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

                                   Form 10-K/A
                                 Amendment No. 2

   X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
  ---                              ACT OF 1934
                   For the fiscal year ended December 31, 1998

                                       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 000-26668

                              HITSGALORE.COM, INC.
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             (Exact name of Registrant as specified in its charter)


        FLORIDA                                65-0036344
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(State or other jurisdiction                (I.R.S. Employer
of incorporation or organization)          Identification No.)

              10134 6th Street, Suite J, Rancho Cucamonga, CA 91730
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                    (Address of principal executive offices)

Registrant's telephone number, including area code           (909) 481-8821

                          SYSTEMS COMMUNICATIONS, INC.
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                                  (Former name)

               4707 140th Avenue North, Clearwater, Florida 33762
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                                (Former Address)


Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value

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
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 by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrants'  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
          ---
                            (Continued on next page)


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The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant on September 30, 1999,  (based on the average of the high and low bid
prices  of  such  stock  on  the   over-the-counter   securities   market)   was
approximately $28,772,534.

The number of outstanding  shares of the  registrant's  common stock,  $.001 par
value, as of September 30, 1999 was 49,979,675.  Of the 49,979,675 shares of the
Registrant's  common  stock  outstanding  as of September  30, 1999,  43,785,126
shares  were  restricted  securities  within  the  meaning of Rule 144 under the
Securities Act of 1933.





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Item 1.  BUSINESS.

Corporate History-

Hitsgalore.com,  Inc., a Florida  corporation (the "Company"),  formerly Systems
Communications,  Inc., was  incorporated  as Florida One Capital  Corporation in
1987 and made an initial public  offering of its common stock in 1988 as a blank
check  company  for the  purpose  of  acquiring  other  companies.  The  Company
underwent  several  corporate name changes from its inception until 1991 when it
changed its name to Systems Communications,  Inc. On March 19, 1999, the Company
and Hitsgalore.com, a Nevada corporation,  completed a reorganization and merger
(the "Reorganization and Merger Agreement").  Pursuant to the Reorganization and
Merger Agreement, (a) the Company transferred its existing business,  properties
and assets to International Healthcare Solutions,  Inc. ("IHSI") and caused IHSI
to assume the  obligations,  debts and liabilities of the Company and, then, (b)
Hitsgalore.com  was merged into the Company and the Company  changed its name to
Hitsgalore.com, Inc. The Company also declared a reverse split of its issued and
outstanding  common  stock,  in the ratio of one share  for each  seven  shares,
immediately prior to the merger (see "The Reorganization" and "The Merger").

General Business History-

During 1990 and 1991, the Company acquired and divested companies engaged in the
eye glass  distribution  and  residential  building  industries  and for a brief
period of time, operating under the name of Highland Healthcare Corporation, was
under the control of another  publicly-owned  blank check company formed for the
purpose of acquiring healthcare related businesses.

Beginning in August 1994, the Company acquired various businesses engaged in the
telecommunications   and   healthcare   cost   containment   industries.   These
acquisitions included (i) Ameristar Telecommunications, Inc. ("ATI"), a reseller
of long-distance  telephone and pay-per-view  television  services and products,
principally  to  the  hospitality  industry,  (ii)  Coast  Communications,  Inc.
("CCI"),  whose  principal  business  was  the  installation  and  servicing  of
pay-per-view  television  equipment,  (iii) LCI  Communications,  Inc.  ("LCI"),
Comstar Network Services,  Inc. ("Comstar"),  Intelicom  International  Holding,
Inc.  ("Intelicom"),   formerly  Affiliated  Communications,  Inc.,  and  Telcom
Network,  Inc.  ("TNI"),  all of which were engaged in the business of reselling
telecommunications  services, (iv) National Solutions Corporation ("NSC"), which
is  engaged  in  the  healthcare  cost  containment  business,  and  (v)  Health
Management  Technologies ("HMT"),  whose principal business was the development,
sale and maintenance of medical management computer software.

In 1996 and 1997,  the Company  sold,  abandoned  or  otherwise  disposed of its
ownership interests in ATI, CCI and HMT, sold substantially all of the operating
assets  of  TNI  and  discontinued  the  operations  of  all  of  its  remaining
telecommunications  businesses.  As of December 31, 1998, NSC, LCI, Comstar, TNI
and two newly-formed  subsidiaries,  IHSI and Ameritel  Communications  Systems,
Inc. ("Ameritel"), all of which are wholly owned subsidiaries, and Intelicom, in
which the Company has an approximate 15.0% minority interest, were all inactive.
The Company's ownership in all of these subsidiary  companies was transferred to
IHSI on March 19, 1999 as a part of the Reorganization and Merger Agreement (see
"The Reorganization" and "The Merger").

