<PAGE>

                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

                                   (MARK ONE)

        /X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2000

       / / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

        FOR THE TRANSITION PERIOD FROM ______________ TO _______________

                         COMMISSION FILE NUMBER 0-19499

                                HEALTHSTAR CORP.
        (Exact name of small business issuer as specified in its charter)

         DELAWARE                                      91-1934592
-------------------------------           ------------------------------------
(State or other jurisdiction of           (I.R.S.  employer  identification no.)
incorporation or organization)


                        2875 N.E. 191ST STREET, SUITE 601
                             AVENTURA, FLORIDA 33180
                    (Address of principal executive offices)

                                 (305) 933-8779
                           (Issuer's Telephone Number)
         ---------------------------------------------------------------
  (Former name, former address and former fiscal year, if changed since last
                                     report)


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

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the last practicable date: Common Stock, $0.001 par value,
4,345,872 outstanding as of February 13, 2001.



<PAGE>


                        HEALTHSTAR CORP. AND SUBSIDIARIES

               FORM 10-QSB FOR THE QUARTER ENDED DECEMBER 31, 2000



                                TABLE OF CONTENTS


<TABLE>
<S>                                                                                                              <C>
PART I - FINANCIAL INFORMATION

     Item 1.   Financial Statements

               Consolidated Balance Sheet as of December 31, 2000..................................................1

               Consolidated Statements of Operations and Retained Earnings (Deficit)
                   For the Three and Nine Months Ended December 31, 2000 and 1999..................................2

               Consolidated Statements of Cash Flows For the Nine Months
                   Ended December 31, 2000 and 1999................................................................3

               Notes to Unaudited Consolidated Financial Statements................................................4

     Item 2.   Management's Discussion and Analysis of Financial Condition
                   and Results of Operations......................................................................12


PART II - OTHER INFORMATION

     Item 1.   Legal Proceedings..................................................................................19

     Item 2.   Changes in Securities and Use of Proceeds..........................................................19

     Item 3.   Defaults Upon Senior Securities....................................................................19

     Item 4.   Submission of Matters to a Vote of Security Holders................................................19

     Item 5.   Other Information..................................................................................19

     Item 6.   Exhibits and Reports on Form 8-K...................................................................19

</TABLE>



<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

                        HEALTHSTAR CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                December 31, 2000
                                   (Unaudited)

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




<TABLE>
<S>                                                                          <C>
ASSETS
    Current assets:
       Cash and cash equivalents                                             $ 6,116,411

    Property and equipment, net                                                    2,184
    Other assets                                                                  10,000
                                                                             -----------

              Total assets                                                   $ 6,128,595
                                                                             ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities:
       Accounts payable                                                      $     8,052
       Accrued expenses                                                          129,885
                                                                              ----------

              Total current liabilities                                          137,937
                                                                              ----------

SHAREHOLDERS' EQUITY
    Common stock, $.001 par value 15,000,000 shares
       authorized, 4,345,872 shares issued and outstanding                         4,346
    Additional paid-in-capital                                                 9,196,428
    Retained earnings (deficit)                                               (3,210,116)
                                                                              -----------

              Total shareholders' equity                                       5,990,658
                                                                               ---------

              Total liabilities and shareholders' equity                     $ 6,128,595
                                                                               =========

</TABLE>









     See accompanying notes to unaudited consolidated financial statements.

                                       -1-


<PAGE>


                        HEALTHSTAR CORP. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS AND
                           RETAINED EARNINGS (DEFICIT)
         For the Three and Nine Months Ended December 31, 2000 and 1999
                                   (Unaudited)

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



<TABLE>
<CAPTION>
                                                          Three Months Ended                     Nine Months Ended
                                                             December 31,                          December 31,
                                                         2000             1999                2000              1999
                                                         ----             ----                ----              ----
<S>                                            <C>                     <C>               <C>               <C>
REVENUE
    Capitated fees                                 $           0       $ 2,035,116       $    667,773      $  6,201,906
    Repricing fees                                             0         1,234,267            248,579         4,294,089
    Other fees                                                 0            43,115             27,298           222,138
                                                   -------------      ------------     --------------    --------------

              Total revenue                                    0         3,312,498            943,650        10,718,133
                                                   -------------      ------------      -------------      ------------

OPERATING EXPENSES
    Cost of services                                           0           405,060             74,813         1,401,696
    Salaries and wages                                   142,428         1,793,340          1,078,274         5,570,288
    General and administrative                           216,897         1,069,775          1,055,564         3,091,327
    Depreciation and amortization                            128           296,647             57,131           937,513
                                                   -------------      ------------      -------------      ------------

              Total operating expenses                   359,453         3,564,822          2,265,782        11,000,824
                                                   -------------      ------------      -------------      ------------

(Loss) from operations                                  (359,453)         (252,324)        (1,322,132)         (282,691)

NON-OPERATING INCOME (EXPENSE)
    Interest income                                       89,447                 0            238,415                 0
    Interest expense                                           0           (89,310)           (10,305)         (230,600)
    Asset impairment charge                                    0          (150,000)                 0          (650,000)
    Net gain (loss) on dispositions of assets                  0         1,031,210            (93,105)        1,145,748
    Gain on settlement of litigation                           0                 0             81,714                 0
                                                   -------------      ------------      -------------      ------------

Income (loss) before income taxes and
    extraordinary item                                  (270,006)          539,576         (1,105,413)          (17,543)

