     further,  that the  Indemnifying  Party  shall not assume the  defense  for
     matters  as to which  there is a  conflict  of  interest  or  separate  and
     different defenses but shall bear the expense of such defense nevertheless.
     No  Indemnifying  Party,  in the  defense of any such claim or  litigation,
     shall, except with the consent of each Indemnified Party,  consent to entry
     of any  judgment or enter into any  settlement  that does not include as an
     unconditional  term thereof the giving by the claimant or plaintiff to such
     Indemnified  Party of a release from all liability in respect to such claim
     or litigation.


          (d) The  obligations of the Company and the Holders under this Section
     9 shall survive the completion of any offering of Registrable Securities in
     a registration statement pursuant to this Agreement.


     10. Information by Holder. The Holder or Holders of Registrable  Securities
included  in any  registration  shall  furnish to the Company  such  information
regarding such Holder or Holders,  the Registrable  Securities held by them, and
the  distribution  proposed by such Holder or Holders as the Company may request
in  writing  and as shall  be  required  in  connection  with any  registration,
qualification, or compliance referred to in this Agreement.


     11.  Transfer of  Registration  Rights.  The rights to cause the Company to
register  securities granted Holders under Sections 5 and 6 may be assigned to a
transferee  or  assignee  in  connection  with any  transfer  or  assignment  of
Registrable Securities by a Holder of not less than 25,000 shares of Registrable
Securities  (subject to the  limitations  of Section 3), or to any transferee or
assignee  who is a  constituent  partner  of a  Holder  or the  estate  of  such
constituent  partner,  provided  that such transfer may otherwise be effected in
accordance  with  applicable  securities  laws,  and notice of such  transfer is
provided promptly to the Company.


     12.  Standoff  Agreement.   Each  Holder  agrees  in  connection  with  any
underwritten  public offering of securities by the Company,  upon request of the
Company or the underwriters  managing such offering of the Company's securities,
not to sell, make any short sale of, loan, grant any option for the purchase of,
or otherwise dispose of any Registrable Securities (other than those included in
the  registration  and other than to affiliates of the Holder who shall agree to
be similarly  bound)  without the prior  written  consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed, in any
event,  one  hundred  eighty  (180)  days))  from  the  effective  date  of such
registration as may be requested by the underwriters;  provided,  however,  that
the  Holders  shall have no such  obligation  under  this  Section 12 unless the
officers and  directors  of the Company who own stock of the Company  shall also
agree to such restrictions.


     13.  Notices,  etc.  All  notices  and  other  communications  required  or
permitted  hereunder shall be in writing and shall be deemed  effectively  given
upon  delivery to the party to be  notified  in person or by courier  service or
five (5) days after  deposit  with the United  States  mail,  by  registered  or
certified mail, postage prepaid, addressed (a) if to a Holder of any Registrable
Securities,  to such address as such Holder shall have  furnished the Company in
writing, or, until any such Holder so furnishes an address to the Company,  then
to and at the address of the last Holder of such securities who has so furnished
an address to the Company, or (b) if to the Company, to its address set forth on
the first page of this  Agreement  and  addressed to the  attention of the Chief
Financial Officer,  or at such other address as the Company shall have furnished
to the Holders in writing.


     14.  Amendment.  Any provision of this Agreement may be amended,  waived or
modified  upon the  written  consent of (i) the  Company  and (ii)  holders of a
majority of the  outstanding  shares of Registrable  Securities.  Any Holder may
waive any of his or her rights or the Company's  obligations  hereunder  without
obtaining the consent of any other person.

     15.  Effectiveness of Agreement.  This Agreement shall be effective at such
time as Holders  representing  a majority of the Series C Preferred  outstanding
immediately prior to the effectiveness of this Agreement shall have executed and
delivered a signed counterpart of this Agreement.

     16.  Counterparts.  This  Agreement  may  be  executed  in  any  number  of
counterparts, each of which shall be an original and all of which together shall
constitute one instrument.

     17.  Governing  Law.  This  Agreement  shall be governed by the laws of the
State of New York.

IN WITNESS  WHEREOF,  the  undersigned  have executed this  Registration  Rights
Agreement as of the date set forth above.


"COMPANY"      PATIENT INFOSYSTEMS, INC.
               a Delaware corporation


               By:
                  ------------------------------------------------------------
                  Name:
                  Title:



"HOLDERS"
              ----------------------------------------------------------------


              By:
                 ------------------------------------------------------------

              Print Name:
                         ----------------------------------------------------

              Title:
                    ---------------------------------------------------------

EX-10

                            EIGHTH ADDENDUM TO LEASE

]The Eight Addendum To Lease is made and entered into the ____ day of November,
2000, between Conifer Prince Street Associates (Landlord) and Patient
Infosystems, Inc. formerly DSMI Corporation (Tenant).

WITNESSETH: That the Tenant currently leases and occupies approximately 12,954
square feet of office space at 46 Prince Street, Rochester, New York 14607
pursuant to a Lease Agreement and First, Second, Third, Fourth, Fifth and Sixth
Addenda To Lease, dated February 22, 1995; August 18, 1995; November 17, 1995;
March 28, 1996; October 29, 1996, November 30, 1996, November 24, 1997, and June
16 1999 respectively.

WHEREAS, Tenant and Landlord desire to extend the Term of the Lease until
December 31, 2001 and decrease the occupied space to the first floor consisting
of 5,504 square feet and lower levl consisting of 1,557 square feet, totaling
7.061 square feet.

NOW, THEREFORE, it is mutually agreed upon by the Landlord and Tenant to modify
certain provisions of the Lease as follows:

1.       Effective upon full execution of this Eighth Addendum To Lease, the
         Term of the Lease shall be extended from January 1, 2001 to
         December 31, 2001.
2.       Tenant agrees to pay, Base Rent for its' leased premises, consisting of
         approximately 7,061 square feet, as follows:
        --------------------- --------------------- ---------------------
               Period                Annual                 Monthly
            Month-to-Month          Per Sq.ft.             Base Rent
                                    Base Rent
        --------------------- --------------------- ---------------------
        --------------------- --------------------- ---------------------
        1/1/2001 - 12/31/2001        $15.08               $8,873.32
        --------------------- --------------------- ---------------------

3.       Parking permits will be available for 20 cars from 9:00am - 5:00pm
         weekdays and 28 passes for evening and after hours shifts.
4.       Effective January 1, 2001, Schedule A-7 shall replace Schedule A6 and
         Tenant's Pro Rata share of taxes, utilities and insurance will be
         23.25%.

