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 September 30, 1999
                                   ------------------

[ ] 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                                (I.R.S. employer
of incorporation or organization)                            identification no.)

                      15720 N. Greenway Hayden Loop Suite 1
                            Scottsdale, Arizona 85260
                    ----------------------------------------
                    (Address of principal executive offices)

                                 (480) 451-8575
                           ---------------------------
                           (Issuer's Telephone Number)

            8745 West Higgins Road, Suite 300 Chicago, Illinois 60631
            ---------------------------------------------------------
              (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,
3,905,872 outstanding as of November 19, 1999.
<PAGE>
                        HEALTHSTAR CORP. AND SUBSIDIARIES

              FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 1999

                                TABLE OF CONTENTS



PART I.  FINANCIAL INFORMATION

     Item 1. Financial Statements

             Consolidated Balance Sheet as of September 30, 1999............   3

             Consolidated Statements of Operations and Retained Earnings
             (Accumulated Deficit) for the Three and Six Months Ended
             September 30, 1999 and 1998....................................   4

             Consolidated Statements of Cash Flows for the Six Months Ended
             September 30, 1999 and 1998....................................   5

             Notes to Unaudited Consolidated Financial Statements...........   6


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


PART II. OTHER INFORMATION

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

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


Signatures..................................................................  20

                                       2
<PAGE>

                         PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                       HEALTHSTAR CORP. AND SUBSIDIARIES
                           Consolidated Balance Sheet
                                  (Unaudited)

                                                                   September 30,
                                                                       1999
                                                                   ------------
                                     ASSETS

Current assets:
  Cash and cash equivalents                                        $    115,007
  Trade accounts receivable, less allowance for doubtful
    accounts of $221,826                                              1,760,300
  Other current assets                                                  460,994
                                                                   ------------
         Total current assets                                         2,336,301

Property and equipment, net                                           2,101,831
Goodwill, net of accumulated amortization of $844,860                 7,932,635
Other assets, at cost                                                   180,405
                                                                   ------------
         Total assets                                              $ 12,551,172
                                                                   ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                                 $    634,726
  Accrued expenses                                                      716,854
  Current portion of long-term debt                                   3,175,000
                                                                   ------------
          Total current liabilities                                   4,526,580
                                                                   ------------
Shareholders' equity:
   Common stock, $.001 par value 15,000,000 shares authorized,
     3,875,872 shares issued and outstanding                              3,876
   Additional paid -in- capital                                       8,341,448
   Accumulated deficit                                                 (320,732)
                                                                   ------------
         Total shareholders' equity                                   8,024,592

                                                                   ------------
         Total liabilities and shareholders' equity                $ 12,551,172
                                                                   ============

See accompanying notes to unaudited consolidated financial statements.

                                       3
<PAGE>
                       HEALTHSTAR CORP. AND SUBSIDIARIES
          Consolidated Statements of Operations and Retained Earnings
                             (Accumulated Deficit)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                  Three Months Ended             Six Months Ended
                                                     September 30,                 September 30,
                                              --------------------------    --------------------------
                                                 1999           1998           1999           1998
                                              -----------    -----------    -----------    -----------
<S>                                           <C>            <C>            <C>            <C>
Revenues:
   Capitated fees                             $ 2,071,804    $ 2,364,468    $ 4,166,790    $ 5,015,720
   Repricing fees                               1,473,003      1,775,353      3,059,822      3,538,583
   Other fees                                      38,970        129,820        124,075        300,160
                                              -----------    -----------    -----------    -----------
                                                3,583,777      4,269,641      7,350,687      8,854,463
                                              -----------    -----------    -----------    -----------
Operating expenses:
   Cost of services                               463,009        578,906        996,636      1,281,774
   Salaries and wages                           1,819,389      2,036,600      3,776,948      4,066,272
   General and administrative                     943,254      1,229,856      2,021,552      2,497,108
   Depreciation and amortization                  322,708        293,185        640,866        582,299
                                              -----------    -----------    -----------    -----------
                                                3,548,360      4,138,547      7,436,002      8,427,453
                                              -----------    -----------    -----------    -----------

Income (loss) from operations                      35,417        131,094        (85,315)       427,010

Non-operating income (expense)
   Interest expense                               (79,791)       (88,949)      (141,290)      (249,292)
   Gain on disposition of assets                       --             --        114,538             --
   Other, net                                      14,833         17,293         54,948         38,139

Asset impairment charge                           500,000             --        500,000             --
                                              -----------    -----------    -----------    -----------

Income (loss) before income taxes                (529,541)        59,438       (557,119)       215,857

Income tax expense (benefit)                      (10,405)        15,000        (19,684)        70,000
                                              -----------    -----------    -----------    -----------

             Net income (loss)                   (519,136)        44,438       (537,435)       145,857

Retained earnings at beginning of period          198,404        493,792        216,703        392,373
                                              -----------    -----------    -----------    -----------
Retained earnings (accumulated deficit)
  at end of period                            $  (320,732)   $   538,230    $  (320,732)   $   538,230
                                              ===========    ===========    ===========    ===========

