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

                                    FORM 10-Q

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

                     For the quarterly period ended September 30, 2000
                                  ------------------

                                                        OR

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

For the transition period from                          to

                                         Commission file number 000-19636
                                                    ---------

                      HEALTHCARE INTEGRATED SERVICES, INC.
                      ------------------------------------
             (Exact name of registrant as specified in its charter)

         Delaware                                            22-3119929
         --------                                            ----------
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                            Identification No.)

1040 Broad Street, Shrewsbury, New Jersey                      07702
-----------------------------------------                      -----
(Address of principal executive offices)                     (Zip Code)

                                           (732) 544-8200
                                          --------------
                       (Registrant's telephone number, including area code)

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

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date.

         Class                              Outstanding at November 20, 2000
         -----                              --------------------------------
Common Stock, $.01 par value                        1,361,703 shares


<PAGE>



                 HEALTHCARE INTEGRATED SERVICES, INC. AND SUBSIDIARIES

                                          INDEX

PART I.           FINANCIAL INFORMATION:                                 PAGE
-------           ----------------------                                 ----

Item 1.           Financial Statements:

     Consolidated Balance Sheets -
         September 30, 2000 and December 31, 1999                          3

     Consolidated Statements of Income -
         Three and nine months ended September 30, 2000 and 1999           4

     Consolidated Statement of Changes in Stockholders Equity -
         For the nine months ended September 30, 2000                      5

     Consolidated Statements of Cash Flows -
         Nine months ended September 30, 2000 and 1999                     6

     Notes to Consolidated Financial Statements                            7

Item 2.           Management's Discussion and Analysis of                 15
                  Financial Condition and Results of Operations

Item 3.           Quantitative and Qualitative Disclosure About           21
                  Market Risk

PART II.          OTHER INFORMATION

Item 5.           Other Information                                       22

Item 6.           Exhibits and Reports on Form 8-K                        22

SIGNATURES                                                                23
----------

     CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES  LITIGATION REFORM ACT OF
1995.  Statements  in  this  Quarterly  Report  that  are not  historical  facts
constitute "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.  Any  statements  contained  herein  which  are  not
historical facts or which contain the words "anticipate," "believe," "continue,"
"estimate,"  "expect,"  "intend," "may,"  "should," and similar  expressions are
intended to identify  forward-looking  statements.  Such statements  reflect the
current  view of the Company  with  respect to future  events and are subject to
certain risks, uncertainties and assumptions, including, but not limited to, the
risk that the Company may not be able to  implement  its growth  strategy in the
intended manner including the integration of acquisitions, risks associated with
the  Company's  need to  refinance  certain  near-term  debt  maturities,  risks
regarding currently unforeseen  competitive pressures affecting  participants in
the health care  market and risks  affecting  the  Company's  industry,  such as
increased regulatory compliance and changes in regulatory requirements,  changes
in payor  reimbursement  levels and  technological  changes.  In  addition,  the
Company's  business,  operations  and  financial  conditions  are subject to the
risks,  uncertainties  and  assumptions  which are  described  in the  Company's
reports and statements  filed from time to time with the Securities and Exchange
Commission.



<PAGE>





                   HEALTHCARE INTEGRATED SERVICES, INC. AND SUBSIDIARIES
                                  CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
<S>                                                                                    <C>                   <C>

                                                                                   September 30,          December 31,
Assets                                                                                  2000                   1999
------                                                                                 ------                 -----
                                                                                    (Unaudited)
Current Assets:
   Cash and cash equivalents                                                        $   405,438           $    645,389
   Accounts receivable - net                                                         14,471,775             13,806,760
   Loan receivable                                                                            -                 50,411
   Due from International Commerce Exchange Systems, Inc. ("ICES")                      504,882                      -
   Prepaid expenses and other                                                           281,523                226,752
                                                                                        -------                -------
                  Total current assets                                               15,663,618             14,729,312
                                                                                     ----------             ----------
Property, Plant and Equipment - Net                                                   8,130,694              7,754,840
                                                                                      ---------              ---------
Deferred Tax Asset - Net                                                              1,192,702              2,494,184
                                                                                      ---------              ---------
Other Assets:
   Due from officer                                                                     264,125                264,125
   Deferred transaction and financing costs                                           1,075,834                905,676
   Other                                                                                354,886                464,679
   Investment in Atlantic Imaging Group, LLC ("AIG")                                    242,828                 94,785
   Goodwill - net                                                                    12,031,873             12,421,518
                                                                                     ----------             ----------
                  Total other assets                                                 13,969,546             14,150,783
                                                                                     ----------             ----------
Total Assets                                                                        $38,956,560            $39,129,119
                                                                                    ===========            ===========
Liabilities and Stockholders' Equity
Current Liabilities:
   Accounts payable and accrued expenses                                             $4,852,826             $2,538,156
   Current portion of capital lease obligations                                       1,177,130                766,338
   Current portion of note payable                                                    2,522,867              2,306,758
   Income taxes payable                                                                       -                  6,475
                                                                                      ---------                  -----
                  Total current liabilities                                           8,552,823              5,617,727
                                                                                      ---------              ---------
Noncurrent Liabilities:
   Capital lease obligations                                                          3,715,786              2,717,700
   Borrowings under revolving line of credit                                          3,586,505              3,251,360
   Note payable                                                                       8,404,434             10,324,538
                                                                                      ---------             ----------
                  Total noncurrent liabilities                                       15,706,725             16,293,598
                                                                                     ----------             ----------
Minority Interests                                                                      443,217                478,800
                                                                                        -------                -------
Commitments and Contingencies
Stockholders' Equity:
   Preferred stock, $.10 par value, 1,000,000 shares authorized:
      Series D 8% cumulative accelerating redeemable preferred stock, 633.647
      shares outstanding at September 30, 2000 and December 31, 1999, respectively
      ($10,500 per share liquidation preference)                                             63                     63
   Common stock, $.01 par value: 50,000,000 shares authorized, 1,361,703
   outstanding at September 30, 2000 and 1,135,699 at December 31, 1999                  13,617                 11,357
   Additional paid-in capital                                                        21,240,419             20,742,679
   Accumulated deficit                                                               (7,000,304)            (4,015,105)
                                                                                     -----------            -----------
                  Total stockholders' equity                                         14,253,795             16,738,994
                                                                                     ----------             ----------
Total Liabilities and Stockholders' Equity                                          $38,956,560            $39,129,119
                                                                                    ===========            ===========


</TABLE>


                See accompanying notes to consolidated financial
                                  statements.



<PAGE>









              HEALTHCARE INTEGRATED SERVICES, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
<S>                                                      <C>                <C>                 <C>                <C>

                                                      Three Months Ended                       Nine Months Ended
                                                         September 30,                           September 30,
                                                          (Unaudited)                             (Unaudited)
                                                        2000               1999                 2000               1999
                                                        ----               ----                 ----               ----
Revenues                                              $3,940,262         $5,384,878         $13,772,742         $17,158,179
                                                      ----------         ----------         -----------         -----------
OPERATING EXPENSES:
   Salaries                                            1,716,570          1,720,430           4,835,120           5,327,092
   Other operating expenses                            1,154,668          1,749,844           4,186,005           5,157,954
   Provision for bad debts                               386,209            161,091           1,206,103             416,339
   Consulting and marketing fees                          14,278            144,746             169,426             411,788
   Professional fees                                     121,633            159,066             291,882             442,704
   Depreciation and amortization                         700,504            797,087           2,331,065           2,369,694
   Interest                                              610,626            597,848           1,829,470           2,120,795
                                                         -------            -------           ---------           ---------
                                                       4,704,488          5,330,112          14,849,071          16,246,366
                                                       ---------          ---------          ----------          ----------
(Loss)/Income Before Minority Interests in                                   54,766
Joint Ventures and Income Taxes                         (764,226)                            (1,076,329)            911,813