Agreed to by:                                        Agreed to by:
PATIENT INFOSYSTEMS, INC.                   CONIFER PRINCE STREET ASSOCIATES
By:      /s/Kent A. Tapper                   By:     /s/Terryl Butwid
    -------------------------                -----------------------------------
Date: 12/8/2000                              Date: 12/20/2000





                                                             SCHEDULE A-7
                             COMMON AREA MAINTENANCE
                                 ADDITIONAL RENT
                                    UTILITIES

Total Square Footage of Building:           30,375
Square Footage Covered By Lease:            7,061
Tenant's Share Electric:                    23.25%

                                 ADDITIONAL RENT

Heating and Air Conditioning
The heat pump units serving the leases premises shall be individually gauged and
monthly charges shall be calculated as set forth on the attached and further
explained as follows:

1.       The heat pump units serving the leased premises shall be identified by
         model number.
2.       The actual heat pump operating hours will be recorded for each month
         (column 3) and multiplied by the energy use factor (column 4)
         applicable to the heat pump model to establish the total energy units
         (column 5).
3.       The total energy units for all heat pumps is then added to the total
         auxiliary usage to establish the grand total usage and energy cost
         (total KWH) for the building.
4.       The grand total usage and energy cost is multiplied by the utility
         company's rate per KWH to establish the total cost for kilowatt hours.
5.       The total KWH are divided by the total heat pump usage and charges to
         establish the heat pump hourly rate (column 6).
6.       The monthly tenant charge is the heat pump hourly rate multiplied by
         the total energy units (column 5).
7.       Tenant shall also pay 23.25% of the general usage/common area electric.

                                 ADDITIONAL RENT
                      Real Estate and Insurance Escalation

In addition to the rents set forth in the Lease, and heretofore in this
Schedule, with 1995 as the base year, Tenant shall pay 23.25% of the increase in
real estate taxes and other government levies in lieu of taxes (payable in
October of the following year), and 23.25% of the increase in property and
liability insurance premiums (payable in February of the following year).

EX-10

                         Termination of Lease Agreement

THIS TERMINATION OF LEASE AGREEMENT  ("Termination  Agreement"),  made this 24th
day of January,  2001 between  Michele M. Hoey and John E. Hoey  ("Lessor")  and
Patient Infosystems, Inc. ("Lessee") provides as follows.

                                   Background

Pursuant the that certain  Agreement  of Lease (the  "Lease")  dated on or about
July 18, 1999 between  Lessor and Lessee,  Lessee is leasing from Lessor certain
premises  (second  floor of the  building  located  at 15 Maple  Avenue,  Paoli,
Pennsylvania  19301).  All capitalized terms used in this Termination  Agreement
shall have the meanings  ascribed to them in the Lease unless otherwise  defined
herein.

Pursuant  to the  provisions  of the Lease,  the Term of the Lease ends July 31,
2002 (the "Expiration Date"). Lessee desires to terminate the Lease prior to the
expiration  date and lessor has agrees to allow lessee to so terminate the Lease
contingent upon certain conditions being met as more fully set forth herein.

NOW  THEREFORE,  in  consideration  of the foregoing and intending to be legally
bound, lessor and lessee agree as follows:

                                    Agreement

1.   The  Lease  shall  be  terminated  as of  February  28,  2001  (the  "Lease
     Termination  Date").  Lessee shall vacate and surrender the Leased Premises
     and surrender same to Lessor,  all in the condition  required by the Lease,
     on or before  the  Lease  Termination  Date.  Lessee  further  shall pay to
     lessor,  through and including the Lease  Termination Date, all payments of
     any  description  owing and  payable  pursuant to the Lease as of the Lease
     Termination Date, including without limitation Base Rent and pro-rata share
     of Lessor's  common  area and/or  collective  utility  expense(s),  without
     reduction  therein of any  description.

2.   On or before February 1, 2001, Lessee shall pay to Lessor the total of Five
     Thousand,    Four   Hundred    Seventeen    Dollars   and   Seventy   Cents
     ($5,417.70)(collectively  the "Lease Termination Payment") representing the
     payment of base rent for February 2001.

     Lessee  agrees to  forfeit  an amount  paid to Lessor in  advance  equal to
     three-(3)  month's rent, in the amount of Fifteen  Thousand,  Seven Hundred
     Eighty-Eight Dollars and Seventy-Six Cents ($15,788.76).

     Lessor and Lessee agree that the Lease  Termination  Payment and forfeiture
     of  advance  payment  represents  an agreed  upon,  liquidated  sum in full
     compensation  and  payment by Lessee to Lessor,  and release of, all claims
     for damages and losses of income by the Lessor against the Lessee resulting
     from the early  termination  of the  Lease as  provided  herein,  which the
     parties agree are impossible to ascertain.  Upon the payments by the Lessee
     to Lessor under Paragraph 2 above, Lessee shall have no further obligations
     or  responsibilities  to Lessor under the Lease,  which shall  thereupon be
     terminated and of no further force and effect.

3.   In accord with terms of the Lease,  the Security  Deposit of Five Thousand,
     Two Hundred Sixty-Two dollars and Ninety-Two Cents  ($5,262.92),  deposited
     by  Lessee to  Lessor,  will be  returnable  to  Lessee  provided  that (1)
     premises  have been vacated;  (2) Lessor shall have  inspected the premises
     after such vacation; and (3) Lessee shall have complied with all the terms,
     covenants and conditions of the Lease, in which event the deposited so paid
     shall be  returned  to Lessee;  otherwise  said sum  deposited  or any part
     thereof may be retained by Lessor at his option as liquidated  damages,  or
     may be  applied  by  Lessor  against  any  actual  loss,  damage  or injury
     chargeable to Lessee, if Lessor determines that such loss, damage or injury
     exceeds said sum deposited.  Lessors'  determination of the amount, if any,
     to be returned to Lessee shall be final.

4.   This Lease Termination  Agreement may be executed in counter parts, each of
     which shall  constitute  an  original  instrument,  but which  counterparts
     together shall constitute the same agreement.  The delivery by either party
     to the other of a facsimile or telecopy of a signed  counterpart shall have
     the same  legally  binding  effect as the  delivery of an  original  signed
     counterpart.

IN WITNESS  WHEREOF,  Lessor and Lessee  have  executed  this Lease  Termination
Agreement as of the date first above written.

                                                Lessor:
                                                     /s/Michele M. Hoey
                                                ------------------------------
                                                     /s/John E. Hoey
                                                ------------------------------
                                                Its Authorized Representative

                                                Lessee:
                                                     /s/Kent A. Tapper
                                                ------------------------------
                                                Patient Infosystems, Inc.
                                                    Kent A. Tapper
                                                ------------------------------
                                                Name
Attest:

Title                              (seal)
     ------------------------------

EX-10

Wells Fargo Bank Iowa,
National Association Amended and Restated
Credit Agreement

THIS AMENDED AND RESTATED CREDIT AGREEMENT (the “Agreement”) dated as of March 28, 2001 (the “Effective Date”) is between Wells Fargo Bank Iowa, National Association (the “Bank”) and Patient Infosystems, Inc. (the “Borrower”).