Income tax expense                                             0           243,577                  0           223,893
                                                   -------------      ------------      -------------      ------------

          Income (loss) before extraordinary item       (270,006)          295,999         (1,105,413)         (241,436)

Extraordinary gain on extinguishment of debt
    (net of income taxes - $0)                                 0                 0            200,000                  0
                                                   -------------      ------------      -------------      ------------

              Net income (loss)                         (270,006)          295,999           (905,413)         (241,436)

Retained earnings (deficit) at beginning of period    (2,940,110)         (320,732)        (2,304,703)          216,703
                                                   -------------      ------------      -------------      ------------

Retained earnings (deficit) at end of period         $(3,210,116)    $     (24,733)       $(3,210,116)     $    (24,733)
                                                   =============      ============      =============      ============

Earnings (loss) per share - Basic and Diluted:
    Income (loss) before extraordinary item         $      (0.06)    $       0.07        $      (0.25)     $      (0.06)
    Extraordinary item                                      0.00             0.00                0.04              0.00
                                                   -------------      ------------      -------------      ------------

              Net income (loss)                     $      (0.06)    $       0.07        $      (0.21)     $      (0.06)
                                                   =============      ============      =============      ============

Weighted average shares outstanding -
    Basic and Diluted                                  4,345,872         3,966,850          4,345,872         3,879,378
                                                   =============      ============      =============      ============
</TABLE>





     See accompanying notes to unaudited consolidated financial statements.

                                       -2-


<PAGE>


                        HEALTHSTAR CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Nine Months Ended December 31, 2000 and 1999
                                   (Unaudited)

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


<TABLE>
<CAPTION>
                                                                                               Nine Months Ended
                                                                                                 December 31,
                                                                                          2000                  1999
                                                                                          ----                  ----
<S>                                                                                    <C>                  <C>
OPERATING ACTIVITIES
    Net (loss)                                                                       $   (905,413)         $   (241,436)
    Adjustments to reconcile net (loss)
    to net cash (used in) operating activities:
       Depreciation and amortization                                                       57,131               937,513
       Asset impairment charge                                                                  0               650,000
       Bad debt expense                                                                         0               287,654
       Stock-based compensation                                                                 0                27,500
       (Gain) loss on dispositions of assets                                               93,105            (1,145,748)
       Extraordinary gain on extinguishment of debt                                      (200,000)                    0
       Gain on settlement of litigation                                                   (81,714)                    0
    Increase (decrease) in cash resulting from
    changes in operating assets and liabilities:
       Trade accounts receivable                                                          158,281               (63,727)
       Other current assets                                                                 4,489                20,647
       Accounts payable                                                                   299,599              (519,822)
       Accrued expenses                                                                  (520,789)             (385,252)
                                                                                    -------------         -------------

              Net cash (used in) operating activities                                  (1,095,311)             (432,671)
                                                                                    -------------         -------------

INVESTING ACTIVITIES
    Net proceeds from dispositions of assets                                            8,201,861             1,625,000
    Proceeds from settlement of litigation                                                 19,827                     0
    Purchases of equipment                                                                      0              (181,726)
                                                                                    -------------         -------------

              Net cash provided by investing activities                                 8,221,688             1,443,274
                                                                                    -------------         -------------

FINANCING ACTIVITIES
    Decrease in other assets                                                               10,000                68,119
    Net proceeds from line of credit                                                            0               400,000
    Payments on long-term debt                                                         (1,325,000)           (1,800,000)
    Proceeds from the issuance of stock options                                                 0               549,125
                                                                                    -------------         -------------

              Net cash (used in) financing activities                                  (1,315,000)             (782,756)
                                                                                    -------------         -------------

Net increase in cash and cash equivalents                                               5,811,377               227,847

Cash and cash equivalents at beginning of period                                          305,034                71,936
                                                                                    -------------         -------------

Cash and cash equivalents at end of period                                            $ 6,116,411          $    299,783
                                                                                    =============         =============

Supplemental data:
    Non-cash transactions:
       Cancellation of subordinated promissory note payable due to the
       previous owner of HealthStar, Inc., and related accrued interest
       and other liabilities as a result of settlement of litigation                 $    261,887          $          0
                                                                                    =============         =============
</TABLE>


     See accompanying notes to unaudited consolidated financial statements.

                                       -3-


<PAGE>


                        HEALTHSTAR CORP. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

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



Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         A. Description of the Business

                  Prior to April 28, 2000, HealthStar Corp. (the "Company") was
                  a healthcare management company dedicated to controlling the
                  cost, improving the quality and enhancing the delivery of
                  healthcare services. The Company provided related products and
                  services designed to reduce healthcare costs. The Company
                  marketed and provided programs and services to insurance
                  companies, self-insured businesses for their medical plans,
                  and third parties that administer employee medical plans.
                  These programs and services assisted clients in reducing
                  healthcare costs for group health plans and for workers'
                  compensation coverage and automobile accident injury claims.
                  The Company operated its business in one segment through its
                  two wholly-owned subsidiaries, HealthStar, Inc. ("HealthStar")
                  and National Health Benefits & Casualty Corporation ("NHBC").
                  The Company is a registrant with the Securities and Exchange
                  Commission and its shares are publicly traded on the
                  Over-The-Counter Bulletin Board.