Equity earnings in AIG                                   127,537             22,389             401,766              (8,425)

Minority Interests in Joint Ventures                     (93,113)            96,335            (293,944)            (87,955)
                                                         --------            ------            ---------            --------
(Loss)/Income Before Income Taxes                       (729,802)           173,490            (968,507)            815,433

Income Tax Expense/(Benefit) Provision                 1,340,091          (782,600)           1,318,537          (1,603,864)
                                                       ---------          ---------           ---------         -----------
Net (Loss)/Income                                     (2,069,893)           956,090          (2,287,044)          2,419,297

Preferred Dividends                                      250,861            322,999             747,133             824,048
                                                         -------            -------             -------             -------
Net (Loss)/Income Available to Common
Shareholders                                         $(2,320,754)          $633,091         $(3,034,177)         $1,595,249
                                                       ==========          ========         ============         ==========

Net (Loss)/Income per Common Share -
Basic                                                  $(1.88)              $.56               $(2.60)              $1.41
                                                        ======              ====               =======              =====
Weighted Average Common Shares
   Outstanding - Basic                                 1,231,505          1,135,699           1,167,867           1,135,699
                                                       =========          =========           =========           =========
Net (Loss)/Income per Common Share-
Diluted                                                $(1.88)              $.47               $(2.60)              $1.20
                                                        ======              ====               =======              =====

Weighted Average Common Shares                         1,231,505          2,025,871           1,167,867           2,008,092
    Outstanding - Diluted                              =========          =========           =========           =========


</TABLE>

             See  accompanying  notes  to  consolidated  financial statements.


<PAGE>





              HEALTHCARE INTEGRATED SERVICES, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
                                   (UNAUDITED)

<TABLE>
<CAPTION>
<S>                                       <C>     <C>      <C>       <C>        <C>           <C>         <C>            <C>

                                                                                          Accumulated
                                                                            Additional     (Deficit)                     Total
                                                                              Paid-in      Retained     Unearned     Stockholders'
                                                                              Capital      Earnings   Compensation       Equity
                                       Preferred Stock      Common Stock
                                       Shares    Amount  Shares     Amount

BALANCE, JANUARY 1, 2000                634       $63   1,135,699  $11,357  $20,742,679  $(3,964,479)   $(50,626)      $16,738,994

Net (loss)                                                                                (2,287,044)                   (2,287,044)

Unearned compensation in connection
with stock option grant

Issuance of stock                                         226,004   2,260      497,740                                     500,000

Amortization of unearned compensation
for stock options                                                                                          48,978           48,978

Preferred dividends                                                                         (747,133)                     (747,133)

BALANCE, SEPTEMBER 30, 2000             634       $63   1,361,703  $13,617  $21,240,419  $(6,998,656)     $(1,648)     $14,253,795
                                        ===       ====  =========  =======  ===========  ============     ========     ===========



</TABLE>



    See  accompanying  notes  to  consolidated  financial statements.


<PAGE>





                 HEALTHCARE INTEGRATED SERVICES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
<S>                                                                      <C>                      <C>

                                                                            Nine Months Ended
                                                                              September 30,
                                                                               (Unaudited)
                                                                             2000                  1999
                                                                             ----                  ----
Cash Flows From Operating Activities:

  Net (loss)/income available to common shareholders                     $(3,034,177)        $1,595,249
  Adjustments to reconcile net (loss)/income available to common
  shareholders to net cash provided by operating activities:
      Depreciation and amortization                                        2,331,064          2,369,694
      Non-cash compensation charge                                            48,978             58,052
      Charge associated with facility closure                                      -             33,371
      Interests in joint ventures                                            145,901             87,955
      Allowance for doubtful accounts                                      1,676,000            693,000
Changes in Assets and Liabilities:
            Accounts receivable                                           (2,341,015)           179,859
            Prepaid expenses and other                                       (54,771)          (189,979)
            Deferred taxes                                                 1,301,482         (1,682,000)
            Goodwill                                                        (135,000)          (224,539)
            Other                                                            109,793           (274,572)
            Accounts payable and accrued expenses                          2,314,670            217,319
            Income taxes payable                                              (6,475)           (60,460)
            Deferred transaction and financing costs                        (170,158)            54,479
                                                                            ---------            ------
                  Net cash provided by operating activities                2,186,292          2,857,428
                                                                           ---------          ---------

Cash Flows from Investing Activities:
      Loan receivable                                                         50,411           (150,000)
      Due from ICES                                                         (504,882)                 -
      Purchases of property, plant and equipment                             (48,111)          (568,342)
                                                                             --------          ---------
                  Net cash used in investing activities                     (502,582)          (718,342)
                                                                            ---------          ---------

Cash Flows from Financing Activities:
      Borrowings (payments) against the revolving line of credit             335,145            (39,355)
      Proceeds from sale of stock                                            500,000                  -
      Distributions to limited partners of joint ventures                   (329,527)          (325,308)
      Payments on capital lease obligations                                 (725,284)        (1,245,307)
      Payments on bridge financing                                        (1,703,995)          (833,783)
      Payments on reserve for subleased equipment                                  -           (302,381)
                                                                          ----------           ---------
                  Net cash used in financing activities                   (1,923,661)        (2,746,134)
                                                                          -----------        -----------

  (Decrease) in cash and cash equivalents                                   (239,951)          (607,048)
  Cash and cash equivalents at beginning of period                           645,389          1,506,123
                                                                             -------          ---------
  Cash and cash equivalents at end of period                                $405,438           $899,075
                                                                            --------           --------

Supplemental Cash Flow Information:
  Interest paid during the period                                             $1,491         $1,863,692
                                                                              ======         ==========
  Income taxes paid during the period                                        $29,903           $196,115
                                                                             =======           ========

Supplemental Schedule of Non-Cash Investing and Financing
Activities:
  Capital leases principally for computer and medical equipment           $2,134,164            $50,855
                                                                          ==========            =======

</TABLE>


            See  accompanying  notes  to  consolidated  financial statements.


<PAGE>




              HEALTHCARE INTEGRATED SERVICES, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                      Nine Months Ended September 30, 2000


Note 1. - Basis of Presentation

         The accompanying  unaudited consolidated condensed financial statements
have been prepared in accordance with generally accepted  accounting  principles
for interim  financial  information  and with the  instructions to Form 10-Q and
Rule 10-01 of Regulation  S-X.  Accordingly,  certain  information  and footnote
disclosures  normally included in annual consolidated  financial statements have
been omitted from the accompanying interim consolidated financial statements. In
the opinion of management,  the accompanying  unaudited  consolidated  financial
statements  contain all  adjustments  necessary to present  fairly the Company's
financial  position  as of  September  30, 2000 and the  related  statements  of
operations and cash flows for the periods ended September 30, 2000 and 1999. The
Company has recorded a net deferred tax asset of  $1,192,702 as of September 30,
2000,  which represents a decrease of $1,301,482 over the net deferred tax asset
of $2,494,184 as of December 31, 1999.  This net deferred tax asset reflects the
benefit of approximately $2,704,000 in federal loss carryforwards that expire in
varying  amounts  between  December 31, 2006 and  December  31,  2014.  This net
deferred tax asset has been recorded net of a valuation  allowance of $1,381,000
as of September 30, 2000 to reflect the estimated  amount of deferred tax assets
which may not be realized through generating  sufficient taxable income prior to
expiration of the loss carryforwards.  Realization of the remaining net deferred
tax asset may be limited  pursuant to  Internal  Revenue  Code  Section 382 as a
result of any changes in ownership.  If such a change were to occur with respect
to the Company, the limitation could reduce the amount of benefits that would be
available to offset future taxable  income each year,  starting with the year of
ownership  change.