Bankruptcy Proceeding-

The Company was subject to an  Involuntary  Petition under Chapter 7 of the U.S.
Bankruptcy Code (the "Petition")  which was filed against the Company on June 1,
1998 in the United States  Bankruptcy  Court for the Middle  District of Florida
(Case No.  98-09299-8P7).  The  Petition  did not include  any of the  Company's
subsidiaries.  On April 20,  1999,  the U.S.  Bankruptcy  Court  issued an order
dismissing the Petition.

<PAGE> 4

The Reorganization-

Immediately prior to the merger with Hitsgalore.com,  a Nevada corporation ("Old
Hitsgalore.com")  described  below  (the  "Merger"),  the  Company  completed  a
reorganization.  As part of the  reorganization,  the  Company  declared a share
consolidation (a reverse split) of its then issued and outstanding common stock,
options,  warrants and other rights to purchase  its common  stock.  The reverse
split reduced each seven shares of common stock  outstanding  to one share.  The
reverse split also applied to all  outstanding  options,  warrants,  convertible
securities and other rights to acquire the Company's common stock. The effect of
the reverse split was such that the Company would have  approximately  8,000,000
shares of common stock  issued and  outstanding,  assuming  exercise of all such
options,  warrants  and other  rights.  The Company  also  transferred  its then
existing business, properties and assets, to International Healthcare Solutions,
Inc., Florida corporation organized by the Company for this purpose ("IHSI"). In
consideration  for the transfer,  the Company  received twenty million shares of
IHSI, constituting all of the outstanding common stock of IHSI, thus making IHSI
a wholly owned  subsidiary of the Company.  The Company also declared a dividend
in kind,  payable in all of the shares of IHSI common  stock,  to the  Company's
stockholders  of record on April 6, 1999. In  furtherance  of the dividend,  the
ISHI common stock was transferred  into a constructive  trust for the benefit of
the Company's  stockholders.  The IHSI common stock is to be  distributed to the
Company's  stockholders  entitled to receive the  dividend  when a  registration
statement  covering the  distribution  under the  Securities Act of 1933 becomes
effective. Although the Company expects IHSI to file such registration statement
promptly,  there is no assurance that a registration will be filed, of if filed,
as to when it will be filed or when it will become effective.

In connection with the transfer of the Company's previous  business,  properties
and assets to IHSI, IHSI assumed all the  obligations,  debts and liabilities of
the Company  that  existed at that time.  Accordingly,  IHSI became  jointly and
severally liable with the Company for such  obligations,  debts and liabilities.
Until  all of such  obligations,  debts and  liabilities  are  satisfied  or the
Company is released therefrom, the Company has a security interest in the assets
transferred  to  IHSI.  As of the  date  of the  Merger,  the  Company  believed
liabilities assumed were approximately $1.9 million.  Such liabilities consisted
principally of unsettled obligations that arose from actions against the Company
that are currently  being  litigated or are in the process of being settled (see
Notes  5 and 14 to the  consolidated  financial  statements  included  elsewhere
herein).   As  of  June  30,  1999,  such   liabilities  have  been  reduced  to
approximately  $689,000.  It is uncertain,  however,  if the  remaining  assumed
obligations will be settled in amounts that approximate  recorded values. In the
event the Company  anticipates  settling these  obligations in amounts different
from  amounts  recorded,  the  Company  will  account  for  the  differences  as
adjustments  to retained  earnings  and  additional  paid in capital in its post
merger financial statements for the year ended December 31, 1999. Any subsequent
adjustments  between  recorded amounts and amounts settled will be accounted for
as a charge or credit to earnings in its financial  statements  for years ending
after December 31, 1999.

The Merger-

On March 19, 1999 (the "Effective  Date"),  the Company and Old  Hitsgalore.com,
completed the Merger pursuant to the Merger and Reorganization Agreement. In the
Merger, Old Hitsgalore.com was merged into the Company and Old  Hitsgalore.com's
outstanding  common stock was converted into 37,675,000  shares of the Company's
common stock.

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In the  Merger,  the  Company  changed  its  name to  Hitsgalore.com,  Inc.  For
accounting purposes, the acquisition of Old Hitsgalore.com has been treated as a
recapitalization of Old Hitsgalore.com, with Old Hitsgalore.com as the acquirer.