                  On December 30, 1999, the Company sold all of the assets of
                  NHBC to Carlmont Capital Group, Inc. and received as
                  consideration $1,500,000 in cash at closing and an earn-out
                  agreement that may provide up to an additional $300,000 in
                  cash, based on cash flows of NHBC, over the 18 months
                  following the closing of the transaction. At December 31,
                  2000, based on financial information provided by Carlmont
                  Capital Group, Inc., the Company believes it is unlikely that
                  it will receive any cash related to the earn-out agreement.

                  On April 28, 2000, the Company sold all of the capital stock
                  of HealthStar to Beyond Benefits, Inc. and received
                  consideration of $8,880,000 in cash at closing. The capital
                  stock of HealthStar constituted substantially all of the
                  assets of the Company. As a result of this sale, the Company
                  no longer operates in the managed healthcare industry and
                  currently does not have any ongoing revenue generating
                  operations. See Note 2, "Gains and Losses on Dispositions of
                  Assets," for further details of the sale of HealthStar and its
                  impact on future operations.


                                       -4-


<PAGE>


                        HEALTHSTAR CORP. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

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



Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         B.       Basis of Presentation

                  The accompanying unaudited consolidated financial statements
                  of HealthStar Corp. and Subsidiaries have been prepared in
                  accordance with generally accepted accounting principles for
                  interim financial information and pursuant to rules and
                  regulations of the Securities and Exchange Commission.
                  Accordingly, they do not include all of the information and
                  notes required by generally accepted accounting principles for
                  a complete financial statement presentation. In the opinion of
                  management, such unaudited interim financial information
                  reflects all adjustments, consisting only of normal recurring
                  adjustments, necessary to present the Company's financial
                  position and results of operations for the periods presented.
                  The results of operations for interim periods are not
                  necessarily indicative of the results to be expected for a
                  full fiscal year. It is suggested that these consolidated
                  financial statements be read in conjunction with the Company's
                  audited consolidated financial statements included in the
                  Company's Annual Report on Form 10-KSB for the year ended
                  March 31, 2000.

         C.       Use of Estimates

                  Management of the Company has made a number of estimates and
                  assumptions relating to the reporting of assets and
                  liabilities and the disclosure of contingent assets and
                  liabilities to prepare these financial statements in
                  conformity with generally accepted accounting principles.

         D.       Principles of Consolidation

                  The consolidated financial statements include the financial
                  statements of the Company and its two wholly-owned
                  subsidiaries. All significant intercompany balances and
                  transactions have been eliminated in consolidation.

         E.       Cash Equivalents

                  The Company considers all highly liquid instruments with
                  original maturities of three months or less to be cash
                  equivalents.

         F.       Earnings (Loss) per Share

                  In accordance with Statement of Financial Accounting Standards
                  No. 128, "Earnings per Share," basic earnings (loss) per share
                  is computed by dividing net income (loss) by the weighted
                  average number of shares of common stock outstanding.



                                       -5-


<PAGE>


                        HEALTHSTAR CORP. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

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



Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         F.       Earnings (Loss) per Share (Continued)

                  Diluted earnings (loss) per share reflects the maximum
                  dilution that would result after giving effect to dilutive
                  stock options and warrants and to the assumed conversion of
                  all dilutive convertible securities and stock. Outstanding
                  options to purchase common shares were not included in the
                  computation of diluted earnings (loss) per share because they
                  were considered anti-dilutive.

         G.       Fair Value of Financial Instruments

                  The fair value of a financial instrument is the amount at
                  which the instrument could be exchanged in a current
                  transaction between willing parties. Management believes that
                  the recorded amounts of current assets and current liabilities
                  approximate fair value because of the short maturity of these
                  instruments.

         H.       Revenue Recognition

                  The Company provided its customers with access to a network of
                  healthcare providers which included physicians, acute care
                  hospitals and ancillary providers such as outpatient surgery
                  centers and home healthcare agencies. These providers
                  contractually agreed with the Company to provide healthcare
                  services to the Company's customers at a discount from billed
                  charges. The Company generated revenue from its customer base
                  by charging network access fees. The Company entered into
                  contracts with its customers and charged network access fees
                  using either of two methods. Customers could choose to pay a
                  capitated fee, which is a fixed, monthly fee per eligible
                  subscriber. Initial enrollment figures were based on estimates
                  provided by the customer. Actual enrollment figures were
                  subsequently provided by the customer and updated periodically
                  at intervals ranging from monthly to semi-annually. Capitated
                  revenue was recognized on a monthly basis when customers were
                  billed using the most current enrollment figures available.
                  Adjustments were made when new enrollment figures were
                  submitted by the customer. The other method under which
                  customers could have elected to pay the Company for network
                  access was called a repricing fee. Under this method, the
                  Company received a percentage of the dollar amount of the
                  discount granted by the healthcare provider for services
                  rendered to an enrolled subscriber. The Company's percentage
                  of the dollar amount of the discount was determined by
                  contract and varied from customer to customer. Repricing fees
                  were recognized as revenue when the Company processed the
                  medical claim, calculated the discount and notified the
                  customer of the amount due.



                                       -6-


<PAGE>


                        HEALTHSTAR CORP. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

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



Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         I.       Cost of Services

                  The major components of cost of services consists of
                  utilization review, case management, external marketing
                  commissions, and costs associated with electronic transmission
                  of customers' healthcare claims.

         J.       Property and Equipment

                  Property and equipment are stated at cost, net of accumulated
                  depreciation. Depreciation is calculated using the
                  straight-line method over the estimated useful lives of the
                  assets, which approximates three years for equipment to seven
                  years for furniture and fixtures. Computer software is
                  amortized over three to five years.