         The Company had an accumulated  deficit of $7,000,304 and $4,015,105 at
September  30,  2000 and  December  31,  1999,  respectively.  The  increase  in
accumulated  deficit is  attributable  primarily to the net loss incurred by the
Company  during the first nine  months of fiscal  2000.  Cash flows  provided by
operating  activities  were  $2,186,292 and $2,857,428 for the nine months ended
September 30, 2000 and September 30, 1999, respectively. The Company is actively
engaged in discussions with two financial institutions for interim and long-term
financing to help  facilitate the Company's  continuing cash  requirements.  The
Company anticipates a significant  increase in its revenues from the acquisition
of Jersey Integrated HealthPractice,  Inc. ("JIHP") of approximately $13 million
(See Note 8 - Newly Formed  Ventures),  as well as from clinical research trials
it has recently arranged.

         The results of operations for the nine months ended  September 30, 2000
are not  necessarily  indicative of the results of  operations  expected for the
year ending December 31, 2000 or any other period.  The  consolidated  financial
statements  included herein should be read in conjunction  with the consolidated
financial  statements and notes thereto contained in the Company's Annual Report
on Form 10-K for the year  ended  December  31,  1999  which is on file with the
Securities and Exchange Commission.

         On January 20, 2000, the Company effectuated a 1:10 reverse stock split
of its  common  stock and  simultaneously  therewith,  commenced  trading on The
American Stock Exchange  under the symbol "HII".  The common stock  discontinued
trading on the Nasdaq National Market as of the close of business on January 19,
2000,  where it was  traded  under the  symbol  "HISS".  Where  applicable,  all
references  to  number  of  shares  or per  share  amounts  in the  accompanying
financial  statements and notes have been adjusted to reflect this reverse stock
split.



<PAGE>




Note 2. - Earnings Per Share

         Basic  (loss)  earnings  per common  share are computed by dividing net
(loss) income available to common shareholders by the weighted average number of
common shares outstanding for the nine month period ended September 30, 2000 and
1999, as applicable.  Diluted  (loss)  earnings per common share are computed by
dividing  net (loss)  income  available to common  shareholders  by the weighted
average  number of common  shares  outstanding  for the nine month  period ended
September 30, 2000 and 1999, as  applicable,  plus the  incremental  shares that
would have been  outstanding  upon the assumed exercise of dilutive stock option
awards and conversion of the preferred shares.



     The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations:

<TABLE>
<CAPTION>
<S>                        <C>            <C>           <C>            <C>           <C>          <C>


                                                   For the Three Months Ended September 30,
                                        2000                                     1999
                                        ----                                     ----
                                    (Unaudited)                                (Unaudited)
                                    -----------                                -----------
                        Income(Loss)     Shares       Per Share       Income        Shares      Per-Share
                        (Numerator)     (Denominator)  Amount        (Numerator) (Denominator)   Amount

Basis EPS
Net (Loss)Income
 Available to
 Common Shareholders  $(2,320,754)       1,231,505     $(1.88)       $ 633,091     1,135,699     $.56

Add:
Preferred Dividends                              -                     322,999            -

Effect of Dilutive
 Securities
Stock Options                   -                                            -        17,779
Series D Stock                  -                                            -       872,393
                         --------        -----------                 ---------       -------

Diluted EPS
Net (Loss)/Income     $(2,320,754)       1,231,505     $(1.88)       $956,090      2,025,871     $.47
                       ==========        =========      =====        ========      =========     ====



                                                   For the Nine Months Ended September 30,
                                        2000                                     1999
                                        ----                                     ----
                                    (Unaudited)                                (Unaudited)
                                    -----------                                -----------
                        Income(Loss)     Shares       Per Share       Income        Shares      Per-Share
                        (Numerator)     (Denominator)  Amount        (Numerator) (Denominator)   Amount

Basis EPS
Net (Loss)Income
 Available to
 Common Shareholders    $(3,034,177)      1,167,867      $(2.60)      $1,595,249    1,135,699     $1.41

Add:
Preferred Dividends                               -                      824,048            -

Effect of Dilutive
 Securities
Stock Options                     -                                            -             -
Series D Stock                    -                                            -       872,393
                           --------      ----------                    ---------       -------

Diluted EPS
Net (Loss)/Income       $(3,034,177)    1,167,867        $(2.60)      $2,419,297     2,008,092     $1.20
                         ==========     =========        ======        =========      =========     =====

</TABLE>


Note 3.  Company Name Change and Relocation of Corporate Office

     Effective  August 1, 1999,  the  Company's  corporate  name was  changed to
HealthCare  Integrated  Services,  Inc.  ("HIS") and its corporate  offices were
relocated to Shrewsbury Executive Center II, 1040 Broad Street,  Shrewsbury, New
Jersey 07702.  In  conjunction  with the  relocation of the Company's  corporate
offices,  the Company  entered into a five year lease for  approximately  10,300
square feet of space.  The lease provides for fixed annual rent in each of years
one and two of $196,308, and $206,640 in each of years three through five.


Note 4. - Beran Acquisition

                  On October 2, 1998  (effective  October 1, 1998),  HIS Imaging
LLC.,  a   wholly-owned   subsidiary  of  the  Company,   acquired  (the  "Beran
Acquisition") all of the assets and business of, and assumed certain liabilities
relating to (i) a  fixed-site  MRI  facility  in  Voorhees,  New Jersey,  (ii) a
multi-modality  diagnostic  imaging  facility  in  Northfield,  New Jersey and a
radiology facility in Ocean City, New Jersey, (iii) a multi-modality  diagnostic
imaging facility in Bloomfield,  New Jersey and (iv) a multi-modality diagnostic
imaging  facility  in  Voorhees  and  Williamstown,  New Jersey and a  radiology
facility  in  Atco  and  Williamstown,  New  Jersey  (collectively,  the  "Beran
Entities").  The consideration given by the Company in the Beran Acquisition was
(x) the assumption of certain obligations and liabilities of the Beran Entities,
(y) cash in the amount of $11.5  million and (z) the issuance of 887.385  shares
of Series D Cumulative  Accelerating  Redeemable  Preferred Stock of the Company
(the  "Series  D  Stock")   having  an  aggregate   liquidation   preference  of
$9,317,542.50  (i.e.,  $10,500 per share liquidation  preference).  The purchase
price was  subject to an  adjustment  based on the value of the Beran  Entities'
accounts receivable as of the closing date and, in accordance therewith,  15.642
shares of Series D Stock having an aggregate liquidation  preference of $164,241
were  transferred  back to the Company and  canceled.  The Company  also assumed
certain  contractual  obligations of the Beran Entities on a going-forward basis
under the contracts assigned to the Company in the Beran Acquisition  (including
operating leases and equipment maintenance agreements).  The Company also loaned
the Beran  Entities (the "Beran Loan") an aggregate of $2.5 million,  which loan
bore  interest at 8% per annum and was to mature  upon the terms and  conditions
contained in the related  promissory  notes, but in no event later then December
31, 1999. As of December 31, 1999, the Beran  Entities  repaid the Beran Loan in
shares  of  Series  D Stock  (i.e.,  238.096  shares  of  Series  D  Stock  were
transferred  back to the Company and  cancelled in repayment of this loan).  The
Company  used the  proceeds of a $14.0  million  bridge loan from DVI  Financial
Services Inc.  ("DFS") to pay the cash portion of the purchase price and to fund
the loan to the Beran Entities (the "DFS Loan").