BACKGROUND

The Borrower has asked the Bank to renew its existing $2,500,000.00 revolving line of credit, which the Borrower uses for general business purposes. Borrowings under the line are currently evidenced by a $2,500,000.00 promissory note dated December 23, 1999, as modified by a Note Modification Agreement dated March 21, 2000 (the “1999 Note”).

The Bank is agreeable to meeting the Borrower's request, provided that the Borrower agrees to the terms and conditions of this Agreement. The Revolving Note, this Agreement, and all "Security Documents" described in Exhibit A may collectively be referred to as the "Documents."

In consideration of the promises contained in this Agreement, the Borrower and the Bank agree as follows:

1.

LINE OF CREDIT

1.1

Line of Credit Amount. During the Line Availability Period defined below, the Bank agrees to provide a revolving line of credit (the "Line") to the Borrower. Outstanding amounts under the Line will not, at any one time, exceed TWO MILLION FIVE HUNDRED THOUSAND DOLLARS and 00/100 Dollars ($2,500,000.00).

1.2

Line Availability Period. The "Line Availability Period" will mean the period of time from the Effective Date or the date on which all conditions precedent described in this Agreement have been met, whichever is earlier, through and including March 31, 2002 (the "Line Expiration Date").

1.3

Advances. The Borrower's obligation to repay advances made under the Line will be evidenced by a single promissory note (the "Revolving Note") dated as of the Effective Date and in form and content acceptable to the Bank. Reference is made to the Revolving Note for interest rate and repayment terms. The Revolving Note will replace, but not be deemed to satisfy, the 1999 Note.

2.

EXPENSES

2.1

Origination Fee. The Borrower shall pay to the Bank an origination fee of $2,500.00, which shall be paid at closing, and which shall be deemed to be earned upon payment by the Borrower.

2.2

Commitment Fee. During the Line Availability Period the Borrower shall pay the Bank a commitment fee of 0.25% per annum on the average daily unused amount of the Line. This fee shall be calculated on the basis of actual days elapsed in a 360 day year and paid quarterly in arrears beginning June 30, 2001.

2.3

Documentation Expense. The Borrower agrees to reimburse the Bank for its reasonable expenses relating to the preparation of the Documents and any possible future amendments to the Documents, which reimbursement may include, but shall not be limited to, reimbursement of reasonable attorneys' fees, including the allocated costs of the Bank's in-house counsel. Despite such reimbursement the Borrower acknowledges that the Bank's counsel is engaged solely to represent the Bank and does not represent the Borrower.

2.3

Collection Expenses. In the event the Borrower fails to pay the Bank any amounts due under this Agreement or under the Documents, the Borrower will pay all costs of collection, including reasonable attorneys' fees and legal expenses incurred by the Bank.

3.

DISBURSEMENTS AND PAYMENTS

3.1

Requests for Advances. Any Line advance permitted under this Agreement must be requested by telephone or in a writing delivered to the Bank (or transmitted via facsimile) by any person reasonably believed by the Bank to be an authorized officer of the Borrower. The Bank will not consider any such request if there is an event which is, or with notice or the lapse of time would be, an event of default under this Agreement. Proceeds will be deposited into the Borrower's account at the Bank or disbursed in such other manner as the parties agree.

3.2

Interest Rate Option Based on LIBOR. In addition to interest rates based on the Base Rate Option defined in the Revolving Note, the Borrower may elect to fix a rate of interest for an agreed upon period of time and principal amount agreeable to the Bank and Borrower based upon the margin stated in the Revolving Note and at an interest rate derived from the current LIBOR rate available to the Bank on national or international money markets for a similar time period and dollar amount.

In order to elect the LIBOR Rate Option, as defined in the Revolving Note, the Borrower must request a quote from the Bank two days prior to funding. This request must designate an amount (the "LIBOR Rate Portion") and a period (the "LIBOR Interest Period"). The LIBOR Rate Portion must be at least $100,000 and the LIBOR Interest Period will be for 30, 60 or 90 days or such other period to which the parties may agree. The Bank shall not be obligated to provide a LIBOR rate quote if it determines that no deposits with an amount and maturity equal to those for which a quotation has been requested are available to it in the London interbank market. The Borrower must orally accept a quote when received or it will be deemed rejected. If accepted, the LIBOR Rate Option will remain in effect for the LIBOR Interest Period specified in the quote. At the end of each LIBOR Interest Period the principal amount subject to the LIBOR Rate Option shall bear interest at the Base Rate Option (as defined in the Revolving Note).

3.3

Payments. All principal, interest and fees due under the Documents shall be paid in immediately available funds as contracted in this Agreement and no later than the payment due date set forth in the statement mailed to the Borrower by the Bank. Should a payment come due on a day other than a day on which the Bank is open for substantially all of its business (a "Banking Day", except as otherwise provided), then the payment shall be made no later than the next Banking Day. For amounts bearing interest at the LIBOR Rate (if any) a Banking Day is a day on which the Bank is open for substantially all of its business and on which dealings in U.S. dollar deposits are carried on in the London interbank market.

4.

SECURITY

All amounts due under this Agreement and the Documents will be secured as provided in Exhibit A. The Borrower also hereby grants the Bank a security interest (independent of the Bank's right of set-off) in its deposit accounts at the Bank and in any other debt obligations of the Bank to the Borrower.

5.

CONDITIONS PRECEDENT

The Borrower must deliver to the Bank the documents described in Exhibit A, properly executed and in form and content acceptable to the Bank, prior to the Bank's initial advance or disbursement under this Agreement.

6.

REPRESENTATIONS AND WARRANTIES

To induce the Bank to enter into this Agreement, the Borrower, to the best of its knowledge and upon due inquiry, makes the representations and warranties contained in Exhibit B. Each request for an advance under this Agreement constitutes a reaffirmation of these representations and warranties.

7.

COVENANTS

During the time period that credit is available under this Agreement, and thereafter until all amounts due under the Documents are paid in full, unless the Bank shall otherwise agree in writing, the Borrower agrees to:

7.1

Financial Information

(a)

Annual Financial Statements. Provide the Bank within 120 days of the Borrower's fiscal year end, the Borrower's annual audited financial statements.

(b)

Notices. Provide the Bank prompt written notice of (1) any event which has or might after the passage of time or the giving of notice, or both, constitute an event of default under the Documents, or (2) any event that would cause the representations and warranties contained in this Agreement to be untrue.

(c)

Additional Information. Provide the Bank with such other information as it may reasonably request, and permit the Bank to visit and inspect its properties and examine its books and records.

7.2

Other Covenants

(a)

Nature of Business. Refrain from engaging in any line of business materially different from that presently engaged in by the Borrower.