         K.       Goodwill

                  Goodwill, which represents the excess of purchase price over
                  the fair value of net tangible assets acquired, was amortized
                  on a straight-line basis over the expected period to be
                  benefited of 20 years.

         L.       Income Taxes

                  The Company accounts for income taxes under the asset and
                  liability method. Deferred 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 operating loss and tax credit carryforwards.
                  Deferred tax assets and liabilities are measured using enacted
                  tax rates expected to apply to taxable income in the years in
                  which those temporary differences are expected to be recovered
                  or settled. The effect on deferred tax assets and liabilities
                  of a change in tax rates is recognized in income in the period
                  that includes the enactment date.

                  A valuation allowance must be established to reduce deferred
                  income tax benefits if it is more likely than not that a
                  portion of the deferred income tax benefits will not be
                  realized. It is management's opinion that the entire deferred
                  tax benefit may not be recognized in future years. Therefore,
                  a valuation allowance equal to the deferred tax benefit has
                  been established for the portion of the net operating loss
                  carryforward and other deferred tax assets which may not be
                  recognized in future years.



                                       -7-


<PAGE>


                        HEALTHSTAR CORP. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

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



Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         M.       Impairment of Long-Lived Assets

                  Management reviews the possible impairment of long-lived
                  assets and certain identifiable intangible assets whenever
                  events or changes in circumstances indicate that the carrying
                  amount of an asset may not be recoverable. Recoverability of
                  assets to be held and used is measured by a comparison of the
                  carrying amount of an asset to future net undiscounted cash
                  flows expected to be generated by the asset. If such assets
                  are considered to be impaired, the impairment to be recognized
                  is measured by the amount by which the carrying amount of the
                  assets exceed the fair value of the assets measured using
                  quoted market prices when available or the present value of
                  estimated expected future cash flows using a discount rate
                  commensurate with the risks involved. In measuring impairment,
                  assets are grouped at the lowest level for which there are
                  identifiable cash flows that are largely independent of the
                  cash flows of other groups of assets.

         N.       Stock Based Compensation

                  The Company applies Statement of Financial Accounting
                  Standards No. 123, "Accounting for Stock-Based Compensation"
                  (SFAS No. 123), which permits entities to recognize as expense
                  over the vesting period the fair value of all stock-based
                  awards on the date of grant. Alternatively, SFAS No. 123 also
                  allows entities to continue to apply the provisions of APB
                  Opinion No. 25 and provide pro forma net earnings and pro
                  forma earnings per share disclosures for employee stock option
                  grants made in 1995 and future years as if the
                  fair-value-based method defined in SFAS No. 123 had been
                  applied. The Company has elected to continue to apply the
                  provisions of APB Opinion No. 25 and provide the pro forma
                  disclosure required by SFAS No. 123. In accordance with APB
                  Opinion No. 25, compensation expense is recorded on the date
                  an option is granted only if the current market price of the
                  underlying stock exceeds the exercise price.

         O.       Comprehensive Income

                  Statement of Financial Accounting Standards No. 130,
                  "Reporting Comprehensive Income" (SFAS No. 130), established
                  standards for reporting and displaying comprehensive income
                  and its components in a full set of general-purpose financial
                  statements. Comprehensive income (loss) was the same as net
                  income (loss) for all periods presented.


                                       -8-


<PAGE>

                        HEALTHSTAR CORP. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

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



Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         P.       Segment Reporting

                  Until April 28, 2000, the Company had one operating business
                  segment, healthcare cost containment, which involved the
                  marketing and provision of programs and services to insurance
                  companies, self-insurance businesses for their medical plans
                  and third parties who administer employee medical plans.

Note 2. GAINS AND LOSSES ON DISPOSITIONS OF ASSETS

         On April 28, 2000, the Company completed the sale of the stock of its
         wholly owned subsidiary, HealthStar, Inc. to Beyond Benefits, Inc. The
         Company received $8,880,000 in cash at closing and used $1,325,000 to
         repay the outstanding principal balance of the Harris Bank term loan.
         This sale, which constituted the sale of substantially all the assets
         of the Company, was approved by the shareholders of the Company on
         April 25, 2000. The sale resulted in a pre-tax loss of $93,105
         primarily as a result of additional transaction costs incurred during
         April 2000. HealthStar, Inc. incurred a pre-tax loss from operations of
         $173,748 during April 2000. Following this sale, the Company no longer
         operates in the managed healthcare industry and currently does not have
         any ongoing revenue generating operations. The Company intends to
         utilize the remaining net proceeds from the sale to acquire one or more
         businesses.

         On December 30, 1999, the Company sold all of the assets of NHBC. The
         Company received $1,500,000 in cash at closing and an earn-out
         agreement that may provide up to an additional $300,000 in cash, based
         on the actual cash flows of NHBC during the 18 months following the
         closing date. At December 31, 2000, based on financial information
         provided by Carlmont Capital Group, Inc., the Company believes it is
         unlikely that it will receive any cash related to the earn-out
         agreement. The Company recognized a pre-tax gain on the sale of NHBC's
         assets of approximately $1,031,000 based on the cash consideration
         of $1,500,000 and used $1,325,000 of the cash proceeds to pay down
         indebtedness owed to Harris Bank.