                  The DFS Loan  bears  interest  at 12% per annum.  The  initial
repayment  schedule of the DFS Loan was as follows:  no payment due in month one
(i.e.,  November 1998), interest only payments of $140,000 in each of months two
through four (i.e.,  December 1998,  January 1999 and February 1999),  principal
and interest  payments of approximately  $308,000 in each of months five and six
(i.e.,  March 1999 and April 1999) with a balloon  payment of $13,951,804 due in
month seven (i.e.,  May 1999),  which balloon  payment date had been extended to
August 1, 1999. In September 1999, the Company  renegotiated the DFS Loan into a
long-term  liability.  As a result, the repayment date of the debt is now May 1,
2004, with principal and interest payments of approximately  $308,000 payable by
the Company in each of the 56 months commencing October 1, 1999. The outstanding
balance  of the  DFS  Loan at the  time of  renegotiation  was  $13,166,217.  In
addition, options to purchase 40,000 shares of the Company's Common Stock, at an
exercise  price of $10.3125 per share,  were issued to DFS for providing the DFS
Loan. The Beran Acquisition was accounted for as a purchase.




<PAGE>




     In July 1999,  the  Company  ceased  operations  at its  Monroe  Diagnostic
Imaging  Center  (the  "Williamstown  Facility")  located in  Williamstown,  New
Jersey.  The facility,  historically and since its acquisition by the Company in
October 1998, had operated unprofitably.  Following its acquisition, the Company
was  unsuccessful  in its attempts to profitably  operate the  facility.  It was
decided that the Company had to either invest in certain  equipment  upgrades to
modernize the facility or cease its operations.  After analysis of the pertinent
factors,  the  Company  determined  to close the  facility.  The  closure of the
Williamstown  Facility  resulted in a one-time  charge to operations  during the
quarter ended September 30, 1999 of approximately  $33,000,  which was primarily
comprised of a reserve for estimated future cash outflows relating to the leased
premises.

Note 5. - Deferred Transaction and Financing Costs

     Deferred transaction and financing costs relate to (i) legal and accounting
fees incurred in connection with the Company's proposed  acquisition of JIHP and
other  pending  acquisitions  or  management  services  contracts and (ii) costs
incurred in connection  with the Company's  ongoing  discussions  with financial
institutions  for  interim  and  long-term  financing.  In the event any of such
proposed  acquisitions  or financing is not  consummated or any such  management
services contract is not executed, the related deferred costs will be expensed.

Note 6. - Segment Information

                  The Company currently operates in two industry  segments:  (i)
diagnostic  imaging  and  (ii)  physician   management/consulting  and  clinical
research operations. The diagnostic imaging segment primarily involves operating
fixed-site  diagnostic imaging facilities.  The physician  management/consulting
and clinical  research  segment,  which commenced  operations  during the second
quarter of fiscal 1998, consists of providing management and consulting services
to independent physician practices and providing clinical research opportunities
to such practices and others.

                  The following table shows net revenues and operating income by
industry  segment for the three and nine month periods ended September 30, 2000.
Assets are not  identified by industry  segment.  Operating  income  consists of
revenues less direct operating  expenses.  All corporate operating expenses have
been allocated to the diagnostic imaging segment:

<TABLE>
<CAPTION>
                        <S>                                                                 <C>                         <C>


                                                                                        Three Months               Nine Months
                                                                                           Ended                         Ended
                                                                                        Sept. 30, 2000             Sept. 30, 2000
                                                                                        --------------             --------------
                                                                                        (Unaudited)                 (Unaudited)
                Net revenues:
                      Diagnostic imaging                                                   $3,615,380               $12,798,925
                      Physician management/consulting
                        and clinical research                                                 320,000                   968,935
                                                                                           ----------               -----------
                      Total                                                                $3,935,380               $13,767,860
                                                                                           ==========               ===========

                Operating (loss)/income:
                      Diagnostic imaging                                                    $(972,726)              $(1,641,238)
                      Physician management/consulting
                        and clinical research                                                 203,618                   560,027
                                                                                              -------                   -------
                      Total                                                                 $(769,108)              $(1,081,211)
                                                                                            ==========              ============

</TABLE>

<PAGE>



Note 7. - Acquisition of Limited Partners' Interest

                Prior to May 1, 1999,  the  Company's  MRI  facility  located in
Philadelphia,  Pennsylvania was operated as a joint venture among a wholly-owned
subsidiary  of the  Company (as the general  partner  holding a 60%  partnership
interest) and certain  individual  medical  professionals and others (as limited
partners  holding in the aggregate the  remaining  40%  partnership  interests).
Effective May 1, 1999, the Company's subsidiary  consummated the purchase of the
limited  partners' 40% partnership  interests for $100,000 in cash. At April 30,
1999, the net book value of this 40%  partnership  interest was $0. The $100,000
purchase  price was recorded by the Company as goodwill  and is being  amortized
over a period of ten years.

Note 8. - Newly Formed Ventures

                Effective April 1999, the Company, in a 50/50 joint venture with
HealthMark Alliance, Inc. ("HAI"), formed Atlantic Imaging Group, LLC ("Atlantic
Imaging") to develop, market and manage statewide networks of diagnostic imaging
facilities. The initial scope of the network is New Jersey. The Company provides
day-to-day  administrative and management services to Atlantic Imaging, and both
the Company and HAI provide  marketing  services.  Atlantic  Imaging has entered
into a five-year arrangement with National Healthcare  Resources,  Inc. ("NHR"),
which provides medical case management  services to several insurance  carriers,
whereby,  among  other  things,  NHR has  agreed to  utilize  the  network on an
exclusive  basis for any MRI  services it refers  claimants  to on behalf of its
clients  (unless  otherwise  instructed  by such  client)  and will  utilize the
network for other radiology services to the extent practicable. Atlantic Imaging
is being  accounted  for by the  Company  using the equity  method.  The network
presently  consists  of 85  diagnostic  imaging  facilities  in New  Jersey  and
currently  provides  services to 18  automobile  insurance  carriers  including:
Allstate Insurance Company, Palisades Safety and Insurance Associates,  National
General  Insurance  Company,  Metropolitan,   National  Continental  Progressive
Insurance Company and Highlands Insurance Group.

                In addition,  in September 1999 the Company established clinical
research operations through a wholly-owned subsidiary, HIS Clinical Research Co.
LLC  ("HISCR").   HISCR  focuses  on  arranging  clinical  research  trials  for
pharmaceutical companies. To date, HISCR has arranged 20 clinical studies in the
areas  of  rheumatology   pain  management   medication,   chronic   prostatitis
medication,    diabetes   drug   therapies,    chronic   bronchitis,    diabetic
polyneuropathy,  respiratory track  infections,  sinusitis,  smoking  reduction,
hypertension,  asthma medication, pulmonary function and pneumonia medication on
behalf of various leading pharmaceutical  companies including ASTA Medica, Inc.;
Abbott  Laboratories;  Merck & Co.,  Inc.;  Ortho-McNeil  Pharmaceutical,  Inc.;
SmithKline Beecham  Corporation;  Takeda America Research & Development  Center,
Inc.; Bristol Meyers Squibb Company; American Biosystems, Inc; Pfizer; and Glaxo
Wellcome,   Inc.  HISCR  has  exclusive   five-year   agreements  with  two  New
Jersey-based  multi-specialty  physician  practices  to arrange  and  coordinate
clinical  research  trials on behalf of their over 100  physicians  and  160,000
patients  and  a New  Jersey  based  primary  care  physician  practice  with  4
physicians and over 25,000 patients.  Amounts  attributable to the operations of
CliniCure.com for the nine months ended September 30, 2000 are not significant.