(b)

Books and Records. Maintain adequate books and records and refrain from making any material changes in its accounting procedures whether for tax purposes or otherwise.

(c)

Compliance with Laws. Comply in all material respects with all laws applicable to its business and the ownership of its property.

(d)

Preservation of Rights. Maintain and preserve all rights, privileges, charters and franchises it now has, excluding sale of assets in the ordinary course of business and the loss of a management contract with independent physicians.

These covenants were negotiated by the Bank and Borrower based on information provided to the Bank by the Borrower. A breach of a covenant is an indication that the risk of the transaction has increased. As consideration for any waiver or modification of these covenants, the Bank may require: additional collateral, guaranties or other credit support; higher fees or interest rates; and possible modifications to the Documents and the monitoring of the Agreement. The waiver or modification of any covenant that has been violated by the Borrower will be made in the sole discretion of the Bank. These options do not limit the Bank's right to exercise its rights under Section 8 of this Agreement.

8.

EVENTS OF DEFAULT AND REMEDIES

8.1

Default

Upon the occurrence of any one or more of the following events of default, or at any time afterward unless the default has been cured, the Bank may declare the Line to be terminated and in its discretion accelerate and declare the unpaid principal, accrued interest and all other amounts payable under the Revolving Note to be immediately due and payable:

(a)

Default by the Borrower in the payment when due of any principal or interest due under the Revolving Note and continuance for twenty (20) days.

(b)

Default by the Borrower in the observance or performance of any covenant or agreement contained in this Agreement, and continuance for more than twenty (20) days.

(c)

Default by the Borrower in the observance or performance of any covenant or agreement contained in the Documents, or any of them, excluding this Agreement, after giving effect to any applicable grace period.

(d)

Default by the Borrower in an amount exceeding $100,000.00 in any agreement with the Bank or any other lender that relates to indebtedness or contingent liabilities which would allow the maturity of such indebtedness to be accelerated.

(e)

Any representation or warranty made by the Borrower to the Bank in this Agreement, or in any financial statement or report submitted to the Bank by or on behalf of the Borrower or by or on behalf of the Guarantor before or after the Effective Date is untrue or misleading in any material respect.

(f)

Any litigation or governmental proceeding against the Borrower seeking an amount that would have a material adverse effect on the Borrower or the Borrower's operations and which is not insured or subject to indemnity by a solvent third party either 1) results in a judgment equal to or in excess of that amount against the Borrower or 2) remains unresolved on the 270th day following its filing.

(g)

A garnishment, levy or writ of attachment, or any local, state, or federal notice of tax lien or levy is served upon the Bank for the attachment of property of the Borrower in the Bank's possession or indebtedness owed to the Borrower by the Bank.

(h)

The Guarantor dies or becomes insolvent or is the subject of a voluntary or involuntary petition under the United States Bankruptcy Code, or the Guarantor is in default with respect to any liabilities or indebtedness owed to the Bank which would permit the Bank to accelerate his indebtedness.

(i)

The issuer of any one of the Standby L/Cs described in Exhibit A is placed into receivership by the FDIC or advises the Bank that it intends to repudiate its obligations to the Bank under the Standby L/C issued by it.

8.2

Immediate Default

If, with or without the Borrower's consent, a custodian, trustee or receiver is appointed for any of the Borrower's properties, or if a petition is filed by or against the Borrower under the United States Bankruptcy Code, then the Line shall immediately terminate and the unpaid principal, accrued interest and all other amounts payable under the Revolving Note and the Documents will become immediately due and payable without notice or demand.

9.

MISCELLANEOUS

(a)

360 Day Year. All interest and fees due under this Agreement will be calculated on the basis of actual days elapsed in a 360 day year.

(b)

GAAP. Except as otherwise stated in this Agreement, all financial information provided to the Bank and all calculations for compliance with financial covenants will be made using generally accepted accounting principles consistently applied ("GAAP").

(c)

No Waiver; Cumulative Remedies. No failure or delay by the Bank in exercising any rights under this Agreement shall be deemed a waiver of those rights. The remedies provided for in the Agreement are cumulative and not exclusive of any remedies provided by law.

(d)

Amendments or Modifications. Any amendment or modification of this Agreement must be in writing and signed by the Bank and Borrower. Any waiver of any provision in this Agreement must be in writing and signed by the Bank.

(e)

Binding Effect: Assignment. This Agreement and the Documents are binding on the successors and assigns of the Borrower and Bank. The Borrower may not assign its rights under this Agreement and the Documents without the Bank's prior written consent. The Bank may sell participations in or assign this Agreement and the Documents and exchange financial information about the Borrower with actual or potential participants or assignees.

(f)

Iowa Law. This Agreement and the Documents will be governed by the substantive laws of the State of Iowa.

(g)

Severability of Provisions. If any part of this Agreement or the Documents are unenforceable, the rest of this Agreement or the Documents may still be enforced.

(h)

Integration. This Agreement and the Documents describe the entire understanding and agreement of the parties and supersedes all prior agreements between the Bank and the Borrower relating to each credit facility subject to this Agreement, whether verbal or in writing.

IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERNS OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED. YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT. THIS NOTICE ALSO APPLIES TO ANY OTHER CREDIT AGREEMENTS (EXCEPT CONSUMER LOANS OR OTHER EXEMPT TRANSACTIONS) NOW IN EFFECT BETWEEN YOU AND THIS LENDER. BY SIGNING BELOW THE BORROWER HEREBY ACKNOWLEDGES THAT IT HAS RECEIVED COPIES OF THIS AGREEMENT AND ALL OTHER DOCUMENTS.

Address for notices to Bank:              Address for notices to Borrower:

Wells Fargo Bank Iowa,                       Patient Infosystems, Inc.
   National Association                      46 Prince Street
666 Walnut Street, P.O. Box 837              Rochester, NY  14607
Des Moines, Iowa 50304-0837
Attention: Randall R. Stromley,              Attention: Kent Tapper
               Vice President
                                             With a copy to:

                                             John Pappajohn
                                             c/o Equity Dynamics
                                             2116 Financial Center
                                             666 Walnut Street
                                             Des Moines, Iowa 50309

Wells Fargo Bank Iowa,                       Patient Infosystems, Inc.
   National Association

By:                                       By:
    -------------------------------------      --------------------------------
      Randall R. Stromley, Vice President

                                          Its:
                                               --------------------------------

DC1425E1

EXHIBIT A

CONDITIONS PRECEDENT TO INITIAL ADVANCE

Note

The Revolving Note

Security Documents

Standby Letters of Credit. Standby letters of credit (each standby letter of credit a “Standby L/C”) issued by banking institutions acceptable to the Bank upon the application of each of the following individuals as account party in the following amount, naming the Bank as beneficiary thereunder: 1) John Pappajohn, $750,000.00; 2) Derace L. Schaffer, $1,250,000.00. Each Standby L/C will support the obligations of the Borrower under the Revolving Note.