Earnings (loss) per share-basic and diluted   $     (0.13)   $      0.01    $     (0.14)   $      0.05
                                              ===========    ===========    ===========    ===========
Weighted average shares outstanding-basic
  and diluted                                   3,850,713      3,115,386      3,835,402      3,063,331
                                              ===========    ===========    ===========    ===========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                       4
<PAGE>
                       HEALTHSTAR CORP. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                  (Unaudited)

                                                           Six Months Ended
                                                             September 30,
                                                        -----------------------
                                                          1999          1998
                                                        ---------     ---------
Operating activities:
  Net income (loss)                                     $(537,435)    $ 145,857
  Adjustments to reconcile net income (loss) to
  net cash used in operating activities:
    Depreciation and amortization                         640,866       582,299
    Asset impairment charge                               500,000            --
    Bad debt expense                                      197,654       330,305
    Stock-based compensation                               27,500        15,000
    Interest expense on debentures                             --        29,578
  Increase (decrease) in cash resulting from
    changes in operating assets and
    liabilities:
    Trade accounts receivable                              36,897      (188,516)
    Other current assets                                  (40,840)      (21,946)
    Accounts payable                                     (248,185)       17,839
    Accrued expenses                                     (872,181)     (518,861)
                                                        ---------     ---------
      Net cash provided (used) in operating activities   (295,724)      391,555
                                                        ---------     ---------
Investing activities:
   Purchases of equipment                                 (36,936)     (289,051)
   Proceeds from the sale of equipment                         --         5,113
                                                        ---------     ---------
      Net cash used in investing activities               (36,936)     (283,938)
                                                        ---------     ---------
Financing activities:
   Decrease (increase) in other assets                    (37,144)      (99,733)
   Net proceeds from line of credit                       400,000       150,000
   Net (payments on) term loan                           (150,000)     (200,000)
   Proceeds from the issuance of stock options            162,875            --
                                                        ---------     ---------
      Net cash provided (used) by financing activities    375,731      (149,733)
                                                        ---------     ---------

Net increase (decrease) in cash and cash equivalents       43,071       (42,116)

Cash and cash equivalents at beginning of year             71,936       199,466
                                                        ---------     ---------

Cash and cash equivalents at end of period              $ 115,007     $ 157,350
                                                        =========     =========

See accompanying notes to unaudited consolidated financial statements.

                                       5
<PAGE>
                        HEALTHSTAR CORP. AND SUBSIDIARIES

              Notes to Unaudited Consolidated Financial Statements


(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     DESCRIPTION OF BUSINESS

     HealthStar  Corp.  (the  "Company")  is  a  healthcare  management  company
     dedicated to controlling the costs, improving the quality and enhancing the
     delivery of healthcare services.  The Company markets and provides programs
     and  services to a variety of payers of medical  claims  such as  insurance
     companies,  self-insured  businesses  and  third  parties  that  administer
     employee  medical plans.  These programs and services  assist the Company's
     customers in reducing  healthcare  costs for group health  plans,  workers'
     compensation  coverage and automobile  accident injury claims.  The Company
     operates   its  business   through  its  two  wholly  owned   subsidiaries,
     HealthStar,   Inc.   ("HSI")  and  National   Health  Benefits  &  Casualty
     Corporation ("NHBC").

     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
     footnotes required by generally accepted accounting principles for complete
     financial  statement  presentation.  In the  opinion  of  management,  such
     unaudited interim 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 Form 10-KSB, for the year ended March 31, 1999.

     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.

     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.

                                       6
<PAGE>
                        HEALTHSTAR CORP. AND SUBSIDIARIES

         Notes to Unaudited Consolidated Financial Statements, Continued


(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

     CASH EQUIVALENTS

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

     EARNINGS (LOSS) PER SHARE

     The Company adopted Statement of Accounting Standards No. 128 "Earnings per
     Share"  (SFAS 128) during  1997.  The  Company's  Earnings per Common Share
     (EPS)  figures for the prior  period were not  effected by adoption of SFAS
     128. In  accordance  with SFAS 128,  basic EPS is computed by dividing  net
     income, after deducting preferred stock dividend  requirements (if any), by
     the weighted average number of shares of common stock outstanding.

     Diluted EPS  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.

     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.  The  recorded  balance of  long-term  debt
     approximates  fair  value,  as the terms of the debt are  similar  to rates
     currently offered to the Company for similar debt instruments.

     REVENUE RECOGNITION

     The Company  provides it customers  with access to a network of  healthcare
     providers  which  includes  physicians,  acute care hospitals and ancillary
     providers such as outpatient surgery centers and home healthcare  agencies.
     These  providers  have  contractually  agreed  with the  Company to provide
     healthcare  services to the  Company's  customers at a discount from billed
     charges.  The Company  generates revenue from its customer base by charging
     network  access fees.  The Company enters into contracts with its customers
     and charges network access fees using either of two methods.  Customers may
     choose to pay a capitated fee,  which is a fixed,  monthly fee per eligible
     subscriber.  Initial  enrollment figures are based on estimates provided by
     the customer.  Actual enrollment  figures are subsequently  provided by the
     customer and are updated  periodically at intervals ranging from monthly to
     semi-annually.  Capitated  revenue is  recognized  on a monthly  basis when
     customers are billed using the most current  enrollment  figures available.
     Adjustments  are made when new  enrollment  figures  are  submitted  by the
     customer.  The other  method  under  which  customers  may elect to pay the
     Company for network  access is called a repricing  fee.  Under this method,
     the Company  receives 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
     is determined  by contract and varies from customer to customer.  Repricing
     fees are  recognized  as revenue  when the  Company  processes  the medical
     claim, calculates the discount and notifies the customer of the amount due.