Absence of Stockholder Approval of the Merger-

The Company's  stockholders  of record  immediately  prior to the Effective Date
have not approved the merger of Old Hitsgalore.com into the Company. Approval by
the Company's  stockholders would not have been required under Florida corporate
law,  but for the  change of the  Company's  name in the  Articles  of Merger to
Hitsgalore.com,  Inc.  from  Systems  Communications,  Inc. The Company has been
advised by counsel that the Merger is deemed, nevertheless, to be effective as a
merger in fact (a defacto merger). A defacto merger may be voidable by action or
vote of a majority  of the  Company's  stockholders  at the date of the  merger,
although  stockholders are not given a right by Florida law to seek avoidance of
the Merger.  Absent such statutory  right,  only the state has authority to seek
avoidance of the Merger.  The Company does not believe that either a majority of
such stockholders or the state would seek to overturn the Merger.

The  Company  intends  to call a special  meeting  of all  record  owners of the
Company's  common  stock at the date of the Merger and who had the right to vote
on the Merger.  The special  meeting will be called and  conducted in accordance
with the Bylaws of the  Corporation.  The Company will distribute an information
statement to stockholders  in accordance with the  requirements of Section 14(c)
of the  Securities  Exchange  Act of 1934,  as amended,  ("Exchange  Act").  The
purpose of the special meeting will be to obtain a ratification of the Merger by
a vote of a  majority  of such  stockholders.  The  Company  intends to call the
special meeting as soon as practicable. For reasons described below, the Company
believes a majority of such  stockholders  will vote in favor of ratification of
the Merger.

On February 6, 1999,  the Company  informally  gathered  persons who  management
believed were the record  holders of a majority of the Company's then issued and
outstanding common stock and entitled to vote on the merger. Notwithstanding the
fact that such persons were  assembled  together and  purported to cast votes in
favor of the  merger,  they  executed  a  document  entitled  "Action by Written
Consent".  The Company did not give notice of this purported special  "meeting",
as  required  by the  Bylaws,  to all  stockholders  of  record.  Based upon the
favorable vote at this "meeting",  the Company entered into the Merger.  A later
evaluation of this "meeting" and of the record of stock ownership by the persons
in attendance  revealed that it was not a proper special meeting of stockholders
and that a majority of the then issued and  outstanding  shares of common  stock
was not  represented at the "meeting",  either in person or by proxy, in view of
the fact that some of such persons  purported to  represent  other  stockholders
without  holding a proxy or other  form of  written  authorization  to do so. In
light of this circumstance,  the persons who comprised the Company's  management
prior to the Merger again  assembled  on April 16, 1999 the record  holders of a
majority of the Company's common stock at the date of the merger. The purpose of
this purported  special  "meeting" was to ratify the Merger.  This "meeting" was
conducted by telephone conference.  Once again, notice of this "meeting" was not
given as required  by the  Bylaws.  Accordingly,  neither  "meeting"  was a duly
constituted meeting of stockholders, but could be characterized as a non-binding
"straw  poll" of the persons  participating.  The persons  participating  in the
conference  call,  seventeen  in number,  did hold of record a  majority  of the
Company's issued and outstanding  common stock on the date of the Merger and did
indicate  their vote for  approval of the  Merger.  The Company has no reason to
believe that any of such persons

<PAGE> 6

will vote  against  ratification  of the  merger  when the  Company  does call a
special meeting,  in accordance with the Bylaws and subject to proper compliance
with Section 14(c) of the Exchange Act.

Dissenters' rights-

Under  Florida  law,  stockholders  dissenting  from the merger  have the right,
called "dissenters'  rights", to elect to receive the fair value of ownership in
a party to the merger in lieu of the shares  which they would  receive or retain
in the merger.  In general,  the fair value of the  dissenter's  interest in the
merger party is determined  by an  independent  appraisal of the merger  party's
business and assets,  and is not  determined  by the market value of the party's
shares  in  the  public  market.  Accordingly,  a  stockholder  of  the  Company
immediately  prior to the merger who votes  against  ratification  of the merger
would be entitled,  upon demand in accordance  with  governing  law, to exercise
dissenters'  rights.  The  Company  intends to  acknowledge  dissenters'  rights
beginning at and from the date the Company obtains a valid  ratification vote on
the  merger.  The  Company  believes  that  no  stockholder  entitled  to  elect
dissenters'  rights will do so in view of the fact that (i) the shares that such
stockholder will receive from the Company in the dividend spin off of the common
stock of IHSI,  subject to  registration of the shares under the Securities Act,
will  represent the same  percentage  of ownership in the entire,  same business
conducted  by  the  Company  immediately  prior  to  the  Merger,  as  was  then
represented by the stockholder's  stock in the Company  immediately prior to the
Merger,  (ii) the probable  appraisal value of the Company's business and assets
immediately prior to the Merger is expected to be  insignificant,  and (iii) the
value of the Company's  common stock in the public  securities  market after the
merger  exceeded the value of the common stock in the public  securities  market
immediately  prior to the Merger,  as adjusted for the reverse split effected in
the  reorganization.  Furthermore,  the Company believes the market value of the
Company's common stock in the public securities market immediately following the
Merger, as well as at the date hereof,  exceeds the probable  appraisal value of
the Company's business and assets immediately prior to the Merger.