     In January 2000, the Company formed CliniCure.com, LLC ("Clinicure.com"), a
wholly-owned  subsidiary,  to provide  web-based  outreach for clinical research
trials by  physicians,  universities,  hospitals and  pharmaceutical  companies.
CliniCure.com's Web site is intended to be an easy to navigate medical


<PAGE>




web site  which  will  facilitate  access to  medical  clinical  trials for both
patients and physicians alike. It is expected that patient users will be able to
research new clinical trials beginning in a variety of areas and, if interested,
will  be  able  to  apply  for  participation  in  these  trials.  Additionally,
physicians and researchers will be able to utilize the site as a referral source
in the recruitment of candidates for clinical  trials.  Amounts  attributable to
the operations of CliniCure.com for the nine months ended September 30, 2000 are
not significant.

Physician Management and Consulting Operations

                Since February  1999, the Company has been providing  management
and  consulting  services  to  a  New  Jersey-based   multi-specialty  physician
practices,  North Jersey  Health,  P.A. ("NJ  Health").  NJ Health is one of the
largest   independent   multi-specialty   physician  practices  in  New  Jersey,
consisting of 32 physicians,  16 offices and 80,000 active patients. In December
1999,  the Company  entered into a letter of intent with NJ Health setting forth
the terms of an agreement which provides for, among other things, management and
consulting  services  pursuant to an administrative  services  agreement with an
initial  term of five years,  during  which  period the Company  will provide NJ
Health  with  certain  non-medical,   management  and  consulting  services.  In
accordance  with  the  agreement,  NJ  Health  will pay to the  Company  a fixed
management fee of $500,000 per annum.  In addition to the fixed  management fee,
additional  management  fees will be paid to the Company  from NJ  Health's  net
income related to ancillary services.  The agreement also enables the Company to
acquire the assets of NJ Health,  subject to certain financial  milestones being
achieved, as well as the satisfaction of certain additional  conditions,  during
the first three years of the agreement.

              The Company has continued to expand its  strategic  focus into the
area of physician  management and consulting  and, in connection  therewith,  in
July 2000,  the Company  announced  that it had entered into several  agreements
including  (1) a merger  agreement  relating  to the  acquisition  of JIHP,  the
management services organization which manages Pavonia Medical Associates,  P.A.
("PMA"), and (2) a multi-year  administrative  services agreement with PMA which
includes a minimum management fee of $1.0 million per year.

                The merger  agreement  with PMA provides for the  acquisition by
the Company of PMA's  approximately  72% equity interest in JIHP in exchange for
the issuance to PMA of preferred  stock of the Company which will  automatically
convert into 1.0 million shares of common stock of the Company upon the approval
of  such  issuance  by  the  Company's  stockholders.  In  connection  with  the
prospective  merger,  PMA has  entered  into a 26-year  administrative  services
agreement  with the  Company  (subject  to  earlier  termination  under  certain
specified  conditions),  pursuant to which PMA will pay the Company a management
fee of $1.0  million per annum  payable in equal  monthly  installments  plus an
additional  management  fee of 10% of PMA's annual  revenues over $20.0 million.
Among other things,  the  consummation  of the acquisition of JIHP is subject to
execution of definitive  acquisition  documents with Liberty  HealthCare System,
Inc.,  the owner of the  remaining  equity  interest  in JIHP.  The  Company had
previously entered into an exclusive five year agreement with PMA to arrange and
coordinate clinical research trials on its behalf.

                PMA is one of the largest  multi-specialty  medical practices in
the state of New Jersey comprised of 72 physicians serving over 80,000 patients.
Its  principal  office is  located  in Jersey  City,  New Jersey and it also has
offices in two other  locations  in northern  New  Jersey.  The Company has been
providing management services to PMA for over two years.



<PAGE>




MedicalEdge Technologies, Inc.

     On September  26, 2000,  the Company  executed an amended  letter of intent
with MedicalEdge Technologies, Inc., an acute care/physician services e-commerce
healthcare company ("MedicalEdge"),  with respect to its acquisition,  by way of
reverse merger (the  "Merger"),  of the Company.  This letter of intent (the "ME
Letter") was subsequently amended and reexecuted as of September 26, 2000.

                The Merger,  when completed,  will reorient part of the focus of
the Company to the  provision of  healthcare  and related  services  through the
Internet.  MedicalEdge  is currently  an indirect  subsidiary  of  International
Commerce Exchange  Systems,  Inc., a "Silicon Alley" based Internet services and
technology holding company ("ICES").

                The ME  Letter  provides  that  in the  Merger  the  MedicalEdge
stockholders  will be issued shares of the Company's Common Stock  representing,
in the aggregate,  72% of the issued and  outstanding  Common Stock  immediately
after the Merger (on a  fully-diluted  basis).  The Merger is subject to,  among
other  closing  conditions,   the  final  negotiation  of  a  merger  agreement,
satisfactory   completion  of  due  diligence,   stockholder  approval  and  the
disposition by the Company of its diagnostic imaging business.

                In order to provide  certain  protection to the  stockholders of
the Company as of September 26, 2000,  the ME Letter  provides that in the event
that the average per share  closing  sales price of the Common  Stock for the 20
consecutive  trading days prior to the first  anniversary  of the closing of the
Merger is not equal to $2.50 or more, each such stockholder of the Company shall
have the right to require  the  Company to  purchase,  in whole or in part,  the
shares of Common Stock such stockholder owned as of September 26, 2000 and which
it still owns as of such  anniversary  date,  for a per share  purchase price of
$2.50.

     The ME Letter  further  provides that upon execution the Company will issue
to MedicalEdge 100 shares of its preferred  stock  convertible at the closing of
the Merger into 100,000 shares of Common Stock.  These shares will  constitute a
portion  of  the  72%  of the  Common  Stock  to be  issued  to the  MedicalEdge
stockholders  in the  Merger as  hereinbefore  discussed.  If the  Merger is not
consummated for any reason prior to the nine-month  anniversary of the execution
of the ME Letter,  other than as a result of MedicalEdge's  inability or refusal
to  proceed,  then  MedicalEdge  shall have the option to require the Company to
repurchase  all of these shares of preferred  stock for either cash (and,  under
certain  specified  conditions,  a one-year  promissory  note) equal to the fair
market value of these 100,000 shares of Common Stock or 100,000 shares of Common
Stock, as the Company shall determine.

                In conjunction with the execution of the ME Letter,  the Company
raised  $500,000  through an agreement to sell 226,004 shares of Common Stock to
Huntington Street Company, and VentureTek L.P. for a per share purchase price of
$2.212. These proceeds were loaned to ICES (the "ICES Loan") for the development
of the business, products and services to be operated, owned and provided by the
surviving  company  after the  Merger.  The  outstanding  principal  and accrued
interest  of the ICES  Loan is  payable  in full in cash on or prior to the
earlier of the 30th day after the closing of the Merger  and the 180th day after
the execution of the ME Letter;  provided,  however,  that if the Merger has not
been consummated prior to such 180th day and MedicalEdge is using its reasonable
efforts in good faith to close the Merger,  and the Merger is not consummated as
a consequence of the Company's inability or refusal to proceed,  then in lieu of
such cash repayment,


<PAGE>




the Company  shall be issued  class A common  stock of ICES having an  aggregate
value equal to such repayment,  based upon an ICES valuation of $500 million. In
addition,  if the Merger has not been  consummated  prior to the 180th day after
the execution of the ME Letter and the Company is using its  reasonable  efforts
in good  faith to close  the  Merger,  and the  Merger is not  consummated  as a
consequence of MedicalEdge's  inability or refusal to proceed,  then the Company
shall have the option to receive  either  repayment  of the ICES Loan in full in
cash or class A common stock of ICES and MedicalEdge shall reimburse the Company
for its actual out-of-pocket expenses incurred in connection with the Merger, up
to an aggregate of $200,000,  one-half of which  reimbursement  shall consist of
cash and one-half of which shall consist of class A common stock of ICES.