                                       7
<PAGE>
                        HEALTHSTAR CORP. AND SUBSIDIARIES

         Notes to Unaudited Consolidated Financial Statements, Continued


(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

     COST OF SERVICES

     The major  components of cost of services are the cost of  outsourcing  the
     medical  case  management  and  utilization   review  functions,   external
     marketing   commissions,   printing  of  provider   directories  and  costs
     associated with the electronic transmission of healthcare claims.

     PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost. 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.

     GOODWILL

     Goodwill, which represents the excess of purchase price over the fair value
     of net tangible assets acquired, is amortized on a straight-line basis over
     the expected  periods to be  benefited,  ranging from 10 to 20 years with a
     weighted average period of 20 years.

     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  capital  loss  carryforward  and a portion of the net
     operating loss carryforward which may not be recognized in future years.

                                       8
<PAGE>
                        HEALTHSTAR CORP. AND SUBSIDIARIES

         Notes to Unaudited Consolidated Financial Statements, Continued


(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

     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 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 will be 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.

     STOCK BASED COMPENSATION

     The Company applies SFAS No. 123, ACCOUNTING FOR STOCK-BASED  COMPENSATION,
     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
     provisions  of 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.

     OTHER FEES

     Other fees consist of revenue generated from the Company's case management,
     utilization  review  programs and from  charges to  customers  for provider
     directories.

     RECLASSIFICATIONS

     Certain  reclassifications  have been made to the  prior  period  financial
     statements to conform to the current period presentation.

                                       9
<PAGE>
                        HEALTHSTAR CORP. AND SUBSIDIARIES

         Notes to Unaudited Consolidated Financial Statements, Continued


(2)  ASSET IMPAIRMENT CHARGE

     The  acquisition of HSI 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 HSI's  operations  were fully
     integrated into the Company, management also explored strategic mergers and
     acquisitions  that  would  complement  HSI's   operations.   In  May  1999,
     management  received  an offer  to sell  HSI 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 in final form 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 approved by the Board of Directors on August 19,
     1999, subject to shareholder approval.

     Management is in the process of obtaining an  independent  valuation of the
     Beyond Benefits stock, and management has assigned no value to the earn-out
     provision. Until the valuation is completed,  management has estimated that
     the stock has a value of approximately  $1,000,000.  This value is based on
     the  expected  future  operating  results of Beyond  Benefits  after giving
     effect to the proposed transaction. A range of cash flow multiples commonly
     used to value  PPO's was  applied to  determine  the  estimated  enterprise
     value.  Accordingly,  the Company has adjusted the carrying  value of HSI's
     goodwill to an estimated fair value of approximately  $7,932,635  resulting
     in a non-cash  impairment  loss of  approximately  $500,000 ($0.13 loss per
     basic and diluted  share).  The fair value was  estimated  based on a sales
     price of  $11,000,000  less  direct  and  incremental  costs to  dispose of
     approximately $300,000.

(3)  BUSINESS SEGMENTS AND MAJOR CUSTOMERS

     The  Company's  operations  are  in one  operating  business  segment,  the
     marketing  and  provision of programs and services to insurance  companies,
     self-insurance businesses for their medical plans, health and welfare funds
     and third parties who administer employee medical plans.

     The Company operates in a very competitive market. The Company's success is
     dependent upon the ability of its sales and marketing group to identify and
     contract with businesses and  organizations  nationwide,  and to administer
     its networks. Changes in the insurance and healthcare industries, including
     the regulation  thereof by federal and state  agencies,  may  significantly
     affect management's estimates of the Company's performance.

                                       10
<PAGE>
                        HEALTHSTAR CORP. AND SUBSIDIARIES

         Notes to Unaudited Consolidated Financial Statements, Continued


(4)  DEBT

     Debt consists of the following at September 30, 1999:

     Note payable to Harris Trust and Savings Bank, due
     January 31, 2001 secured by substantially all the
     assets of the Company                                           $1,925,000

     Line of credit payable to Harris Trust and Savings Bank,
     due January 31, 2001 secured by substantially all the
     assets of the Company                                            1,050,000

     Unsecured note payable to the seller of HSI, interest
     payable monthly at 8.0%, currently due                             200,000
                                                                     ----------
                                                                     $3,175,000
                                                                     ==========

     On November 19, 1999, the Company and Harris Trust and Savings Bank entered
     into an agreement as follows: (i) the Company made a payment of $100,000 on
     the line of credit  concurrent  with entering into the  agreement;  (ii) on
     November 30, 1999,  the Company  will make the $150,000  principal  payment
     which  was due on  September  30,  1999;  (iii) the bank  will  extend  the
     maturity date of the term loan and line of credit to January 31, 2000;  and
     (iv) the bank  will  reset the  interest  rate on the term loan and line of
     credit to prime plus 1.0% on November  30,  1999 from the  current  rate of
     prime plus 3.5%.