Current Business-

As a result of the  Merger,  the  Company is now  engaged in the  business of an
internet,  business-to-business  search engine. Old Hitsgalore.com was organized
on July 21, 1998,  began beta operations in August 1998 and launched its website
in  November  1998.  As an  internet  search  engine  for  business-to  business
commerce,  the Company  provides a searchable  database to  businesses  bringing
people  ("hits") to their  websites.  The  Company's  revenues  are  principally
derived from the sale of portal service sponsorships, membership keyword bid and
rank rights and local city editions of its  business-to-business  search engine.
The    Company's    website    is   located   on   the   world   wide   web   at
http://www.hitsgalore.com.

Products and Services-

The Company's portal services currently include free lifetime banner placements,
free banner  generation,  free real time stock quotes,  free internet voice mail
and free E-mail. The Company's most recent portal service is "Free Billboard(TM)
Hits," a music portal.

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Free Banner Placement. Free banner placements (miniature advertisements common
throughout   the   world-wide   web)  allow  website   traffic  to  "click"  and
automatically  gain  access  to the  banner-owner's  website.  The  free  banner
placements  are  designed  to drive  traffic  (or  "hits") to the  sponsors'  or
members' business website.  The banner-owner obtains a free banner made to order
utilizing  templates  (free  banner  generation)  provided  free  of  charge  by
Hitsgalore. The free banners can be used anywhere on the internet and are placed
into rotation on the Hitsgalore.com  website. In many cases, this portal service
provides  the first  opportunity  for the banner owner to advertise on a website
other than its own.

Free Real Time Quotes.  Hitsgalore.com  provides  access to detailed stock quote
information  for  companies  listed  on the New  York  Stock  Exchange,  NASDAQ,
American  Stock  Exchange and Bulletin  Boards,  including  current  price (real
time), open, change, high, low, earnings per share, volume,  shares outstanding,
market  capitalization,  dividend,  ex-dividend date,  price/earnings  ratio and
industry sector. A ticker look-up feature is also included.

Voice  email  ("RocketTalk").  RocketTalk  allows  users to send voice  messages
quickly  and easily  over the  Internet to anyone,  anywhere.  With  RocketTalk,
clear, high-quality voice messages to other RocketTalk users can be sent. Or, if
the intended recipient is not yet a RocketTalk user, RocketTalk will forward the
message to the recipient's email address along with a small utility to play it.

Email  ("HitsMail").  HitsMail is a  state-of-the-art  Web-based  Internet email
service. A HitsMail user is able to access fast,  reliable and free email at any
time from any location. HitsMail also provides many business-minded benefits and
capabilities - allowing the user to take advantage of a Web-based  email service
that will grow with their needs.

Billboard Hits.  Billboard Hits allows users to make their own custom CD with up
to five songs for free from a library of titles from the 50s, 60s, 70s and 80s.

In order to obtain any of the portal services offered by Hitsgalore.com, the new
member  must  register  and  provide   Hitsgalore.com   with  certain   relevant
information,  including a description of the business or service provided by the
user,  and the contact  information  for the business  (location,  phone number,
email address,  etc). This enables the Company to provide quality business leads
to its sponsors and contact its new members to discuss other revenue  generating
products and services.  As a result of the Company's  business  model,  both the
Company  and the  sponsor  achieve  value by  building a database  of  potential
customers  who have  voluntarily  given  their  relevant  contact  and  business
information to Hitsgalore.com. New members are generally receptive to additional
sales calls from  Hitsgalore.com  and the sponsor  because the new members  have
received something of value, at no cost.

Sponsorships. Under the sponsorship program, sponsors acquire the right to "give
away" the Company's portal services in exchange for lead generation. The sponsor
is  required  to deposit a minimum  of $99.00  with  Hitsgalore.com  in order to
participate in the sponsorship  program.  The deposit is non-refundable.  When a
member orders a portal service, the sponsor, or sponsors,  which are selected on
a rotation basis from the Hitsgalore.com website, pay for the product or service
on the basis of an agreed upon "point"  system.  The current  program allows 200
points for each $99.00 deposit and the points  charged to the sponsors'  account
currently range from one to four points each time the sponsor is selected to pay
for a portal service. One or more sponsors may be selected

<PAGE> 8

to pay for a portal service based on the cost of the service or the product.  In
the case where  more than one  sponsor  is  selected  to pay for the cost of the
portal service or product,  each participating  sponsor receives an email of the
ordering  member's  relevant  business  information.  When the  deposit is fully
utilized, the Company bills the sponsor for additional sponsorship fees.