         On June 7, 1999, the Company sold its First American Vision Services
         program for cash consideration of $125,000 to an immediate family
         member of a former officer of the Company, which resulted in a pre-tax
         gain of $114,538. The vision program accounted for approximately
         $14,000 in revenue during the nine month period ended December 31,
         1999.



                                       -9-


<PAGE>


                        HEALTHSTAR CORP. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

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



Note 3.  GAIN ON SETTLEMENT OF LITIGATION AND EXTRAORDINARY GAIN ON
         EXTINGUISHMENT OF DEBT

         The Company was involved in litigation asserted by the previous owner
         (the "plaintiff") of HealthStar. In this litigation, the plaintiff
         filed a complaint for breach of contract on December 4, 1998 seeking
         damages. On September 15, 2000, the plaintiff agreed to settle the
         lawsuit under certain terms, including waiving his right to collect
         principal and interest under the subordinated promissory note that the
         Company issued to him in connection with the acquisition of HealthStar.
         In return, the Company authorized the release to the plaintiff of
         certain moneys and interest held in escrow under the terms of a stock
         purchase agreement entered into in connection with the acquisition of
         HealthStar. The settlement resulted in an extraordinary gain, net of
         related income tax effects, of $200,000 resulting from the cancellation
         of the subordinated promissory note. Additionally, a pre-tax
         non-operating gain of $81,714 was recognized as a result of the waiver
         of accrued interest on the subordinated note as well as reimbursement
         of certain professional fees from the plaintiff.

Note 4.  ASSET IMPAIRMENT CHARGE

         The acquisition of HealthStar in fiscal 1998 resulted in allocating a
         substantial portion of the purchase price to goodwill. Pursuant to SFAS
         No. 121 "Accounting for the Impairment of Long-Lived Assets and for
         Long Lived Assets to be Disposed Of", management evaluated the
         recoverability of the long-lived assets, including goodwill. While
         management originally believed that revenues and profits could grow
         after HealthStar's operations were fully integrated into the Company,
         management also explored strategic mergers and acquisitions that would
         complement HealthStar's operations. In May 1999, management received an
         offer to sell HealthStar to Beyond Benefits, Inc. a privately held
         managed healthcare company. The original offer was for $15,500,000 in
         cash. However, in subsequent negotiations, that offer was reduced to
         $10,000,000 in cash, 5% of the common equity of Beyond Benefits, Inc.
         and an earn out provision for up to an additional $1,250,000. The offer
         was accepted and approved by the Board of Directors on August 19, 1999,
         subject to shareholder approval.

         On December 16, 1999, the Company and Beyond Benefits entered into an
         amendment to the Stock Purchase Agreement to provide that the cash
         portion of the purchase price be increased to $10,850,000 from
         $10,000,000 and to remove from the purchase price 303,943 shares of
         Beyond Benefits' non-voting common stock which was to have represented
         5% of the common equity of Beyond Benefits. Accordingly, the Company
         adjusted the carrying value of HealthStar's goodwill to an estimated
         fair value of approximately $7,674,809, resulting in a non-cash
         impairment charge of $150,000 ($0.04 loss per basic and diluted share)
         for the three months ended December 31, 1999 and $650,000 ($0.17 loss
         per basic and diluted share) for the nine months ended December 31,
         1999. The fair value was estimated based on a sales price of
         $10,850,000 less direct and incremental costs to dispose of
         approximately $300,000.



                                      -10-


<PAGE>


                        HEALTHSTAR CORP. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

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



Note 4.  ASSET IMPAIRMENT CHARGE (CONTINUED)

         Subsequent to December 31, 1999, the offer was reduced in final form to
         $8,880,000 in cash. The offer was accepted and approved by the Board of
         Directors and was approved by the shareholders on April 25, 2000.


















                                      -11-


<PAGE>


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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION:

         This document includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements other
than statements of historical fact included in this document, including,
without limitation, the statements under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Liquidity and
Capital Resources" regarding the Company's strategies, plans, objectives,
expectations, and future operating results are forward-looking statements.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable at this time, it can give no
assurance that such expectations will prove to have been correct. Actual
results could differ materially based upon a number of factors including, but
not limited to, history of losses, no dividends, limited public market and
liquidity, shares eligible for future sale, delays in or failure to identify
and consummate a suitable acquisition or acquisitions, realization of the
earn-out provision related to cash flows of NHBC for the 18 months following
the December 1999 sale of NHBC's assets to Carlmont Capital Group, Inc. and
other risks detailed from time to time in the Company's Securities and
Exchange Commission filings.

         Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the unaudited
financial statements and notes for the three and nine month periods ended
December 31, 2000 and 1999 contained herein and the audited financial
statements and notes for the years ended March 31, 2000 and 1999 contained in
the Company's Form 10-KSB filed with the Securities and Exchange Commission
on June 29, 2000.

RESULTS OF OPERATIONS

THREE MONTHS ENDED DECEMBER 31, 2000 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1999

         As a result of the completion of the sale of HealthStar to Beyond
Benefits on April 28, 2000 and the completion of the sale of the assets of NHBC
to Carlmont on December 30, 1999, the Company is no longer engaged in the
managed healthcare business and had no revenue generating operations for the
three months ended December 31, 2000. The Company's only source of cash is
interest income generated from the investment of the remaining proceeds from the
sale of HealthStar in a money market account. It should be noted that the
operating results for the three months ended December 31, 1999 include the
operating results for both HealthStar and NHBC for the entire period.