(5)  RELATED PARTY TRANSACTIONS

     On June 7, 1999, the Company sold its vision program for cash consideration
     of  $125,000  to an  immediate  family  member of a former  officer  of the
     Company.  The  Company  recognized  a gain  on the  sale  of  approximately
     $114,000.

                                       11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     Management's  Discussion and Analysis of Financial Condition and Results of
Operations  should be read in  conjunction  with the  financial  statements  and
footnotes for the quarter ended September 30, 1999 contained  herein and for the
year ended March 31, 1999  contained in the Company's Form 10-KSB filed with the
Securities and Exchange Commission on June 29, 1999.

OVERVIEW

     HealthStar  Corp.  (the  "Company")  is  a  healthcare  management  company
dedicated to  controlling  the costs,  improving  the quality and  enhancing the
delivery of healthcare  services.  The Company markets and provides programs and
services to a variety of payers of medical  claims such as insurance  companies,
self-insured  businesses  and third  parties that  administer  employee  medical
plans.  These programs and services  assist the Company's  customers in reducing
healthcare  costs for group health  plans,  workers'  compensation  coverage and
automobile accident injury claims.

     Through its two wholly owned subsidiaries,  HealthStar,  Inc. ("HSI"),  and
National Health Benefits and Casualty Corporation ("NHBC"), the Company provides
its customers with access to a nationwide network of healthcare  providers.  The
Company owns and operates the HealthStar  Preferred  Provider  Organization (the
"PPO").  At September 30, 1999, the  HealthStar PPO network  consisted of direct
contracts with over 2,000 acute care hospitals, approximately 125,000 physicians
and  approximately  5,000  ancillary  healthcare  providers  such as  outpatient
surgery  facilities  and home  healthcare  agencies.  The Company also  provides
access  to  medical  cost   containment   services  such  as  implementing   and
coordinating case management procedures,  managing and reviewing the utilization
of healthcare services and comprehensive medical bill review.

RECENT DEVELOPMENTS

     On September  23, 1999,  the Company and HSI entered into a Stock  Purchase
Agreement  with Beyond  Benefits,  Inc.,  a privately  held  managed  healthcare
Company, pursuant to which the Company proposes to sell all of the capital stock
of HSI to Beyond  Benefits.  Under the terms of the agreement,  the Company will
receive $10,000,000 in cash at closing and 303,943 shares of non-voting Series B
common stock of Beyond Benefits, which constitutes 5% of the total common equity
of Beyond Benefits  outstanding as of the closing of the  transaction.  Further,
the Company may receive up to an  additional  $1,250,000  in cash pursuant to an
earn-out  provision if predetermined HSI revenue figures are realized during the
18 month period following the closing.

     The proposed  transaction  constitutes a sale of  substantially  all of the
Company's assets for the purpose of Delaware law applicable to the Company.  The
Company  is  required  to  obtain  the  affirmative  vote of a  majority  of the
outstanding  shares of its  common  stock  prior to  consummating  the  proposed
transaction.  On  August  19,  1999,  the  Board  of  Directors  of the  Company
unanimously  approved  the proposed  transaction  subject to the approval by the
shareholders.  The vote will take place in conjunction with the Company's Annual

                                       12
<PAGE>
Shareholders'  Meeting  which is  expected  to be held in January  2000.  If the
proposed  transaction is approved by the shareholders,  the Company will receive
$10,000,000 in cash at closing, of which  approximately  $2,725,000 will be used
to repay the entire amount of outstanding  indebtedness owed to Harris Trust and
Savings Bank.

     On November 15,  1999,  the Company  announced  that it had  terminated  an
agreement  whereby it was to have acquired a 49% interest in  Physiciansite.com,
Inc., a privately held Internet  based  healthcare  company.  The Company was to
have issued 4.0 million  shares of its common  stock to an  investment  group in
exchange  for the right to acquire  the  interest in  Physiciansite.com  through
subsequent cash purchases of Physiciansite.com stock totaling $7.2 million.

     As of the date of this  report,  the Company and NHBC have  entered  into a
letter of intent to sell the  assets of NHBC to a  privately  held  company  not
affiliated  with the Company for  $2,500,000 in cash.  The offer is subject to a
number of conditions  including the buyer's satisfaction with the results of its
due  diligence,  the  negotiation  and execution of a definitive  asset purchase
agreement, and the buyer obtaining financing for the purchase.

     The Company  intends to use the net  proceeds  from these sales to acquire,
through the purchase of equity or debt securities,  interests in  Internet-based
businesses  generally related to the healthcare and medical services industries.
The Company will not  distribute any of the net proceeds of the proposed sale of
HSI to its shareholders.

RESULTS OF OPERATIONS

Three Months Ended September 30, 1999 Compared to Three Months Ended September
30, 1998

     The  Company  derives the  majority  of its  revenue  from fees paid by its
customers  for access to the  Company's  PPO  network of  contracted  healthcare
providers. These providers have contractually agreed with the Company to provide
healthcare  services  to the  Company's  customers  at a  discount  from  billed
charges.  The Company's customer base consists of a variety of payers of medical
claims such as insurance companies,  third-party administrators and self-insured
employers.  The Company  enters into  contracts  with its  customers and charges
network  access fees using either of two methods.  Customers may choose to pay a
capitated fee, which is a fixed, monthly fee per eligible subscriber.  The other
method that  customers may elect choose to pay the Company for network access is
called a repricing fee. Under this method,  the Company receives 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 is determined by contract and varies from customer
to customer

     Total revenue  decreased  $685,864 or 16% to $3,583,777 in 1999 compared to
$4,269,641  in 1998.  Revenue for HSI  decreased  $665,319 to $2,934,013 in 1999
from  $3,599,332  in 1998,  a decrease of 18%.  The majority of the decrease was
attributable to the loss of four  significant  customers that were active during
the comparable  period in 1998.  Revenue for NHBC  decreased  $20,545 or 3% from
$670,309 in 1998 to $649,764 in 1999.  Overall,  capitated fees declined 12% and
repricing fees declined approximately 17% from the year ago period.