Bid and Rank.  Under the  Keyword  Bid & Rank  Program,  a sponsor or member can
choose where they appear on the results page of a selected  "keyword".  Research
indicates  that when someone  conducts a search on the Internet,  they seldom go
further  than the first  page or two of  results.  Thus,  it is  important  to a
business where it first appears on the results page. Many search engines rely on
a  "relevancy"  process  where they  count the  number of times a keyword  might
appear  within  the site.  Accordingly,  some  website  operators  have taken to
"imbedding" the keyword multiple times to appear more relevant. With the Keyword
Bid & Rank program offered by  Hitsgalore.com,  the website  operator can ensure
their placement on the results page but pay only for those "click-throughs" that
actually visit their site as a result of a search at Hitsgalore.com. The bidding
process starts at $0.01 per click-through and each time someone is outbid,  they
receive email messages  notifying them of that fact.  Thus, the bidding  becomes
"real-time".  Each keyword sponsor can have an unlimited  number of keywords and
has the ability to bid on each.

Life Foundation  Trust Sales  Agreement.  On April 15, 1999, the Company and the
Life Foundation Trust ("LFT") entered into an agreement that provided for, among
other things,  the reservation by Hitsgalore.com of up to 200 metropolitan areas
for the  Company's  "Local City  Editions  (LCEs)."  LCEs are websites  that are
developed  by the Company for cities  within a specified  area.  These  websites
contain local city content and search capabilities on a local basis.

The total  purchase  price for the LCEs  reserved  by  Hitsgalore.com  under the
agreement is $10.0 million.  The websites are to be developed by  Hitsgalore.com
over  the  twelve-month   period  ending  on  April  15,  2000  and  payment  to
Hitsgalore.com  by LFT is to be made on that date. The $10.0 million  payment is
collateralized   by  a  collection   of  postage   stamps.   Through  the  LCEs,
Hitsgalore.com is able to localize search results.  Thus,  someone  conducting a
search at a local  city  edition  can find  those  businesses  offering  a given
product or service within that market. The LCEs also contain local content, such
as articles and stories  about the local market,  as well as pertinent  links to
other local city information such as weather, sports and other media channels.

Certain Matters related to the Offer and Sale of Local City Edition Licenses-

Beginning in January 1999 and ending in April 1999, the Company offered LCEs for
sale on its web site. During that period,  it sold LCEs to 37 persons,  plus The
Life Foundation  Trust.  Each LCE is granted a limited  non-exclusive use of the
proprietary software,  the website and the programming and content therein. Some
of the LCEs also entitled the LCE to earn a performance bonus equal to the price
paid for the license,  if the LCE earns  commission  income from the sale of the
Company's products during the first six months of the license period equal to or
in excess of the price of the  license.  The  performance  bonus was  payable in
shares of the  Company's  common  stock at no  additional  cost to the LCE.  The
Company has been  advised by counsel  that the  Company's  offering of the stock
performance  bonus feature may  constitute an  unregistered  public  offering of
securities.  Accordingly, the Company has made an undertaking to notify all LCEs
to which the stock performance feature applies that the Company will not deliver
shares of its common  stock in payment of the  performance  bonus,  but that the
performance bonus will be paid in cash.

<PAGE> 9

The Company ceased offering LCEs in April 1999 as a result of the agreement with
LFT.

Previous Business-

The Company was previously engaged in the resale of long-distance  telephone and
pay-per-view ("PPV") television services and products ("Telecommunications") and
in the healthcare cost containment business  ("Healthcare").  As of December 31,
1998, the Company had sold, abandoned, discontinued or otherwise disposed of its
telecommunications  businesses and was engaged,  solely,  in the healthcare cost
containment business.  After the Reorganization and Merger Agreement,  which was
effective as of March 19, 1999,  and the transfer of the Company's then existing
business,  properties  and assets to IHSI,  the Company is now engaged solely in
the business of an internet business-to-business search engine.

The following is a description of the Company's business for the past five years
and prior to giving effect to the  Reorganization  and Merger Agreement.  All of
the Company's business,  properties and assets at the time of the Reorganization
and Merger  Agreement  were  transferred to IHSI for a spin-off to the Company's
stockholders.