REVENUE

         Prior to the sale of its two wholly owned subsidiaries, HealthStar and
NHBC, the Company derived the majority of its revenue from fees paid by its
customers for access to the Company's PPO network of contracted healthcare
providers. The Company had no revenue from operations for the three months ended
December 31, 2000. Total revenue for the three months ended December 31, 1999
was $3,312,498.



                                      -12-


<PAGE>


OPERATING EXPENSES

         Prior to the sales of HealthStar and NHBC, cost of services included
the cost of outsourcing the medical case management and utilization review
functions, commissions paid to outside brokers, fees paid to other PPO networks
for access to healthcare providers which were not directly contracted with the
Company, the cost of electronic claims processing and the cost of printing
provider directories. There was no cost of services in the current quarter as a
result of the sales of HealthStar and NHBC. Cost of services for the three
months ended December 31, 1999 was $405,060.

         Salaries and wages includes all employee compensation, payroll taxes,
health insurance and other employee benefits. Salaries and wages were $142,428
for the three months ended December 31, 2000 compared to $1,793,340 in the
comparable period last year.

         General and administrative expenses include all other operating
expenses, such as telecommunications, office supplies, postage, travel and
entertainment, professional fees, bad debt expense, insurance, rent and
utilities. General and administrative expenses were $216,897 for the three
months ended December 31, 2000 versus $1,069,775 for the comparable period last
year. In the current quarter, approximately $175,000 was related to professional
fees, including legal, accounting, consulting and investment banking fees
related to the Company's investigation of possible acquisition candidates.

         Depreciation and amortization was $128 for the three months ended
December 31, 2000 versus $296,647 for the three months ended December 31, 1999.
The overall decrease in depreciation and amortization expense was primarily due
to a decrease in fixed assets and goodwill as a result of the sales of
HealthStar and NHBC.

NON-OPERATING INCOME (EXPENSE)

         Interest income for the three months ended December 31, 2000 was
$89,447. Interest income was generated from the investment of the net proceeds
from the sale of HealthStar into a money market account that currently yields
approximately 5.5%. The Company did not have any interest income in the
comparable period last year.

         There was no interest expense in the current quarter as a result of the
payoff of the remaining $1,325,000 owed to Harris Bank from the proceeds of the
sale of HealthStar on April 28, 2000. Interest expense for the three months
ended December 31, 1999 was $89,310.

         The acquisition of HealthStar in fiscal 1998 resulted in allocating a
substantial portion of the purchase price to goodwill. Pursuant to SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long Lived Assets to
be Disposed Of," management evaluated the recoverability of the long-lived
assets, including goodwill. While management originally believed that revenues
and profits could grow after HealthStar's operations were fully integrated into
the Company, management also explored strategic mergers and acquisitions that
would complement HealthStar's operations. In May 1999, management received an
offer to sell HealthStar to Beyond Benefits, Inc., a privately held managed
healthcare company. The original offer was for $15,500,000 in cash. However, in
subsequent negotiations, that offer was reduced to $10,000,000 in cash, 5% of
the common equity of Beyond Benefits, Inc. and an earn out provision for up to
an additional $1,250,000. The offer was accepted and approved by the Board of
Directors on August 19, 1999, subject to shareholder approval.


                                      -13-


<PAGE>


NON-OPERATING INCOME (EXPENSE) (CONTINUED)

         On December 16, 1999, the Company and Beyond Benefits entered into an
amendment to the Stock Purchase Agreement to provide that the cash portion of
the purchase price be increased to $10,850,000 from $10,000,000 and to remove
from the purchase price 303,943 shares of Beyond Benefits' non-voting common
stock which was to have represented 5% of the common equity of Beyond Benefits.
Accordingly, the Company adjusted the carrying value of HealthStar's goodwill to
an estimated fair value of approximately $7,674,809 at December 31, 1999,
resulting in a non-cash impairment charge of $150,000 ($0.04 loss per basis and
diluted share) for the three months ended December 31, 1999. The fair value was
estimated based on a sales price of $10,850,000 less direct and incremental
costs to dispose of approximately $300,000. Subsequent to December 31, 1999, the
offer was reduced in final form to $8,880,000 in cash. The offer was accepted
and approved by the Board of Directors and was approved by the shareholders on
April 25, 2000.

         On December 30, 1999, the Company sold all of the assets of its
wholly owned subsidiary National Heath Benefits and Casualty Corp. ("NHBC")
to Carlmont Capital Group, Inc., a California based company. This transaction
resulted in a pretax gain of approximately $1,031,000.

INCOME TAX EXPENSE

         The Company recorded no income tax expense in the current quarter due
to the level of year-to-date losses incurred. Income tax expense of $243,577 was
recorded in the comparable period last year.

NET LOSS

         The Company had a net loss of $270,006 for the three months ended
December 31, 2000 compared to net income of $295,999 for the three months ended
December 31, 1999.

NINE MONTHS ENDED DECEMBER 31, 2000 COMPARED TO NINE MONTHS ENDED DECEMBER 31,
1999

         As a result of the completion of the sale of HealthStar to Beyond
Benefits on April 28, 2000 and the completion of the sale of the assets of NHBC
to Carlmont on December 30, 1999, the Company is no longer engaged in the
managed healthcare business and has no revenue generating operations. It should
be noted that the operating results for the nine months ended December 31, 2000
only include the operating results of HealthStar for the first 28 days of the
month of April 2000, and do not include any operating results for NHBC.
Conversely, the Company's operating results for the nine months ended December
31, 1999 include the operating results for both HealthStar and NHBC for the
entire period.