     Other fees  include  charges to  customers  for  medical  case  management,
utilization review and revenue generated from the sale of provider  directories.
The prior period results  include revenue from a Company  administered  pharmacy
benefit program that was terminated in June 1999.  Other fees decreased  $90,850

                                       13
<PAGE>
or 70% from  $129,820 in 1998 to $38,970 in 1999.  Approximately  $65,000 of the
decrease is attributable to the termination of the pharmacy benefit program.

     Cost  of  services  includes  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 providers not contracted
directly with the Company, the cost of electronic claims processing and the cost
of printing  provider  directories.  Included in the prior year period are costs
associated with  administering the Company's  pharmacy benefit program.  Cost of
services  decreased  $115,897 or 20% to  $463,009  in 1999 from  $578,906 in the
comparable period in 1998.  Approximately  $50,000 of the decrease is due to the
termination of the pharmacy benefit program. The remaining reduction is due to a
decrease  in access  fees paid to other PPO  networks  during the  period.  As a
percentage of total revenue,  cost of services decreased from 13.6% at September
30, 1998 to 12.9% at September 30, 1999.

     Salaries and wages include all employee compensation, payroll taxes, health
insurance and other  employee  benefits.  Also included in this category are the
commissions paid to in-house sales and marketing personnel. For the three months
ended  September  30,  1999,  salaries  and wages were  $1,819,389  compared  to
$2,036,600 for the three months ended September 30, 1998, a decrease of $217,211
or 11%. The  decrease is  attributable  to a reduction  in staffing  levels as a
result of  departmental  reorganizations  that  were  recently  implemented.  In
addition,  sales  commissions  have  decreased  as a result  of the  decline  in
revenue.

     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.  For the
three months ended September 30, 1999, general and administrative  expenses were
$943,254 compared to $1,229,856 for the comparable period in 1998, a decrease of
$286,602 or 23%.  Bad debt  expense  for the  quarter  was  $90,000  compared to
$209,522 in the comparable period in 1998, a decrease of approximately  $120,000
or 57%. The  decrease is a result of the lower  revenue in the period and better
collection efforts. The decrease in bad debt expense accounted for approximately
42%  of the  overall  decrease  in  general  and  administrative  expenses.  The
remainder of the decrease is due to tighter cost controls throughout the various
operating expense  categories and the effect of the closing of a regional office
in Dallas, Texas in June 1999.

     Depreciation and amortization increased $29,523 or 10%, to $322,708 in 1999
from $293,185 in 1998. The increase is due to higher  depreciation  expense as a
result of an increase in gross  property and  equipment.  At September 30, 1999,
gross property and equipment was  $3,540,285  compared to 3,424,446 at September
30, 1998.

     Interest  expense for the  quarter was $79,791  compared to $88,949 for the
comparable  period in 1998, a decrease of $9,158 or 10%. At September  30, 1999,
total indebtedness was $3,175,000  compared to $3,950,000 at September 30, 1998.
The decrease in interest  expense  resulting from a lower level of  indebtedness
during the three months ended September 30, 1999 was partially  offset by higher
interest rates during the current quarter.

     The  acquisition of HSI 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 HSI's operations were fully  integrated into the Company,  management
also explored  strategic  mergers and  acquisitions  that would complement HSI's
operations.  In May  1999,  management  received  an offer to sell HSI 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 in final form 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  approved by the Board of  Directors  on August 19,  1999,  subject to
shareholder approval.

     Management is in the process of obtaining an  independent  valuation of the
Beyond  Benefits  stock,  and  management  has assigned no value to the earn-out
provision.  Until the valuation is completed,  management has estimated that the
stock  has a value  of  approximately  $1,000,000.  This  value  is based on the
expected future operating  results of Beyond Benefits after giving effect to the
proposed  transaction.  A range of cash flow  multiples  commonly  used to value
PPO's was applied to determine the estimated enterprise value. Accordingly,  the
Company has adjusted the carrying  value of HSI's  goodwill to an estimated fair
value of  approximately  $7,932,635  resulting in a non-cash  impairment loss of
approximately  $500,000 ($0.13 loss per basic and diluted share). The fair value
was estimated based on a sales price of $11,000,000  less direct and incremental
costs to dispose of approximately $300,000.

     Income tax expense (benefit) has been recognized at the Company's effective
income tax rate which,  subject to various  credits and  adjustments,  generally
approximating 30%. Management believes that there will be no tax benefit related
to the asset impairment charge of $500,000.