Healthcare-

The  Company  entered  the  healthcare  cost   containment   business  with  the
acquisition  of  National  Solutions  Corporation  ("NSC") in 1995.  The Company
pursued  development  for  commercial  use  of  licensed  healthcare  management
information  systems technology  designed to manage the healthcare benefit costs
of large  self-insured  companies.  The Company licensed the systems  technology
under a Cooperative  Research and Development  Agreement  ("CRDA") with the U.S.
Army.  The licensed  technology  was a part of the  Civilian  Health and Medical
Program for the Uniformed  Services  ("Champus")  program  developed by the U.S.
Armed Services.  The Company suspended development of the licensed technology in
June 1997 and the CRDA  expired in June 1998.  The Company  attempted to augment
its  healthcare  cost  containment  business  with  the  acquisition  of  Health
Management Technologies ("HMT"), in March 1996, whose principal business was the
development,  sale and  maintenance  of  medical  management  PC based  computer
software but disposed of that business in a rescission transaction in June 1997.

After  suspension of development of the licensed  technology  acquired under the
CRDA and the  disposition of HMT, the Company  redirected its business  strategy
and began to develop a network of other  healthcare  management  companies that,
collectively,  offered a wide  array of  healthcare  cost  containment  and case
management services and products for resale by the Company to large self insured
companies on a fee income or revenue sharing basis.

The Company initiated this strategy in 1997, beginning with a strategic alliance
agreement  (the  "Alliance  Agreement")  between the Company and HMG Health Care
Claims Auditing,  Inc. ("HMG"). The strategic alliance with HMG gave the Company
the ability to, among other things,  provide  electronic review and reporting of
health care claims paid and on an ongoing basis to identify duplicate, erroneous
or medically  inconsistent  charges,  payments for ineligible patients and other
responsible  party  liabilities  from other  group  benefit  programs,  workers'
compensation coverage, motor vehicle or third party liability coverage, payments
for non-covered  services,  misapplied  deductibles and co-payments and provider
agreement compliance.

<PAGE> 10

In 1998, HMG, as the Company's  alliance partner,  and the Company  negotiated a
service agreement (the "Service Agreement") with Chrysler Corporation to perform
retrospective  analysis and recovery  services  for  pharmaceutical  claims paid
during 1998 by the auto maker.  Pursuant to the Service  Agreement  and Alliance
Agreement,  the  Company  and HMG were to  receive a monthly  fee of $4,000  and
$12,000, respectively,  from the auto maker and were to share on a 50%-50% basis
twenty percent (20%) of claims  recovered,  up to $5,000,000 of recovered claims
in the aggregate. HMG began performance under the Service Agreement in May 1998.
Amounts  payable to the Company under the Alliance  Agreement are being withheld
pending  HMG's  performance  under the Service  Agreement and were a part of the
assets  transferred  to IHSI in connection  with the  Reorganization  and Merger
Agreement.  As of the date  hereof,  it is  uncertain  whether  or not IHSI will
derive any revenues from this agreement.

The Company had also entered  into an alliance  agreement  with Haddon  National
Companies,  Inc.  located  in  Maple  Shade,  NJ  ("HNCI")  and had an  alliance
agreement with a major pharmaceutical manufacturer.  The alliance agreement with
HNCI  gave  the  Company  the   ability  to  sell  and  market   HNCI's   claims
administration  and processing  services,  medical and surgical cost containment
services  and  Medicare  A and  B  validation  services  to  large  self-insured
corporations,  third party administrators,  commercial health insurers and other
managed  healthcare  companies.  The  alliance  with  the  major  pharmaceutical
manufacturer  allowed  the  Company  to sell  and  market  the  healthcare  cost
containment  products  of its  other  alliance  partners  to the  pharmaceutical
manufacturers'  customers.  As of the  date  of the  Reorganization  and  Merger
Agreement,  the Company had not realized any benefits  from these  alliances and
such benefits, if any, are to be realized by IHSI.

Telecommunications-

As described above, the Company entered the telecommunications  business in 1994
with   its   acquisitions   of  ATI   and   CCI  and   further   augmented   its
telecommunications  businesses in 1995 with the  acquisition  of TNI and certain
other resellers of  telecommunications  products and services.  These businesses
were engaged in the switch-less  resale of long-distance  telephone  services to
residential  and small  business  customers and the sale of PPV  television  and
long-distance  telephone  products,  principally  to the  hospitality  industry.
Following  each of  these  acquisitions,  the  acquired  businesses  experienced
diminishing revenues and continued to incur operating losses. Consequently,  the
Company  decided to dispose of or otherwise  discontinue the operations of those
businesses. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the notes to the  consolidated  financial  statements
included elsewhere herein.