            The Company has  agreed to file a  registration  statement  covering
these  226,004  shares of Common  Stock within 30 days after the closing of
this sale and the issuance of the  requisite  shares;  and, to issue  additional
shares of Common  Stock to these  investors  if the  market  price of the Common
Stock at the  earlier of 90 days from the  closing of the sale or the  effective
date of the  registration  statement  is less than $2.88 in order to provide the
investors with a 130% return on their investment (valuing all shares at the then
market  price).  The issuance of these  226,004  shares of Common Stock has been
delayed pending the receipt of certain consents.



<PAGE>




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

For the Nine Months Ended September 30, 2000 vs. September 30, 1999

     For the nine months ended September 30, 2000,  revenues were $13,772,742 as
compared to $17,158,179 for the nine months ended September 30, 1999, a decrease
of  approximately  $3,385,000  or 20%. For the nine months ended  September  30,
2000, revenues from the four New Jersey-based diagnostic imaging facilities (the
"Beran  Facilities")  acquired  effective  as of  October  1, 1998  (the  "Beran
Acquisition") had decreased by approximately  $1,830,000,  and revenues from the
Company's  Monmouth,  Edgewater and  Rittenhouse MRI facilities had decreased by
approximately $1,650,000. Interest income decreased by $278,000. These decreases
in revenues were  partially  offset by increases at the  Company's  Brooklyn and
Wayne MRI facilities of approximately  $641,000.  The Company's  working capital
was  adversely  affected  by the  marked  decline in the number of MRI and other
diagnostic  imaging  referrals to the  Company's  New Jersey  facilities,  which
decline  resulted  from  certain  changes  enacted  and  significant   penalties
implemented  by  automobile   insurance   carriers  in  late  December  1999  to
pre-certification   requirements  of  diagnostic   imaging  procedures  and  the
uncertainties associated with these changes.

                For the nine months ended September 30, 2000, operating expenses
were  $14,849,071 as compared to $16,246,366 for the nine months ended September
30,  1999,  a decrease of  approximately  $1,397,000  or 9%. This  decrease  was
primarily due to (i) decreased interest expense  (approximately  $291,000) under
the $14.0  million  bridge  loan (the "DFS  Loan")  provided  to the  Company in
October  1998  in  connection  with  the  Beran  Acquisition   (which  loan  was
renegotiated  in September  1999 from a short-term  bridge loan into a long-term
liability), (ii) decreased overall salary expense relating to the elimination of
several management and administrative  positions in connection with, among other
things, the consolidation of billing functions (approximately  $492,000),  (iii)
decreased consulting,  marketing and professional fees (approximately  $242,000)
and (iv) decreased general and administrative expenses (approximately $972,000).
A substantial  portion of these decreases are a result of the Company's  expense
reduction efforts.  The decreases in operating expenses were partially offset by
an increase in bad debt  expense  relating to certain  receivables  of the Beran
Facilities (approximately $790,000).

                Earnings for the nine months ended  September 30, 2000  from the
Company's 50% ownership interest in Atlantic Imaging  increased by approximately
$410,000.  This increase is a result of the joint venture being in operation for
the entire period and increased volume at the network's facilities.

For the Three Months Ended September 30, 2000 vs. September 30, 1999

                For the three months ended  September  30, 2000,  revenues  were
$3,940,262  as compared to $5,384,878  for the three months ended  September 30,
1999, a decrease of approximately  $1,445,000 or 27%. For the three months ended
September  30, 2000,  revenues from the four Beran  Facilities  had decreased by
approximately $855,000, and revenues from the Company's Monmouth,  Edgewater and
Rittenhouse  MRI facilities had decreased by  approximately  $750,000.  Interest
income  decreased by $51,000.  These decreases in revenues were partially offset
by increases at the Company's Brooklyn and Wayne MRI facilities of approximately
$205,000.  The Company's  working  capital was adversely  affected by the marked
decline  in the  number of MRI and other  diagnostic  imaging  referrals  to the
Company's New Jersey  facilities,  which decline  resulted from certain  changes
enacted and


<PAGE>




penalties  implemented by automobile insurance carriers in late December 1999 to
pre-certification   requirements  of  diagnostic   imaging  procedures  and  the
uncertainties associated with these changes.

                For  the  three  months  ended  September  30,  2000,  operating
expenses were  $4,704,488  as compared to $5,330,112  for the three months ended
September 30, 1999, a decrease of  approximately  $626,000 or 12%. This decrease
was primarily due to (i) decreased  consulting,  marketing and professional fees
(approximately  $130,000),  (ii) decreased general and  administrative  expenses
(approximately  $595,000)  and (iii)  decreased  depreciation  and  amortization
expense  relating  to  fully  depreciated  assets  (approximately   $97,000).  A
substantial  portion of these  decreases are a result of the Company's  recently
institued expense reduction  efforts.  The decreases in operating  expenses were
partially  offset  by an  increase  in bad  debt  expense  relating  to  certain
receivables of the Beran Facilities (approximately $225,000).

                Earnings for the three months ended September 30, 2000  from the
Company's 50% ownership interest in Atlantic Imaging  increased by approximately
$105,000.  This increase is a result of the joint venture being in operation for
the entire period and increased volume at the network's facilities.

Liquidity and Capital Resources of the Company

                As of  September  30,  2000,  the Company had a cash  balance of
$405,438,  current assets of $15,663,618,  current liabilities of $8,552,823 and
working capital of $7,110,795.

                While the Company's working capital benefited from the Company's
renegotiation  in  September  1999 of the DFS Loan  into a  long-term  liability
(which renegotiation resulted in an extended repayment date of May 1, 2004, with
monthly  principal  and  interest  payments  of  approximately   $308,000),  the
Company's  working  capital was adversely  affected by the marked decline in the
number of MRI and other diagnostic imaging referrals to the Company's New Jersey
facilities.

     The  Company  is  actively   engaged  in  discussions  with  two  financial
institutions  for  interim  and  long-term  financing  to  help  facilitate  the
Company's continuing cash requirements.  The Company has also instituted certain
expene  reduction  measures  which has  resulted in a decrease in the  Company's
operating  expenses as hereinbefore  discussed.  The Company is also prepared to
adopt  additional  expense  reduction  measures if its  estimates as to its cash
requirements and sources thereof prove to be inaccurate.

                Cash flows provided by operating  activities were $2,186,292 for
the nine months ended September 30, 2000,  which consisted  primarily of (i) net
loss of $3,034,177,  (ii) depreciation and amortization of $2,331,064,  (iii) an
increase in the allowance for doubtful accounts  receivable of $1,676,000,  (iv)
minority  interests  in joint  ventures  of  $145,901  and (v) a reserve for the
valuation of the deferred tax asset of $1,381,000.  Other significant components
of cash flows  provided  by  operating  activities  include  (A) an  increase in
accounts receivable,  net of $665,015,  (B) an increase in deferred tax asset of
$79,518,  (C) an increase in prepaid  expenses and other of $54,771,  and (D) an
increase in accounts payable and accrued expenses of $2,314,670.