                                       14
<PAGE>
Six Months Ended September 30, 1999 Compared to Six Months Ended September 30,
1998

     Total revenue decreased $1,503,776 or 17% to $7,350,687 in 1999 compared to
$8,854,463 in 1998.  Revenue for HSI decreased  $1,557,119 to $6,044,271 in 1999
from  $7,601,390  in 1998,  a decrease  of 20%. A majority of the  decrease  was
attributable to the loss of four  significant  customers that were active during
the comparable  period in 1998.  Revenue for NHBC  increased  $53,343 or 4% from
$1,253,073 in 1998 to $1,306,416 in 1999.  Overall,  capitated fees declined 17%
and repricing fees declined approximately 14% from the year ago period.

     Other fees  include  charges to  customers  for  medical  case  management,
utilization review and revenue generated from the sale of provider  directories.
The prior period results  include revenue from a Company  administered  pharmacy
benefit program that was terminated in June 1999. Other fees decreased  $176,085
or 59% from $300,160 in 1998 to $124,075 in 1999.  Approximately $155,000 of the
decrease is attributable to the termination of the pharmacy benefit program.

     Cost  of  services  includes  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 providers not contracted
directly with the Company, the cost of electronic claims processing and the cost
of printing  provider  directories.  Included in the prior year period are costs
associated with  administering the Company's  pharmacy benefit program.  Cost of
services  decreased  $285,138 or 22% to $996,636 in 1999 from  $1,281,774 in the
comparable period in 1998.  Approximately $150,000 of the decrease is due to the
termination of the pharmacy benefit program. The remaining reduction is due to a
decrease  in access  fees paid to other PPO  networks  during the  period.  As a
percentage  of total  revenue,  cost of services  decreased to 13.6% for the six
months ended September 30, 1999 from 14.5% for the comparable period in 1998.

     Salaries and wages include all employee compensation, payroll taxes, health
insurance and other  employee  benefits.  Also included in this category are the
commissions paid to in-house sales and marketing  personnel.  For the six months
ended  September  30,  1999,  salaries  and wages were  $3,776,948  compared  to
$4,066,272  for the six months ended  September 30, 1998, a decrease of $289,324
or 7%. The  decrease  is  attributable  to a reduction  in staffing  levels as a
result of  departmental  reorganizations  that  were  recently  implemented.  In
addition,  sales  commissions  have  decreased  as a result  of the  decline  in
revenue.

     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. For the six
months  ended  September  30, 1999,  general and  administrative  expenses  were
$2,021,552  compared to $2,497,108 for the comparable period in 1998, a decrease
of $475,556 or 19%. Bad debt expense for the six months ended September 30, 1999
was $197,654  compared to $330,305 in the comparable  period in 1998, a decrease
of approximately  $133,000 or 40%. The decrease is a result of the lower revenue
in the period and better  collection  efforts.  The decrease in bad debt expense
accounted  for  approximately  28%  of  the  overall  decrease  in  general  and
administrative expenses. The remainder of the decrease in is due to tighter cost
controls  throughout the various operating expense  categories and the effect of
the closing of a regional office in Dallas, Texas in June 1999.

     Depreciation and amortization increased $58,567 or 10%, to $640,866 in 1999
from $582,299 in 1998. The increase is due to higher  depreciation  expense as a
result of an increase in gross  property and  equipment.  At September 30, 1999,
gross property and equipment was  $3,540,285  compared to 3,424,446 at September
30, 1998.

                                       15
<PAGE>
     Interest  expense for the six months ended  September 30, 1999 was $141,290
compared to $249,292 for the  comparable  period in 1998, a decrease of $108,292
or 43%. The  decrease in interest  expense is  attributable  to a lower level of
indebtedness during the current six month period.

     The  acquisition of HSI 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 HSI's operations were fully  integrated into the Company,  management
also explored  strategic  mergers and  acquisitions  that would complement HSI's
operations.  In May  1999,  management  received  an offer to sell HSI 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 in final form 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  approved by the Board of  Directors  on August 19,  1999,  subject to
shareholder approval.

     Management is in the process of obtaining an  independent  valuation of the
Beyond  Benefits  stock,  and  management  has assigned no value to the earn-out
provision.  Until the valuation is completed,  management has estimated that the
stock  has a value  of  approximately  $1,000,000.  This  value  is based on the
expected future operating  results of Beyond Benefits after giving effect to the
proposed  transaction.  A range of cash flow  multiples  commonly  used to value
PPO's was applied to determine the estimated enterprise value. Accordingly,  the
Company has adjusted the carrying  value of HSI's  goodwill to an estimated fair
value of  approximately  $7,932,635  resulting in a non-cash  impairment loss of
approximately  $500,000 ($0.13 loss per basic and diluted share). The fair value
was estimated based on a sales price of $11,000,000  less direct and incremental
costs to dispose of approximately $300,000.

     Income tax expense (benefit) has been recognized at the Company's effective
income tax rate which,  subject to various  credits and  adjustments,  generally
approximating 30%. Management believes that there will be no tax benefit related
to the asset impairment charge of $500,000.

LIQUIDITY AND CAPITAL RESOURCES

     At  September  30,  1999,  the  company  had  $115,000  in  cash  and  cash
equivalents  compared to $72,000 at September  30, 1998.  At September 30, 1999,
the  Company  had a  working  capital  deficiency  of  approximately  $2,200,000
compared to a working  capital  deficiency  of  $2,900,000 at March 31, 1999, an
improvement of approximately $700,000.