Each Standby L/C shall bear an expiry date of April 30, 2002, and shall permit the Bank to draw upon it in an amount equal to the amount of the Standby L/C on the 20th day following a default by the Borrower under the Revolving Note or at any time on or after March 31, 2002.

Personal Guaranty of John Pappajohn. The unconditional personal Guaranty of John Pappajohn. Pursuant to the Guaranty, the Guarantor guarantees a maximum of $580,000.00 principal indebtedness, plus accrued interest on the full amount of the Line, plus collection costs.

Personal Line of Credit Reserve Agreement of John Pappajohn. An agreement with John Pappajohn whereby he agrees that his personal line of credit with the Bank will be reserved in the amount of $500,000.00 for purposes of making an advance to cover his obligations to the Bank under his personal Guaranty referenced above.

Security Agreement of Borrower. The Security Agreement signed by the Borrower dated December 23, 1999, granting the Bank a first lien security interest in the Borrower’s accounts, inventory, equipment and general intangibles described in that Agreement, together with one or more UCC-1 Financing Statements sufficient to perfect the security interest granted to the Bank in each jurisdiction where such property is located.

Authorization

Corporate Certificate of Authority. A certificate of the Borrower’s corporate secretary as to the incumbency and signatures of the officers of the Borrower signing the Documents and containing a copy of resolutions of the Borrower’s board of directors authorizing execution of the Documents and performance in accordance with the terms of the Agreement.

Organization

Articles of Incorporation And By - Laws. A certified copy of the Borrower's Articles of Incorporation and By-Laws and any amendments, if applicable.

Certificate of Good Standing. A copy of the Borrower's Certificate of Good Standing, recently certified by the Delaware Secretary of State.

Other

Arbitration Agreement. The Arbitration Agreement dated December 23, 1999 signed by the Bank and Borrower, subjecting to binding arbitration potential controversies between the Bank and Borrower relating to the Documents and the Agreement, as more fully described in the Arbitration Agreement.

DC1425E1

EXHIBIT B

REPRESENTATIONS AND WARRANTIES

Organizational Status. The Borrower is a corporation duly formed and in good standing under the laws of the State of Delaware.

Authorization. This Agreement, and the execution and delivery of the Documents required hereunder, is within the Borrower’s powers, has been duly authorized and does not conflict with any of its organizational documents or any other agreement by which the Borrower is bound, and has been signed by all persons authorized and required to do so under its organizational documents.

Litigation. There is no litigation or governmental proceeding pending or threatened against the Borrower which could have a material adverse effect on the Borrower’s financial condition or business, except those disclosed in Exhibit C attached hereto.

Taxes. The Borrower has paid when due all federal, state and local taxes.

No Default. Except as otherwise disclosed to the Bank prior to the date hereof, there is no event which is, or with notice or the lapse of time would be, an event of default under this Agreement.

ERISA. The Borrower is in compliance in all material respects with ERISA and has received no notice to the contrary from the PBGC or other governmental entity.

Environmental Matters. (1) The Borrower is in compliance in all material respects with all health and environmental laws applicable to the Borrower and its operations and knows of no conditions or circumstances that could interfere with such compliance in the future; (2) the Borrower has obtained all environmental permits and approvals required by law for the operation of its business; and (3) the Borrower has not identified any “recognized environmental conditions”, as that term is defined by the American Society for Testing and Materials in its standards for environmental due diligence, which could subject the Borrower to enforcement action if brought to the attention of appropriate governmental authorities.

DC1425E1

EX-10

Wells Fargo Bank Iowa,
National Association Revolving Note

$2,500,000.00 March 28, 2001

FOR VALUE RECEIVED, Patient Infosystems, Inc. (the “Borrower”) promises to pay to the order of Wells Fargo Bank Iowa, National Association (the “Bank”), at its principal office or such other address as the Bank or holder may designate from time to time, the principal sum of TWO MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($2,500,000.00), or the amount shown on the Bank’s records to be outstanding, plus interest (calculated on the basis of actual days elapsed in a 360-day year) accruing on the unpaid balance at the annual interest rate defined below. Absent manifest error the Bank’s records will be conclusive evidence of the principal and accrued interest owing hereunder.

This Revolving Note is issued pursuant to an Amended and Restated Credit Agreement of even date herewith between the Bank and the Borrower (the “Agreement”). The Agreement, and any amendments or substitutions thereto, contain additional terms and conditions including default and acceleration provisions. The terms of the Agreement are incorporated into this Revolving Note by reference. Capitalized terms not expressly defined herein shall have the meanings given them in the Agreement.

INTEREST RATE

Base Rate Option. Unless the Borrower chooses the LIBOR Rate Option as defined below, the principal balance outstanding under this Revolving Note will bear interest at an annual rate equal to the Base Rate, floating (the “Base Rate Option”). The Base Rate is the “base” or “prime” rate of interest established by the Bank from time to time at its principal office in Des Moines, Iowa.

LIBOR Rate Option. Subject to the terms and conditions of the Agreement the Borrower may elect that all or portions of the principal balance of this Revolving Note bear interest at the LIBOR Rate plus 1.75% (the “LIBOR Rate Option”). Specific reference is made to the Section 3 of the Agreement for terms governing the designation of interest periods and rate portions.

The LIBOR Rate will be computed in accordance with the following formula.

         LIBOR Rate =     London Interbank Rate
                          ----------------------
                          1.00 - Reserve Percentage

         Where,

(1) “London Interbank Rate” means the average rate at which U.S. Dollar deposits with a term equal to the applicable LIBOR Interest Period and in an amount equal to the LIBOR Rate Portion are offered to the Bank on the London Interbank Market.

(2) “Reserve Percentage” means the Federal Reserve System requirement (expressed as a percentage) applicable to the dollar deposits used in calculating the LIBOR Rate above.

REPAYMENT TERMS

Interest. Interest will be payable on the last day of each month, beginning March 31, 2001. Interest accruing under the LIBOR Rate Option will be payable at the end of the respective LIBOR Interest Period or the last day of each month, whichever is earlier.

Principal. Principal, and any unpaid interest, will be payable in a single payment due on March 31, 2002.

Prepayment Fee. Each prepayment of principal amounts bearing interest under the LIBOR Rate Option, whether voluntary or by reason of acceleration, will be accompanied by accrued interest on the amount prepaid plus a prepayment fee equal to the amount, if any, by which:

(1) the additional interest that would have been payable on the amount prepaid if it had not been paid until the last day of the applicable interest period, exceeds

(2) the interest that would have been recoverable by the Bank by reinvesting the amount prepaid from the prepayment date to the last day of the applicable interest period in U.S. Government Securities having a maturity date on or about that date.