     Cash flows used in investing activities for the nine months ended September
30, 2000 were  $502,582,  which  related to the loan issued to ICES of $504,882,
interest  income of $50,411  associated  with a $2.5  million  loan to the Beran
Entities and purchases of property,  plant and equipment of $48,111. The loan to
ICES bears  interest at 9.5% per annum and matures on or prior to the earlier of
the 30th day  after  the  closing  of the  Merger   and the  180th day after the
execution of the ME Letter; provided however,


<PAGE>




that if the  Merger  has not  been  consummated  prior  to  such  180th  day and
MedicalEdge is using its  reasonable  efforts in good faith to close the Merger,
and the Merger is not consummated as a consequence of the Company's inability or
refusal to proceed,  then in lieu of such cash  repayment,  the Company shall be
issued  class A common  stock of ICES  having an  aggregate  value equal to such
repayment,  based upon an ICES valuation of $500 million.  The loan to the Beran
Entities  bore  interest at 8% per annum and matured  December 31,  1999.  As of
December 31,  1999,  the Beran  entities  repaid this loan in shares of Series D
Cumulative  Accelerating  Redeemable  Preferred  Stock (i.e.,  238.096 shares of
Series D Stock were  transferred  back to the Company and cancelled in repayment
of this  loan),  except for the  $50,411 in  interest  which was paid in cash in
January 2000.

     Cash flows used in financing activities for the nine months ended September
30, 2000 were $1,923,661, which consisted primarily of payments on capital lease
obligations  of  $725,284,  payments  on the DFS Bridge Loan of  $1,703,995  and
distributions  to limited  partners of joint  venture of $329,527,  all of which
were partially offset by borrowings under the Company's revolving line of credit
of $335,145 and proceeds from the sale of stock of $500,000.

                In connection with the Company's efforts to reorient part of its
focus to the provision of healthcare and related  services  through the Internet
and to  divest  itself  of its  diagnostic  imaging  business,  the  Company  is
currently  negotiating  the sale of its interest in its MRI facility  located in
Wayne, New Jersey to the limited partners.  This facility is operated as a joint
venture among a wholly-owned  subsidiary of the Company (as the general  partner
holding a 51% partnership interest) and two individual medical professionals (as
limited partners  holding in aggregate the remaining 49% partnership  interest).
The sale is  expected  to close in  November  2000 and  result  in a gain to the
Company. Proceeds of the sale will be used to reduce outstanding liabilities.

                In  addition  to the  above  transaction,  the  Company  is also
negotiating  the sale of its MRI facility  located in  Brooklyn,  New York to an
unrelated third party, The sale is currently structured as an asset purchase and
is expected  to close in  November  2000,  resulting  in a gain to the  Company.
Proceeds of the sale will be used to reduce outstanding liabilities.

     On September  26, 2000,  the Company  executed an amended  letter of intent
with  respect to the  acquisition,  by way of  reverse  merger,  of  MedicalEdge
Technologies, Inc. ("MedicalEdge"),  an acute care/physician services e-commerce
healthcare company.  The ME Letter was subsequently amended and reexecuted as of
September 26, 2000.

                The Merger,  when completed,  will reorient part of the focus of
the Company to the  provision of  healthcare  and related  services  through the
Internet.  MedicalEdge  is currently  an indirect  subsidiary  of  International
Commerce Exchange  Systems,  Inc., a "Silicon Alley" based Internet services and
technology holding company ("ICES").

                The ME  Letter  provides  that  in the  Merger  the  MedicalEdge
stockholders  will be issued shares of the Company's Common Stock  representing,
in the aggregate,  72% of the issued and  outstanding  Common Stock  immediately
after the Merger (on a  fully-diluted  basis).  The Merger is subject to,  among
other  closing  conditions,   the  final  negotiation  of  a  merger  agreement,
satisfactory   completion  of  due  diligence,   stockholder  approval  and  the
disposition by the Company of its diagnostic imaging business.

                In order to provide  certain  protection to the  stockholders of
the Company as of September 26, 2000,  the ME Letter  provides that in the event
that the average per share  closing  sales price of the Common  Stock for the 20
consecutive  trading days prior to the first  anniversary  of the closing of the
Merger is not equal to $2.50 or more, each such stockholder of the Company shall
have the right to require  the  Company to  purchase,  in whole or in part,  the
shares of Common Stock such stockholder owned as of September 26, 2000 and which
it still owns as of such  anniversary  date,  for a per share  purchase price of
$2.50.

     The ME Letter  further  provides that upon execution the Company will issue
to MedicalEdge 100 shares of its preferred  stock  convertible at the closing of
the Merger into 100,000 shares of Common Stock.  These shares will  constitute a
portion  of  the  72%  of the  Common  Stock  to be  issued  to the  MedicalEdge
stockholders  in the  Merger as  hereinbefore  discussed.  If the  Merger is not
consummated for any reason prior to the nine-month  anniversary of the execution
of the ME Letter,  other than as a result of MedicalEdge's  inability or refusal
to  proceed,  then  MedicalEdge  shall have the option to require the Company to
repurchase  all of these shares of preferred  stock for either cash (and,  under
certain  specified  conditions,  a one-year  promissory  note) equal to the fair
market value of these 100,000 shares of Common Stock or 100,000 shares of Common
Stock, as the Company shall determine.

                In conjunction with the execution of the ME Letter,  the Company
raised  $500,000  through an agreement to sell 226,004 shares of Common Stock to
Huntington Street Company, and VentureTek L.P. for a per share purchase price of
$2.212. These proceeds were loaned to ICES (the "ICES Loan") for the development
of the business, products and services to be operated, owned and provided by the
surviving  company  after the  Merger.  The  outstanding  principal  and accrued
interest  of the ICES  Loan is  payable  in full in cash on or prior to the
earlier of the 30th day after the closing of the Merger  and the 180th day after
the execution of the ME Letter;  provided,  however,  that if the Merger has not
been consummated prior to such 180th day and MedicalEdge is using its reasonable
efforts in good faith to close the Merger,  and the Merger is not consummated as
a consequence of the Company's inability or refusal to proceed,  then in lieu of
such cash repayment,


<PAGE>




the Company  shall be issued  class A common  stock of ICES having an  aggregate
value equal to such repayment,  based upon an ICES valuation of $500 million. In
addition,  if the Merger has not been  consummated  prior to the 180th day after
the execution of the ME Letter and the Company is using its  reasonable  efforts
in good  faith to close  the  Merger,  and the  Merger is not  consummated  as a
consequence of MedicalEdge's  inability or refusal to proceed,  then the Company
shall have the option to receive  either  repayment  of the ICES Loan in full in
cash or class A common stock of ICES and MedicalEdge shall reimburse the Company
its actual out-of-pocket  expenses incurred in connection with the Merger, up to
an aggregate of $200,000,  one-half of which reimbursement shall consist of cash
and one-half of which shall consist of class A common stock of ICES.

            The Company has  agreed to file a  registration  statement  covering
these  226,004  shares of Common  Stock within 30 days after the closing of this
sale and to issue  additional  shares of Common Stock to these  investors if the
market  price of the Common  Stock at the earlier of 90 days from the closing of
the sale or the effective date of the registration  statement is less than $2.88
in order  to  provide  the  investors  with a 130%  return  on their  investment
(valuing all shares at the then market price).

                In July 2000,  the Company  announced  that it had entered  into
several agreements  including (1) a merger agreement relating to the acquisition
of JIHP, the management  services  organization  which manages  Pavonia  Medical
Associates, P.A. ("PMA"), and (2) a multi-year administrative services agreement
with PMA which includes a minimum management fee of $1.0 million per year.

                The merger  agreement  with PMA provides for the  acquisition by
the Company of PMA's  approximately  72% equity interest in JIHP in exchange for
the issuance to PMA of preferred  stock of the Company which will  automatically
convert into 1.0 million shares of common stock of the Company upon the approval
of such issuance by the Company's stockholders.  In connection with such merger,
PMA has  entered  into a  26-year  administrative  services  agreement  with the
Company (subject to earlier  termination  under certain  specified  conditions),
pursuant to which PMA will pay the Company a management  fee of $1.0 million per
annum payable in equal monthly installments plus an additional management fee of
10% of PMA's  annual  revenues  over $20.0  million.  Among  other  things,  the
consummation  of the  acquisition  of JIHP is subject to execution of definitive
acquisition  documents with Liberty  HealthCare  System,  Inc., the owner of the
remaining  equity  interest in JIHP. The Company had previously  entered into an
exclusive  five year  agreement  with PMA to  arrange  and  coordinate  clinical
research trials on its behalf.