REVENUE

         Prior to the sale of its two wholly owned subsidiaries, HealthStar and
NHBC, the Company derived the majority of its revenue from fees paid by its
customers for access to the Company's PPO network of contracted healthcare
providers. Total revenue for the nine months ended December 31, 2000 was
$943,650 versus $10,718,133 for the nine months ended December 31, 1999. Total
revenue in the current year period is equal to the total revenue for HealthStar
for the 28-day period in April 2000, prior to the Company's sale of HealthStar,
which was consummated on April 28, 2000.

                                      -14-


<PAGE>


OPERATING EXPENSES

         Prior to the sales of HealthStar and NHBC, cost of services included
the cost of outsourcing the medical case management and utilization review
functions, commissions paid to outside brokers, fees paid to other PPO
networks for access to healthcare providers which are not directly contracted
with the Company, the cost of electronic claims processing and the cost of
printing provider directories. For the nine months ended December 31, 2000,
cost of services was $74,813 versus $1,401,696 for the comparable period last
year. Cost of services in the current nine month period is equal to the cost
of services for HealthStar for the 28-day period in April 2000.

         Salaries and wages includes all employee compensation, payroll
taxes, health insurance, other employee benefits, and temporary labor. Prior
to the sales of HealthStar and NHBC, this category also included commissions
paid to in-house sales and marketing personnel. Salaries and wages were
$1,078,274 for the nine months ended December 31, 2000 ($688,345 of which was
incurred prior to the sale of HealthStar) compared to $5,570,288 in the
comparable period last year. The remaining salaries and wages expense for the
nine months ended December 31, 2000 of $389,929 is related to the
compensation of the Company's two executive officers.

         General and administrative expenses include all other operating
expenses, such as telecommunications, office supplies, postage, travel and
entertainment, professional fees, bad debt expense, insurance, rent and
utilities. General and administrative expenses were $1,055,564 for the nine
months ended December 31, 2000 ($298,604 of which was incurred prior to the
sale of HealthStar) versus $3,091,327 for the comparable period last year.
The remaining general and administrative expenses of $756,960 are primarily
related to professional fees, including legal, accounting, consulting and
investment banking fees related to the Company's investigation of possible
acquisition candidates and other general overhead items such as travel and
insurance.

         Depreciation and amortization was $57,131 for the nine months ended
December 31, 2000 versus $937,513 for the nine months ended December 31,
1999. The overall decrease in depreciation and amortization expense was
primarily due to a decrease in fixed assets and goodwill as a result of the
sales of HealthStar and NHBC.

NON-OPERATING INCOME (EXPENSE)

         Interest income for the nine months ended December 31, 2000 was
$238,415. Interest income was generated from the investment of the net proceeds
from the sale of HealthStar into a money market account that currently yields
approximately 5.5%. The Company did not have any interest income in the
comparable period last year.

         Interest expense for the nine months ended December 31, 2000 was
$10,305 versus $230,600 for the nine months ended December 31, 1999. The overall
decrease was a result of the payoff of the remaining $1,325,000 owed to Harris
Bank from the proceeds of the sale of HealthStar on April 28, 2000.



                                      -15-


<PAGE>


NON-OPERATING INCOME (EXPENSE) (CONTINUED)

         The acquisition of HealthStar in fiscal 1998 resulted in allocating a
substantial portion of the purchase price to goodwill. Pursuant to SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long Lived Assets to
be Disposed Of," management evaluated the recoverability of the long-lived
assets, including goodwill. While management originally believed that revenues
and profits could grow after HealthStar's operations were fully integrated into
the Company, management also explored strategic mergers and acquisitions that
would complement HealthStar's operations. In May 1999, management received an
offer to sell HealthStar to Beyond Benefits, Inc., a privately held managed
healthcare company. The original offer was for $15,500,000 in cash. However, in
subsequent negotiations, that offer was reduced to $10,000,000 in cash, 5% of
the common equity of Beyond Benefits, Inc. and an earn out provision for up to
an additional $1,250,000. The offer was accepted and approved by the Board of
Directors on August 19, 1999, subject to shareholder approval.

         On December 16, 1999, the Company and Beyond Benefits entered into an
amendment to the Stock Purchase Agreement to provide that the cash portion of
the purchase price be increased to $10,850,000 from $10,000,000 and to remove
from the purchase price 303,943 shares of Beyond Benefits' non-voting common
stock which was to have represented 5% of the common equity of Beyond Benefits.
Accordingly, at December 31, 1999, the Company adjusted the carrying value of
HealthStar's goodwill to an estimated fair value of approximately $7,674,809
resulting in a non-cash impairment loss of approximately $650,000 ($0.17 loss
per basic and diluted share) for the nine months ended December 31, 1999. The
fair value at December 31, 1999 was estimated based on a sales price of
$10,850,000 less direct and incremental costs to dispose of approximately
$300,000. Subsequent to December 31, 1999, the offer was reduced in final form
to $8,880,000 in cash. The offer was accepted and approved by the Board of
Directors and was approved by the shareholders on April 25, 2000.

         On December 30, 1999, the Company sold all of the assets of its
wholly owned subsidiary National Health Benefits and Casualty Corp. ("NHBC")
to Carlmont Capital Group, Inc., a California based company. This transaction
resulted in a pre-tax gain of approximately $1,031,000 in the nine months
ended December 31, 1999.