     During the three months ended  September  30,  1999,  the Company  received
approximately $163,000 in cash from the exercise of employee stock options.

     On June 7, 1999, the Company sold its vision  benefit  program for $125,000
in cash to an immediate  family member of a former  officer of the Company.  The
Company  recognized  a gain on the sale of  approximately  $114,000.  The vision
program  accounted for  approximately  $14,000 in revenue  during the six months
ended September 30, 1999.

     The Company's senior lender is Harris Trust and Savings Bank in Chicago. In
December 1997, Harris provided the debt financing for the Company's  acquisition
of  HealthStar,  Inc.  The  debt  consisted  of a  $2,500,000  term  loan  and a
$1,500,000 line of credit. Both credit facilities had a term of three years. The
term loan was set to amortize over the three year period with quarterly payments
of  principal  of $100,000 in year one,  $125,000 in year two,  $150,000 in year
three and a final  balloon  payment at  maturity in  December  2000.  The amount
permitted to be  outstanding  on the line of credit is determined by a borrowing
base calculation that is submitted to the bank on a monthly basis. At the end of
each  month,  the  total  amount  outstanding  on both the term loan and line of
credit cannot exceed the sum of 80% of the eligible accounts  receivable and 50%
of the gross fixed assets of the Company.

     Under the terms of the credit  facility,  the  Company is required to be in
compliance with a series of financial covenants such as a minimum current ratio,
maximum  leverage ratio and a minimum fixed charge  coverage ratio. At March 31,
1999, the Company was not in compliance  with two of the three  covenants  which
caused an event of default under the credit agreement. On June 8, 1999, the bank
agreed to a waiver and reset the covenant levels. As a condition to granting the
waiver,  the bank amended the terms of the credit  facility  whereby it required
the Company to payoff all  outstanding  indebtedness  no later than November 30,
1999.  The interest  rate on both the term loan and line of credit was increased
to prime plus 1.5% and a minimum earnings covenant was added.

     At September  30, 1999,  the total amount owed to the bank was  $2,975,000.
The debt consisted of $1,925,000 on the term loan and $1,050,000  outstanding on
the line of credit.  On September  30, 1999,  the Company was required to make a
$150,000 principal payment on the term loan,  however,  the Company did not have
the cash  available  to make the  payment.  On October  19,  1999,  the  Company
prepared its monthly  borrowing  base report for September and it indicated that
the  Company  was  required to make a payment of $100,000 on the line of credit.
The Company did not have the cash  available to make the payment an the bank was
notified.  These events  constituted a default under the credit facility and the

                                       16
<PAGE>
bank exercised its right to raise the interest rate on the term loan and line of
credit to prime plus 3.5% which equates to 12.0% as of November 17, 1999.

     On November 19, 1999, the Company and the bank entered into an agreement as
follows:  (i) the  Company  made a  payment  of  $100,000  on the line of credit
concurrent  with entering  into the  agreement;  (ii) on November 30, 1999,  the
Company will make the $150,000  principal payment which was due on September 30,
1999;  (iii) the bank will extend the maturity date of the term loan and line of
credit to January 31, 2000;  and (iv) the bank will reset the  interest  rate on
the term loan and line of credit to prime plus 1.0% on  November  30,  1999 from
the current rate of prime plus 3.5%.

     The Company has arranged a private placement of common stock to one or more
accredited investors and the proceeds, estimated to be $300,000, will be used to
fund the November 30, 1999 payment of $150,000 due under the agreement.

     If the  proposed  sale of HSI to Beyond  Benefits,  Inc. is approved by the
shareholders,  the Company  expects to receive  $10,000,000  in cash at closing,
which will be sufficient to pay off the total amount of indebtedness  due to the
bank on January 31, 2000. The estimated outstanding  indebtedness at maturity is
$2,725,000.  If the proposed transaction is not consummated prior to January 31,
2000, the Company will have to seek additional financing from outside sources to
pay off the  indebtedness  owed to the bank.  There are no assurances  that such
financing will be available to the Company.

YEAR 2000

     Many computer  programs and equipment with embedded chips or processors use
two  rather  than  four  digits  to  represent  the  year and may be  unable  to
accurately process dates after December 31, 1999. This, as well as certain other
date-related  programming  issues,  may  result  in  miscalculations  or  system
failures  which can disrupt the  businesses  which rely on them.  The term "Year
2000  Issue" is used to refer to all  difficulties  the turn of the  century may
bring to computer users.

     The Company has determined that many of its internal  computer programs and
some items of its  equipment  are  susceptible  to  potential  Year 2000  system
failures  or  processing   errors.   This  assessment  of  internal  systems  is
substantially  complete.  The Company has  modified  and  replaced  the impacted
programs or equipment.  Remediation efforts are underway using both internal and
external resources,  with priority given to the systems whose failure might have
a  material  impact  on the  Company.  To date all  required  changes  have been
identified and made and testing of the changes is approximately 95% complete.