ADDITIONAL TERMS AND CONDITIONS. The Borrower agrees to pay all costs of collection, including reasonable attorneys’ fees and legal expenses incurred by the Bank in the event this Revolving Note is not duly paid. Demand, presentment, protest and notice of nonpayment and dishonor of this Revolving Note are expressly waived. This Revolving Note will be governed by the substantive laws of the State of Iowa.

PATIENT INFOSYSTEMS, INC.

By:
     ---------------------------------------------

Its:
     ---------------------------------------------







DC1425E1

EX-10

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. HOLDERS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

PROMISSORY NOTE

March 23, 2001

Subject to the terms and conditions of this Note, and for good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, Patient Infosystems, Inc., a Deleware corporation (the “Company”), hereby promises to pay to the order of __________ whose address is ________________ (the “Holder”), the principal amount of One Million Four Hundred Eighty Three Thousand Five Hundred Dollars ($1,483,500.00), plus simple interest accrued on unpaid principal from the date of this Note until paid at the rate of nine and one-half percent (9.5%) per annum. This Note consolidates and supercedes the following unsecured Notes:

- -----------------------------------------------------------------------------
    Original Date of Note       Amount           Interest accrued on 3/23/01
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
       08/20/2000                $125,000                $7,092.01
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
       09/18/2000                 $62,500                $3,067.71
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
       10/04/2000                $125,000                $5,607.64
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
       11/02/2000                 $25,000                  $930.21
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
       11/13/2000                 $80,000                $2,744.44
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
       11/15/2000                 $16,000                  $540.44
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
       11/30/2000                $130,000                $3,876.53
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
       12/27/2000                $130,000                $2,950.28
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
       12/10/2000                $130,000                $3,533.47
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
       01/11/2001                $110,000                $2,060.97
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
       01/25/2001                $110,000                $1,654.58
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
       02/07/2001                $110,000                $1,277.22
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
       02/21/2001                $110,000                  $870.83
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
       03/07/2001                $110,000                  $464.44
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
       03/22/2001                $110,000                   $29.03
- -----------------------------------------------------------------------------
                          ---------------------------------------------------
TOTAL                          $1,483,500               $36,699.82
                          ---------------------------------------------------

The Company hereby promises to pay the Holder the accrued interest from the prior Notes totaling Thirty Six Thousand Six Hundred and Ninety Nine Dollars and Eighty Two Cents ($36,699.82) and the Holder hereby agrees to terminate these prior Notes.

This Note may be one of a series of Promissory Notes (collectively, the “Bridge Notes”) identical in substance to this Note except as to the Holder and principal amount.

The following is a statement of the rights of the Holder and the terms and conditions to which this Note is subject, to which the Holder, by acceptance of this Note by its signature below, and the Company, by issuance of this Notes, agrees:

1. PAYMENT

(a) Obligation. The outstanding principal under this Note and the accrued interest thereon will be due and payable on demand. All payments of principal and/or interest under this Note will be made at the address of the Holder set forth above or at such other address as is provided by the Holder to the Company in writing.

(b) Prepayment. The Company may prepay this Note in whole or in part at any time without penalty. Prepayments will be applied to accrued but unpaid interest first and then to unpaid principal. Any prepayments made by the Company on any of the Bridge Notes will be made simultaneously on all Bridge Notes in identical amount (if all Bridge Notes are of the same principal amount) or an amount prorated among the Bridge Notes in proportion to the principal amounts of each Bridge Note (if the Bridge Notes are in different principal amounts).

2. SECURITY. To secure payment of the Bridge Notes, the Company has delivered to the holders of the Bridge Notes a certain Security Agreement dated March 23, 2000, which provides a first security interest in all of the Company’s tangible and intangible assets. A default in this Security Agreement that is not cured within 10 days, shall constitute a default under this Note.

3. TRANSFERABILITY. This Note is not transferable.

4. GOVERNING LAW. This Note will be governed by and construed in accordance with the laws of the State of Iowa, excluding that body of law relating to conflict of laws.

5. WAIVER. The Company hereby waives diligence, presentment, demand, protest and notice of dishonor.

6. COLLECTION EXPENSES. The Company promises and agrees to pay all costs of collection of this Note including, but not limited to, reasonable attorneys’ fees, paid or incurred by the Holder on account of such collection, whether or not suit is filed with respect thereto and whether or not such costs are paid or incurred, or to be paid or incurred, prior to or after entry of judgment.

IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the date first written above.

                                            Patient Infosystems, Inc.

                                            ------------------------------
                                            By:  Kent A. Tapper

ACCEPTED:
- ---------



- ----------------------
By: ___________________

EX-10

PATIENT INFOSYSTEMS, INC.

SECURITY AGREEMENT

        FOR VALUE RECEIVED, as security for the obligations defined below, the receipt and sufficiency of which is hereby acknowledged, the undersigned Debtor, Patient Infosystems, Inc., a Delaware corporation, hereby grants to ____________ (“Secured Party”) a security interest in the following described property: All of Debtor’s inventory now owned or hereafter acquired; All of Debtor’s accounts, now existing or hereafter arising, together with all interest of Debtor in any goods, the sale or lease of which give rise to any of Debtor’s accounts, and all chattel paper, documents, and instruments relating to said accounts; All of Debtor’s investment property now owned or hereafter acquired; All of Debtor’s general intangibles now owned or hereafter acquired; All of Debtor’s equipment now owned or hereafter acquired; All of Debtor’s fixtures on the real estate described in paragraph two (2) below; and, All of Debtor’s intellectual property, including any patents, either applied for or issued, designs, processes, trade secrets, licenses, copyrights, trademarks, service marks, trade names or any other intangible rights of any nature pertaining to a product or process now owned or hereafter acquired, together with the proceeds, products, increase, issue, accessions, attachments, accessories, parts, additions, repairs, replacements and substitutes of, to and for all of the foregoing. Debtor will promptly deliver to Secured Party duly endorsed when necessary, all such chattel paper, documents and instruments and related guaranties now on hand or hereafter received. All such property in which a security interest is granted is herein called the “Collateral.”

        1. Obligations. The aforesaid security interests secure payment of the following liabilities: All liability and losses incurred by Secured Party by reason of the Promissory Note executed contemporaneously with the execution of this Security Agreement between Secured Party and Debtor, together with all other obligations of Debtor to Secured Party now existing or hereafter arising, whether direct or indirect, contingent or absolute and whether as maker or surety and including, but not limited to, future advances and amounts advanced and expenses and attorneys fees incurred pursuant to this Security Agreement.

        2. Real Estate. Any collateral attached to, or grown upon, land will be grown upon or attached to the following described real estate located in Monroe County: 46 Prince Street, Rochester, NY 14620.