                PMA is one of the largest  multi-specialty  medical practices in
the state of New Jersey comprised of 72 physicians serving over 80,000 patients.
Its  principal  office is  located  in Jersey  City,  New Jersey and it also has
offices in two other  locations  in northern  New  Jersey.  The Company has been
providing management services to PMA for over two years.

     When  completed,  the Company  expects the  acquisition  of JIHP to add $13
million in revenues  to the  Company  and will act as a platform  from which the
Company  hopes to  continue  to build  its  physician  practice  management  and
consulting  division,  its clinical  research  trials  division and its clinical
trials  website,  CliniCure.com,  and is intended to be a launching  pad for the
e-commerce  expansion  of  its  business,   selling  products  and  services  to
physicians  and patients  alike.  Continued  expansion of these  businesses  may
require additional sources of financing in the future.

                In December 1997, the Company agreed to guarantee a $1.0 million
loan from DFS to JIHP.  This loan was  funded by DFS to JIHP on  January 8, 1998
and bears interest at 12% per annum and is repayable  over 48 months  commencing
in February  1998 at $26,330 per month.  At September  30,  2000,  approximately
$387,243 of the loan was outstanding.  PMA and each physician stockholder of PMA
have  acknowledged  that such  extension of credit is for their benefit and have
agreed that to the extent  that the  Company is or becomes  liable in respect of
any indebtedness or other liability or obligation of either PMA or JIHP, and the
acquisition by the Company of 100% of the  outstanding  capital stock of JIHP is
not  consummated,  then  PMA and  each  physician  stockholder  of PMA  agree to
indemnify  and hold the  Company  harmless  from  and  against  any and all such
liabilities and obligations.

                In June 2000,  the Company  entered into a lease  agreement with
Stratus Services Group, Inc. ("Stratus"), which is an employment leasing company
and also  provides  a wide range of other  staffing  and  outsourcing  services.
Effective June 19, 2000, all Company employees (aggregating


<PAGE>




approximately  150 employees)  except certain officers and  radiologists  became
employees  of Stratus  and then were leased  back to the  Company.  Stratus is a
public  company  traded on Nasdaq under the symbol "SERV" and the CEO of Stratus
is a former  director of the Company.  As of September 30, 2000, the Company had
paid Stratus  $1,340,133 for such lease arrangement (which represents the leased
employees' compensation plus a leasing and administrative fee to Stratus related
to taxes and insurance and for payroll, human resources and accounting services)
and had an  outstanding  balance owed to Stratus in the amount of $167,847.  The
term of the  lease  agreement  is for one year and  automatically  renews  on an
annual basis with a right to terminate with 30 days written notice.

                Effective December 26, 1996, the Company entered into a Loan and
Security Agreement with DVI Business Credit Corporation ("DVIBC"),  an affiliate
of DFS, to provide a revolving line of credit to the Company. The maximum amount
available  under such credit  facility  initially was  $2,000,000,  which amount
increased to $3,000,000 in October 1998 in connection with the Beran Acquisition
and further  increased to $4,000,000 in December 1999, with advances  limited to
75% of eligible accounts  receivable,  as determined by DVIBC.  Borrowings under
the line of credit bear  interest at the rate of 3% over the prime  lending rate
and are repayable on May 26, 2001.  The Company's  obligations  under the credit
facility are collateralized  through a grant of a first security interest in all
eligible accounts receivable.  The agreement contains customary  affirmative and
negative covenants including covenants requiring the Company to maintain certain
financial  ratios and minimum levels of working  capital.  Borrowings under this
credit  facility  are used to fund  working  capital  needs as well as acquiring
businesses which are  complementary  to the Company.  At September 30, 2000, the
Company had $3,586,505 of borrowings under this credit facility.

                Prior to May 1, 1999,  the  Company's  MRI  facility  located in
Philadelphia,  Pennsylvania was operated as a joint venture among a wholly-owned
subsidiary  of the  Company (as the general  partner  holding a 60%  partnership
interest) and certain  individual  medical  professionals and others (as limited
partners  holding in the aggregate the  remaining  40%  partnership  interests).
Effective May 1, 1999, the Company's subsidiary  consummated the purchase of the
limited  partners' 40% partnership  interests for $100,000 in cash. At April 30,
1999, the net book value of this 40%  partnership  interest was $0. The $100,000
purchase  price  has been  recorded  by the  Company  as  goodwill  and is being
amortized over a period of ten years.

                In  July  1999,   the  Company   closed  its  MRI   facility  in
Williamstown,  New Jersey. The facility,  historically and since its acquisition
by the Company in October  1998 as part of the Beran  Acquisition,  had operated
unprofitably.  Following its  acquisition,  the Company was  unsuccessful in its
attempts to profitably operate the facility. It was decided that the Company had
to either  invest in certain  equipment  upgrades to  modernize  the facility or
cease its  operations.  After  analysis of the  pertinent  factors,  the Company
determined  to close the facility.  The closure of this  facility  resulted in a
one-time  charge to operations  during the quarter  ended  September 30, 1999 of
approximately  $33,000,  which is primarily comprised of a reserve for estimated
future cash outflows relating to the leased premises.

                The  nature  of the  Company's  operations  require  significant
capital  expenditures which generally have been financed through the issuance of
debt  and  capital  leases  and  proceeds  received  from  the  sale  of  equity
securities,  including the Company's initial public offering of Common Stock and
redeemable warrants in November 1991, the subsequent exercise of such redeemable
warrants,  the sale of Series C Convertible Preferred Stock in February 1996 and
the  recent  agreement  to issue  226,004  shares  of  common  stock.  Continued
expansion of the Company's business, including the


<PAGE>




expansion of the Company's physician management/consulting and clinical research
operations,  will require  substantial cash resources and will have an impact on
the Company's liquidity. The Company is actively engaged in discussions with two
financial  institutions  for interim and long-term  financing to help facilitate
the Company's continuing cash requirements.  The Company has instituted measures
to improve its revenues,  including  the formation of Atlantic  Imaging in April
1999 and the  launching of  CliniCure.com,  the pending  merger with JIHP and is
also  actively  considering  various  other  strategic  alternatives,  including
additional joint ventures, the sale and/or other disposition of all or a portion
of its diagnostic imaging operations and expansion of its e-commerce operations.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk
         ----------------------------------------------------------

         Not Applicable.



<PAGE>



                                            PART II - OTHER INFORMATION

         Items 1 through 5 have been omitted because the related  information is
either inapplicable or has been previously reported.

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

         (a)    Exhibit 2 -         Letter of Intent date as of September 26,
                                    2000 between HealthCare Integrated Services,
                                    Inc. and MedicalEdge Technologies, Inc.

                Exhibit 10 -        Stock Purchase Agreement dated August 23,
                                    2000 among HealthCare Integrated Services,
                                    Inc. and Huntington Street Company and
                                    Venturetek, L.P.

                Exhibit 27 -        Financial Data Schedule

         (b)      Reports on Form 8-K

                  None

<PAGE>

                                                    SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.

                               HEALTHCARE INTEGRATED SERVICES, INC.
                                          (Registrant)



Date: November 20, 2000                /s/ Elliott H. Vernon
                                       Elliott H. Vernon
                                       Chairman of the Board and Chief
                                       Executive Officer
                                       (Principal Executive Officer)


Date: November 20, 2000                /s/ Alfred Beltrani
                                       Alfred Beltrani
                                       Vice President - Controller
                                       (Principal Financial and
                                        Accounting Officer)