COMPUTER OUTSOURCING SERVICES, INC. TO ACQUIRE $8 MILLION OUTSOURCING COMPANY; COMPANY REPORTS FIRST QUARTER RESULTS.

NEW YORK--(BUSINESS WIRE)--March 20, 1995--Computer Outsourcing Services, Inc. ("COSI") (Nasdaq National Market: COSI) today announced that it has signed a letter of intent to acquire a computer outsourcing business with revenues of approximately $8 million. As announced on January 27th, COSI's total revenues for fiscal 1994 were $15,806,764. Management expects the acquisition to be non-dilutive to earnings per share on a going forward basis.

According to the letter of intent, the terms of the acquisition call for the payment of cash and notes payable over two years. Closing of the acquisition is anticipated in May 1995, subject to completion of further due diligence, approval of the Boards of Directors of both companies and the signing of a definitive agreement.

In other news, the Company also announced unaudited financial results for the first quarter ended January 31, 1995 (see attached table). Revenues for the first quarter ended January 31, 1995 increased 25% to a record $4,398,536 from $3,516,919 in the same period of 1994. Net income was $53,539, or $.01 per share, compared to $221,720, or $.07 per share, in the comparable 1994 quarter. Management noted that revenue growth in the first quarter of 1995 was primarily attributable to expansion of the Company's payroll processing business. Earnings in the first quarter of 1995 were impacted by increased sales and marketing expenses for payroll processing services and the cost of temporarily running duplicate payroll processing systems while the Company is converting its payroll processing programs onto a standardized, client/server payroll platform.

Commenting on today's news, Zach Lonstein, President and CEO of COSI, remarked, "This acquisition brings significant strategic and financial benefits to COSI. Strategically, the company to be acquired fits well with our existing computer outsourcing business while expanding our presence in new niche outsourcing markets including banking and transportation. Upon completion of this acquisition and our third payroll processing acquisition, previously announced in December, COSI's annualized revenues will increase to $28 million."

Mr. Lonstein continued, "In addition to being non-dilutive to earnings per share, we expect this acquisition to offer economies of scale to COSI's outsourcing business which will help offset the short-term increased expenses in our payroll processing business as we expand our sales force and standardize our systems. These payroll processing investments were reflected in our first quarter financial results. While we are never pleased to see profits decline, we believe these investments support COSI's stated commitment to long-term growth in the payroll processing industry. Toward this goal, we are progressing according to plan."

COSI provides payroll and tax filing services to approximately 3,000 customers nationwide and offers other data processing services to companies in niche markets including publishing, direct marketing, apparel importing and manufacturing and healthcare. -0-

                    COMPUTER OUTSOURCING SERVICES, INC.
                      CONSOLIDATED INCOME STATEMENTS
                              (unaudited)

                                    Three Months Ended
                                 January 31,      January 31,
                                   1995              1994

Revenues                        $4,398,536        $3,516,919

Income before provision for
 income taxes                      115,210           379,603

Provision for income taxes          61,671           157,883

Net income                       $  53,539        $  221,720
Net income per common share           $.01              $.07

Weighted average
 number of shares outstanding    3,551,248         3,135,646

CONTACT: Computer Outsourcing Services, Inc., New York

Zach Lonstein, [phone]

or

The Equity Group Inc., New York

Carolyn Bancone, [phone]

Tamara Ehlin, [phone]