        3. Filing. In the event a financing statement is not filed, a carbon, photocopy or other reproduction of this Security Agreement may be filed as a financing statement. If for fixtures, timber or minerals, such a filing shall be filed of record in the real estate records of the county wherein said collateral is situated.

        4. Debtors. Each of the undersigned debtors, if more than one, execute this Security Agreement as his, her, its, or their joint and several obligation and it shall be binding upon and fully enforceable against either or both, or any or all of them, and reference herein to “Debtor” shall in such case be deemed to be plural provided however that nothing contained herein shall extend personal liability under any of the Obligations as to which such Debtor is not otherwise liable.

        5.Collateral. Debtor represents, warrants and agrees:

        a. All Collateral is bona fide and genuine and Debtor is authorized to grant a security interest in said Collateral free and clear of all liens and encumbrances, except the security interest created herein.

        b. Debtor’s principal place of operation is at the address shown herein, and Debtor shall promptly give Secured Party written notice of any change thereof, unless prior written consent of Secured Party is obtained. All Collateral and all of the Debtor’s business records are now kept, and shall continue to be kept, at such address.

PATIENT INFOSYSTEMS, INC.; Debtor            ___________________; Secured Party


BY: _________________________                   BY: ___________________________

     Kent A. Tapper
     Patient Infosystems, Inc.
     46 Prince Street
     Rochester, NY  14620



Date:________________________

THIS AGREEMENT SPECIFICALLY INCLUDES ALL OF THE ADDITIONAL PROVISIONS SET FORTH BELOW. DEBTOR ACKNOWLEDGES RECEIPT OF A FULLY COMPLETED COPY OF THIS SECURITY AGREEMENT.

ADDITIONAL PROVISIONS

        1. Representations and Agreements. Debtor represents and agrees as follows:

        a. If a corporation or other business entity, Debtor is duly organized, existing and is qualified in good standing in all states in which it is doing business, and the execution, delivery and performance of this Security Agreement are within Debtor’s powers, having been duly authorized, and are not in contravention of law or the terms of Debtor’s charter, bylaws, if any, or any indenture, agreement, or undertaking to which Debtor is a party, or by which it is bound. If an individual, Debtor is of legal age. Debtor will not change his, her or its name, or identity unless written notice is given in advance to Secured Party.

        b. Debtor shall maintain insurance upon the Collateral which is tangible property against all customarily insured risks for the full insurable value thereof (and furnish Secured Party with duplicate policies if Secured Party so requests), loss to be payable to Debtor and Secured Party as their respective interests may appear. In the event of any loss or damage to any Collateral, Debtor will give Secured Party written notice thereof forthwith, promptly file proof of loss with the appropriate insurer and take all other steps necessary or appropriate to collect such insurance. If Secured Party so elects, Secured Party shall have full authority to collect all such insurance and to apply any amount collected to amounts owed hereunder, whether or not matured. Secured Party shall have no liability for any loss which may occur by reason of the omission or the lack of coverage of any such insurance.

        c. Debtor shall at all times maintain Collateral which is tangible property in good condition and repair, defend at Debtor’s expense all Collateral from all adverse claims and shall not use any of the Collateral for any illegal purpose.

        d. Debtor shall (i) keep such books and records pertaining to the Collateral and to Debtor’s business operations as shall be satisfactory to Secured Party; (ii) permit representatives of Secured Party at any time to inspect the Collateral and inspect and make abstracts from Debtor’s books and records; and (iii) furnish to Secured Party such information and reports regarding the Collateral and Debtor’s business operations and its financial status, as Secured Party may from time to time reasonably require. Secured Party is hereby authorized to request confirmation of such information or additional information of any kind whatsoever.

        e. Debtor shall give such notice in writing (including but not limited to notice of assignment or notice to pay Secured Party directly) as Secured Party may require at any time to any or all account debtors, with respect to accounts which are Collateral, and, if Secured Party shall so request, deliver to Secured Party copies of any and all such notices.

        f. Debtor shall promptly transmit to Secured Party all information that it may have or receive with respect to Collateral or with respect to any account debtor which might in any way affect the value of the Collateral or Secured Party’s rights or remedies with respect thereto.

        g. Unless in default under this Agreement, Debtor may sell inventory in the ordinary course of business and consume any raw materials or supplies, the use and consumption of which are necessary to carry on Debtor’s business. Debtor shall not otherwise consume, assign or transfer any Collateral without prior written consent of Secured Party. The provision of this Agreement granting a security interest in proceeds shall not be construed to mean that Secured Party consents to any sale or disposition of any Collateral.

        h. Debtor shall pay when due all taxes, assessments, and any other governmental levy which is, or may be, levied against any Collateral, and shall otherwise maintain the Collateral free of all liens, charges, and encumbrances (except liens set forth herein and the security interest created hereby).

        i. Debtor shall not store any Collateral with any warehouseman without Secured Party's consent.

        j. Debtor shall promptly, unless Secured Party shall waive such requirement in writing, deliver to Secured Party all certificates of title, if any, (or any other documents evidencing title) to all Collateral with such proper notations, assignments, or endorsements as may be necessary or appropriate to create, preserve or protect Secured Party’s security interest in the Collateral.

        k. Debtor shall, at its cost and expense, execute, deliver, file or record, in any such manner or form as the Secured Party may require, any assignment, financing statement or other paper that may be necessary or desirable, or that Secured Party may request, in order to create, preserve or perfect any security interest granted hereby or to enable Secured Party to exercise and enforce its rights hereunder or under any Collateral. Secured Party is further granted the power, coupled with an interest, to sign on behalf of Debtor as attorney-in-fact and to file one or more financing statements under the Uniform Commercial Code naming Debtor as debtor and Secured Party as secured party and describing the Collateral herein specified.

        2. Expenses. Debtor upon demand shall pay to Secured Party forthwith the amounts of all expenses, including reasonable attorney’s fees and legal expenses, incurred by Secured Party, in seeking to collect any sums secured hereunder or to enforce any rights in the Collateral. Such amounts shall be secured hereby, and if not paid on demand shall bear interest at the highest rate payable on any of the Obligations.

        3. Collection Authority on Accounts. Debtor hereby irrevocably appoints Secured Party its true and lawful attorney, with full power of substitution, in Secured Party’s name, Debtor’s name or otherwise, for Secured Party’s sole use and benefit, but at Debtor’s cost and expense, to exercise, if Secured Party shall elect after an event of default has occurred (whether or not Secured Party then elects to exercise any other of its rights arising upon default) all or any of the following powers with respect to all or any Accounts which are Collateral:

        a. To execute on Debtor's behalf assignments of any or all Accounts which are Collateral to Secured Party, and to notify account debtors thereunder to make payments directly to Secured Party;

        b. To demand, sue for, collect, receive, and give acquittance for any and all moneys due or to become due upon or by virtue thereof;

        c. To receive, take, endorse, assign and deliver any and all checks, notes, drafts, documents and other negotiable and non-negotiable instruments and chattel paper taken or received by Secured Party in connection therewith;

        d. To settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto;

        e. To sell, transfer, assign or otherwise deal in or with the same or the proceeds thereof or the relative goods, as fully and effectually as if Secured Party were the absolute owner thereof; and

        f. To extend the time or payment of any or all thereof and to make any allowance and other adjustments with reference thereto.