Employees-

Following completion of the Reorganization and Merger Agreement, the Company had
15 employees and 5 contract programmers on staff.

ITEM 2.  PROPERTIES.

The Company does not own any properties. All office space is leased and consists
of  approximately  1,420 square feet, in the case of its  facilities  located in
Cucamonga,  CA,  and  approximately  1,450  square  feet,  in  the  case  of the
facilities occupied by IHSI. The facilities occupied by IHSI were transferred to
IHSI in connection with the  Reorganization  and Merger Agreement and a separate
lease was executed.  Accordingly,  the Company has no future  obligations  under
that lease. The Company believes that its leased facilities are adequate for its
current needs and that  additional  suitable  facilities  will be available,  as
required.

ITEM 3.  LEGAL PROCEEDINGS.

As of December  31,  1998,  the Company was subject to an  Involuntary  Petition
under Chapter 7 of the U.S. Bankruptcy Code (the "Petition"). The Petition was

<PAGE> 11

filed against the Company on June 1, 1998 in the United States  Bankruptcy Court
for the Middle District of Florida (Case No. 98-09299-8P7). The Petition did not
include  any  of the  Company's  subsidiaries.  On  April  20,  1999,  the  U.S.
Bankruptcy Court issued an order dismissing the Petition.

The  Company  was  also  subject  to  various  other  legal  and  administrative
proceedings.  As of December  31,  1998,  the  Company  had accrued  liabilities
totaling  approximately  $1.4  million for loss  contingencies  related to these
proceedings.  Amounts  provided,  as of December 31, 1998, are estimates and, as
such, are subject to change upon final resolution.  Certain of these proceedings
were settled subsequent to December 31, 1998 for less than accrued amounts.  For
a more complete discussion of legal proceedings, see Note 14 to the consolidated
financial statements included elsewhere herein.

On May 13, 1999, May 16, 1999 and June 11, 1999,  separate putative class action
suits were filed against the Company,  Mr. Steve Bradford and Mr. Dorian Reed in
the United States  District  Court,  Central  District of California  (Case Nos.
99-5060,  99-5151R and  99-6925R,  respectively),  involving the purchase of the
Company's  securities during periods  specified in the complaints.  On September
20, 1999, the Court entered an order  consolidating  the three lawsuits into one
and appointing the lead plaintiff and lead counsel for the consolidated  lawsuit
(the "Consolidation  Order").  Pursuant to the Consolidation  Order, on or about
October 8, 1999,  a single  consolidated  amended  class action  complaint  (the
"Amended  Complaint") was filed by the plaintiffs in the  consolidated  putative
class action under Case No. 99-5060R.

The  Amended  Complaint  seeks to assert  claims for  violations  of the federal
securities  laws  against the Company  and  Messrs.  Bradford  and Reed based on
alleged  misrepresentations  and  omissions  of  fact  purportedly  made  in the
Company's press releases and certain SEC filings during the period from February
17, 1999 through August 24, 1999 (the "Class  Period").  The Defendants  believe
the claims to be without merit and intend to vigorously contest the lawsuit.  On
November 10, 1999, a motion to dismiss the Amended Complaint was filed on behalf
of the Company and Messrs.  Bradford  and Reed.  All  discovery is stayed in the
matter pending  disposition of the motion to dismiss.  A decision on such motion
is not  expected  until  later this year or early  2000.  It is not  possible to
predict  the likely  outcome of these cases or the  likelihood  or amount of any
losses,  if any, in the event of an adverse outcome.  No provision has been made
in the accompanying financial statements related to these matters.

The Company has filed a Complaint,  against one  identified  and five  anonymous
internet posters for Libel,  Tortious  Interference with Business  Relations and
Civil Conspiracy, in the United States District Court for the Middle District of
Florida. The Complaint,  entitled Hitsgalore.com,  Inc. v. Janice Shell, et al.,
Case NO.  99-1387-CIV-T-26C,  seeks damages in excess of twenty million dollars.
The  Complaint  alleges  that,  beginning  at least as  early as May  1999,  the
Defendants  intentionally and maliciously published and republished a variety of
false and  defamatory  statements  about  Hitsgalore.com,  Inc. in a  nationwide
"cybersmear"  campaign on  electronic  bulletin  boards on the  internet.  These
statements  either  explicitly  stated or implied  that the  Company  engaged in
illegitimate,  illegal, dishonest,  fraudulent and criminal business operations,
when,  in truth and fact,  the  Defendants  knew or should  have known that such
statements  were false and libelous per se. At the present time,  the Company is
seeking to ascertain the identity of the anonymous Defendants through discovery.