     The Company is also dependent on its contracted medical providers and payer
customers to successfully  address their respective Year 2000 technology  issues
in connection with their claims processing  functions.  An important part of the
Year 2000 program  involves  working with those third  parties to determine  the
extent to which the Company may be  vulnerable to their failure to address their
own Year 2000 issues.  The Company is communicating  with those third parties to
ascertain  whether  their Year 2000 issues  which  might  impact the Company are
being addressed. Where practical and appropriate, the Company will try to verify
the  information  or  assurances  they provide with testing,  particularly  with
regard to mission critical  relationships.  At present, the Company has not been
advised by any third party of any Year 2000 issue likely to materially interfere

                                       17
<PAGE>
with the Company's business. However, not all third parties have been responsive
to the Company's inquiries and there may be providers of significant services on
which the Company  relies,  such as utilities,  which are unwilling or unable to
provide  information  concerning  their Year 2000 readiness.  To the extent that
outside vendors do not provide satisfactory responses, the Company will consider
changing to vendors who have  demonstrated Year 2000 readiness.  However,  there
are no assurances that the Company will be able to do so.

     The Company  has begun to develop  contingency  plans to minimize  any Year
2000  disruptions in the event that an internal or third party mission  critical
system does not function  properly.  The contingency plans call for isolation of
the failing component and taking the appropriate  corrective  action,  which may
include  modification  or  replacement  of  the  faulty  hardware,  software  or
non-information  system,  manual processing of transactions,  use of alternative
service  providers,  relocation to temporary  facilities,  and other measures as
deemed  necessary.  Once developed,  these contingency plans will be continually
refined as additional information becomes available.

     The  consequences of an uncorrected  Year 2000 issue could include business
interruption,  exposure to monetary  claims by customers  and others and loss of
business  goodwill.  The  likelihood of these events and the possible  financial
impact if they occur cannot be predicted.

     The Company is  continuing to upgrade  equipment to be Year 2000  compliant
and total  expenditures  relating to the upgrade for the year are expected to be
approximately $40,000 and to date the Company has spent approximately $30,000.

     The  estimates  and  conclusions  set forth above  contain  forward-looking
statements and are based on management's  best estimate of future events.  Risks
to completing  the plan include the  availability  of  resources,  the Company's
ability to  discover  and correct  material  Year 2000  issues,  and other third
parties  on which the  Company  relies  to bring  their  systems  into Year 2000
compliance.

                                       18
<PAGE>
                           PART II. OTHER INFORMATION

ITEM 5. OTHER INFORMATION

CHANGES TO THE BOARD OF DIRECTORS

     On July 27, 1999,  Gerald E. Finnell,  Gary L. Nielsen,  Jon M. Donnell and
Thomas S. O'Brien,  resigned as Directors of HealthStar  Corp. and were replaced
by Edward M. Chism,  Brian  McWilliams,  Dr.  Luis A. Queral and Dr.  Michael D.
Flax.  Edward M.  Chism was  appointed  Chairman  of the  Board.  These four new
Directors  joined  Stephen J.  Carder on the Board.  The  resignations  were not
related to any disagreements  between any Director and the Company regarding any
matter relating to the Company's operations, policies or practices.

     On August 19, 1999,  Stephen J. Carder,  Darren T.  Horndasch and Denise E.
Nedza resigned as HealthStar's  CEO, COO and CFO  respectively.  Mr. Carder also
resigned as a Director,  but remains  President  of  HealthStar's  subsidiaries,
HealthStar,  Inc. and National  Health  Benefits and Casualty Corp. Mr. Horndash
and Ms. Nedza remained in their respective positions at HealthStar,  Inc. Thomas
C. Ronk was named  HealthStar  Corp.'s new  President and CEO and was elected to
the Company's Board of Directors.  Steven A. Marcus was named Vice President and
Chief  Financial  Officer of  HealthStar  Corp.  Also on August 19, 1999,  Brian
McWilliams  resigned from HealthStar's  Board of Directors.  Mr. McWilliams left
for  personal  reasons and was  replaced  by David J. Lewis.  Also on August 19,
1999, Richard A. Yardley was named to the Board of Directors.

     On November 12, 1999, Thomas C. Ronk resigned as President, Chief Executive
Officer and Director of HealthStar  Corp.  On the same date,  Richard A. Yardley
also  resigned  as a Director of  HealthStar  Corp.  and was  replaced by Isidor
Buholzer.  Edward M. Chism,  Chairman of the Board, was appointed  President and
Chief Executive Officer of HealthStar Corp.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

          10.1 Compensation  Agreement  between the Company and Darren Horndasch
               dated July 1, 1999.

          10.2 Compensation Agreement between the Company and Denise Nedza dated
               July 1, 1999.

          27   Financial Data Schedule

     (b)  Reports on Form 8-K

     A report on Form 8-K (Item 5) was filed with the  Securities  and  Exchange
Commission  on  October  13,  1999,  relating  to the  Company  entering  into a
Definitive  Agreement  to  sell  the  stock  of  its  wholly  owned  subsidiary,
HealthStar, Inc., to Beyond Benefits, Inc.

     A report on Form 8-K (Item 5) was filed with the  Securities  and  Exchange
Commission  on November  22, 1999  relating to the  termination  of an agreement
whereby the Company was to have  acquired a 49%  interest in  Physiciansite.com,
Inc.

                                       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 22nd day of November 1999.


                                   HEALTHSTAR CORP.


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