Any funds collected pursuant to such powers shall be applied to the payment of the Obligations. The exercise by Secured Party of, or failure to so exercise, any of the foregoing authority, shall in no manner affect Debtor’s liability to Secured Party on an y of the Obligations. Secured Party shall be under no obligation or duty to exercise any of the powers hereby conferred upon it and it shall be without liability for any act or failure to act in connection with the collection of or the preservation of any rights under any such accounts. Secured Party shall not be bound to take any steps necessary to preserve rights in any instrument or other chattel paper against prior parties.

        4. Set-Off. In the event of default hereunder, Secured Party at its option at any time, and without notice to Debtor, may apply against the Obligations any property of Debtor held by Secured Party. As additional security for payment of the Obligations, Debtor hereby grants to Secured Party a security interest in any funds or property of Debtor now or hereafter in possession of Secured Party and with respect thereto Secured Party will have all rights and remedies herein specified.

        5. Waiver. Debtor waives protest, notice of dishonor, and presentment of all commercial paper at any time held by Secured Party on which Debtor is in any way liable, notice of non-payment at maturity of any account or chattel paper, and notice of any action taken by Secured Party except where notice is expressly required by this Agreement or cannot by law be waived.

        6. Default. Debtor will be in default upon the occurrence of any of the following events: (a) failure to make payment when due and payable, of any of the Obligations; (b) failure of the performance of any obligation or covenant contained or referred to herein, except as to (a), after failing to cure same upon 10 days notice; (c) any warranty, representation or statement made or furnished to Secured Party by or on behalf of Debtor proves to have been false in any material respect when made or furnished; (d) any event which results in the acceleration of the maturity of the indebtedness of Debtor or any guarantor or co-maker of any of the Obligations to others under any indenture, agreement or undertaking; (e) loss, theft, damage, destruction or encumbrance to, or of, the Collateral or the making of any levy, seizure of attachment thereof or thereon; (f) death of, dissolution of, termination of existence of, insolvency of, business failure of , appointment of a receiver of any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding under any bankruptcy or insolvency law by or against, Debtor or any guarantor or co-maker of any of the Obligations; (g) the occurrence or nonoccurrence of any event or events which causes the Secured Party, in good faith, to deem itself insecure for any reason whatsoever.

        In any such event Secured Party may at its option declare any or all of the Obligations to be due and payable and such sums shall then be due and payable immediately, without notice or demand.

        7. Rights and Remedies on Default. After the occurrence of any event of default, Secured Party may exercise at any time and from time to time any rights and remedies available to it under applicable law, including but not limited to the right to sell, lease or otherwise dispose of the collateral, and the right to take possession of the Collateral. For that purpose, Secured Party may enter upon any premises on which the Collateral or any part thereof may be situated and remove it. Secured Party may require Debtor to assemble the Collateral and make it available at a place to be designated by Secured Party which is reasonable convenient to both parties. If at the time of repossession any of the Collateral contains other personal property not included in the Collateral, Secured Party may take such personal property into custody and store it at the risk and expense of Debtor. Debtor agrees to notify Secured Party within forty-eight (48) hours after repossession of the Collateral of any such other personal property claimed, and failure to do so will release Secured Party and its representatives from any liability for loss or damage thereto. Any notice or of intended disposition of any of the Collateral required by law shall be deemed reasonable if such notice is given at least seven (7) days before the time of such disposition. Any proceeds of any disposition by Secured Party of any of the Collateral may be applied by it to the payment of expenses in connection with the Collateral, including but not limited to repossession expenses and reasonable attorney fees and legal expenses, and any balance of such proceeds shall be then applied against the Obligations and other amounts secured hereby in such order of application as Secured Party may elect.

        8. General Provisions.

        a. Secured Party may, at its option, pay any tax, assessment, or other Governmental levy, or insurance premium or any other expense or charge relating to Collateral which is payable by Debtor and not timely paid by it, and further may pay any filing or recording fees. Any amount or amounts so pay, with interest thereon at the highest rate payable on any of the Obligations from the date of payment until repaid shall be secured hereby and shall be payable upon demand.

        b. Secured Party shall not be deemed to have waived any of its rights hereunder or under any other agreement, instrument, or paper signed by Debtor unless such waiver be in writing and signed by Secured Party. No delay or omission on the part of Secured Party in exercising any right shall operate as a waiver of such right or any other right. A waiver on any one occasion shall not be construed as a bar to, or waiver of, any right or remedy on any future occasion.

        c. Any notice, if mailed, shall be deemed reasonable and given when mailed postage prepaid, addressed to the Debtor at the address shown above, or at any other address of Debtor appearing on Secured Party’s records.

        d. Covenants, representations, warranties and agreements herein set forth shall be binding upon Debtor, its legal representatives, successors, and assigns. This Agreement may be assigned by Secured Party and all rights an privileges of Secured Party under this Agreement shall then inure to the benefit of its successors and assigns.

        e. If any provision of this Agreement shall be for any reason held to be invalid or unenforceable, such invalidity or unenforceability shall not effect any other provisions hereof, but this Agreement shall be construed as if such invalid or unenforceable provision had never been contained herein.

        f. If Debtor is a guarantor, endorser, co-maker, or an accommodation party with respect to the Obligations, Debtor hereby waives the benefit of any and all defenses and claims of damage which are dependent upon Debtor’s character as a party other than the maker. Each party to any of the Obligations hereby consents to and waives notice of (1) any and all extensions, whether or not for longer than the original period, granted as to the time of payment of any or all of the Obligations, and (2) any renewal of any or all of the Obligations.

        g. This Agreement and all rights and duties hereunder, including but not limited to all matters of construction, validity, and performance shall be governed by the law of the State of Iowa and any suit hereon may be instituted in Des Moines, Polk County, Iowa.

        h. Unless otherwise defined or the context otherwise requires, all terms used herein which are defined in the Iowa Uniform Commercial Code shall have the meanings therein stated. The rights and remedies herein conferred upon Secured Party shall be in addition to, and not in substitution or in derogation of, rights and remedies conferred by the Iowa Uniform Commercial Code and other applicable law.

        i. All words and phrases used herein shall be construed as in the singular or plural number, and as masculine, feminine, or neuter gender, as the context may require. Captions are inserted for convenience only and shall not be taken as altering the text.