         The Company recorded a pretax loss of $93,105 on the sale of HealthStar
during the current nine month period. The Company also recorded a pre-tax gain
of $114,538 on the sale of its vision program during the nine months ended
December 31, 1999.

         The Company was involved in litigation asserted by the previous owner
(the "plaintiff") of HealthStar. In this litigation, the plaintiff filed a
complaint for breach of contract on December 4, 1998 seeking damages. On
September 15, 2000, the plaintiff agreed to settle the lawsuit under certain
terms, including waiving his right to collect principal and interest under the
subordinated promissory note that the Company issued to him in connection with
the acquisition of HealthStar. In return, the Company authorized the release to
the plaintiff of certain moneys and interest held in escrow under the terms of a
stock purchase agreement entered into in connection with the acquisition of
HealthStar. The settlement resulted in an extraordinary gain, net of related
income tax effects, of $200,000 resulting from the cancellation of the
subordinated promissory note. Additionally, a pre-tax non-operating gain of
$81,714 was recognized as a result of the waiver of accrued interest on the
subordinated note as well as reimbursement of certain professional fees from the
plaintiff.



                                      -16-


<PAGE>


INCOME TAX EXPENSE

         The Company recorded no income tax expense in the current nine month
period due to the level of operating losses incurred. Tax expense of $223,893
was recorded in the comparable period last year.

NET LOSS

         The Company incurred a net loss of $905,413 for the nine months
ended December 31, 2000 compared to a net loss of $241,436 for the nine
months ended December 31, 1999. Components of the net loss in the current
year period are net interest income of $228,110, a net loss from the
operations of HealthStar of $173,747, the loss on the sale of HealthStar of
$93,105, corporate overhead expenses of $1,148,385 (primarily related to
salaries and wages, professional fees, including legal, accounting,
consulting and investment banking fees related to the Company's investigation
of possible acquisition candidates, other general overhead items such as
travel and insurance, and depreciation and amortization), and the
extraordinary gain and non-operating gain totaling $281,714 resulting from
the cancellation of the subordinated promissory note and related accrued
interest and the reimbursement of certain professional fees.

LIQUIDITY AND CAPITAL RESOURCES

         On December 30, 1999, the Company sold the assets of its wholly owned
subsidiary National Health Benefits & Casualty Corporation ("NHBC") to Carlmont
Capital Group, Inc. ("Carlmont"), a privately held company based in Chula Vista,
California. This sale was made pursuant to the terms of an Asset Purchase
Agreement dated December 28, 1999, by and among the Company, NHBC and Carlmont.
The Company received $1,500,000 in cash at closing and an earnout agreement that
may provide up to an additional $300,000 in cash, based on the actual cash flows
of NHBC during the 18 month period after closing. At December 31, 2000, based on
financial information provided by Carlmont Capital Group, Inc., the Company
believes it is unlikely it will receive any cash related to the earn-out
agreement.

         On April 28, 2000, in connection with the sale of HealthStar to Beyond
Benefits, the Company received $8,880,000 in cash at the closing of the sale.
The Company incurred $595,491 in transaction costs related to the sale. The
Company used $1,325,000 of the cash proceeds to repay the entire principal
balance on its term loan owed to Harris Bank. The remaining proceeds were
invested in a money market account which currently yields approximately 5.5%. As
a result of this sale, the Company no longer has any revenue generating
operations. The Company's only source of cash is interest income generated from
the investment of the remaining proceeds from the sale of HealthStar in a money
market account. The Company will continue to invest substantially all of its
cash in a money market account until such time that it is needed in connection
with the Company's plan to acquire a business or businesses. There can be no
assurance that the Company will be able to consummate an acquisition of a
business or businesses in accordance with the Company's current business plan or
in a timely manner.

         At December 31, 2000, the Company had cash and cash equivalents of
$6,116,411 and total liabilities of $137,937, which equates to net working
capital of $5,978,474.



                                      -17-


<PAGE>


LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

         The Company's principal use of cash will be the payment of general
corporate overhead items including the payment of salaries to its two employees,
both of whom are executive officers of the Company. The Company will also use
cash to execute its plan to acquire a business or businesses. These costs may
include the compensation of consultants, attorneys and other professionals whose
services are required in connection with effecting an acquisition.

         To the extent the Company continues to have no operating revenues and
holds its cash in a money market account, the net effect of reductions in
interest rates, the advent of inflation, an increase in corporate overhead and
the passage of time--or a combination of two or more of these factors--could
result in a reduction of the Company's cash or its purchasing power, which, in
turn, could materially adversely affect the Company's prospects and financial
condition.










                                      -18-


<PAGE>


                           PART II - OTHER INFORMATION



ITEM 1.    LEGAL PROCEEDINGS

           None.

ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS

           None.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

           None.

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

           None.

ITEM 5.    OTHER INFORMATION

           None.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

           (A)    Exhibits

                  None.

           (B)    REPORTS ON FORM 8-K

                  None.








                                      -19-


<PAGE>


                                   SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report on Form 10-QSB to be signed on its
behalf by the undersigned thereunto duly authorized, this 13th day of February,
2001.


                                       HEALTHSTAR CORP.



                                       By:  /s/ STEVEN A. MARCUS
                                            ------------------------------------
                                           Steven A. Marcus
                                           Vice President and Chief Financial
                                           Officer (Principal Financial and
                                           Accounting Officer)









                                      -20-