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

There were no matters  submitted to a vote of security holders during the fourth
quarter of 1998 or during the first three quarters of 1999.

See "Business - Absence of Stockholder Approval of the Merger".

<PAGE> 12

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.

Prior to the Reorganization and Merger Agreement, the Company's common stock was
quoted  under the stock  symbol  "SCMI" on the OTC  Bulletin  Board and over the
counter market. Upon completion of the Merger and Reorganization  Agreement, the
Company's  common  stock was  quoted  under the stock  symbol  "HITS" on the OTC
Bulletin  Board and over the counter  market.  Beginning  on April 7, 1999,  the
Company's  common  stock is  quoted  under the  stock  symbol  "HITT" on the OTC
Bulletin Board and over the counter  market.  The following table sets forth the
approximate  high and low bid quotations for the Company's Common Stock for each
quarter during the last two years.  Such high and low bid  quotations  have been
adjusted for the reverse  stock split,  in the ratio of one share for each seven
shares,  declared effective as of the close of business on March 18, 1999. These
bid quotations  are  inter-dealer  prices  without  retail markup,  mark-down or
commission, and may not represent actual transactions.

Quarter ended          High bid       Low bid
-------------         ----------     ---------
March 31, 1997        $ 10.50       $ 10.0625

June 30, 1997            2.1875        1.19675

September 30, 1997       2.84375       1.3125

December 31, 1997        2.40625       1.3125

March 31, 1998           3.9375        0.91

June 30, 1998            2.31          0.63

September 30, 1998       0.98          0.14

December 31, 1998        0.63          0.07

The high and low bid quotations for the Company's  common stock on September 30,
1999 were $2.0625 and $1.9375 per share, respectively.

There are no  restrictions  on the  declaration  or payment of  dividends or any
provisions that restrict  dividends.  The payment by the Company of dividends in
the future rests within the  discretion of the Company's  Board of Directors and
will  depend,  among other  things,  upon the  Company's  earnings,  its capital
requirements, its financial condition and other relevant factors.

The Company has not paid any  dividends  on its common  stock.  Effective  as of
October 30, 1998, the Company declared a dividend in kind to its stockholders of
300,000 shares of common stock of Intelicom  International  Holding,  Inc.; and,
effective  as of April 6, 1999,  the Company  declared a dividend in kind to its
stockholders of 20,000,000  shares of common stock of  International  Healthcare
Solutions,  Inc. Distribution of these dividends is subject to the effectiveness
of registration  statements under the Securities Act of 1933, as amended,  which
are to be filed by  IHSI.  There is no  assurance  as to  whether  or not  these
dividends  will be  distributed  to the  stockholders  entitled  to receive  the
dividends.

As of September 30, 1999, the Company had approximately 665 registered owners of
its common stock and approximately 4,000 shareholders.

<PAGE> 13

ITEM 6.  SELECTED FINANCIAL DATA.

The following selected  historical and pro forma financial data has been derived
from the financial statements and pro forma information of Hitsgalore.com,  Inc.
(a development stage enterprise),  formerly Systems Communications,  Inc., as of
December 31, 1998 and for the period from inception  (July 21, 1998) to December
31, 1998, included elsewhere herein. Hitsgalore.com,  a Nevada corporation ("Old
Hitsgalore.com"),  was merged into the  Company,  effective as of March 19, 1999
and  the  Company  changed  its  name to  Hitsgalore.com,  Inc.  For  accounting
purposes,   the  acquisition  of  Old  Hitsgalore.com  has  been  treated  as  a
recapitalization of Old Hitsgalore.com, with Old Hitsgalore.com as the acquirer.
As a result of the merger, the historical financial statements and operations of
Old Hitsgalore.com became those of the Company. The following selected pro forma
information includes adjustments to retroactively  reflect the equivalent number
and par value of the shares of the Company's common stock issued and outstanding
after giving  effect to the merger and the  obligations,  debts and  liabilities
assumed  in the  merger.  The pro forma  operations  and per  share  data of the
Company,  as set forth  herein,  are not  necessarily  indicative  of the future
operations of the Company. See "Item 1 - Business".


INCOME STATEMENT DATA:

                                               For the Period from Inception
                                                    to December 31, 1998
                                               -----------------------------
                                                Historical        Pro Forma
                                               ------------     ------------
Net revenues                                  $      17,779    $      17,779
Net income                                            1,007            1,007
Basic earnings per share                               0.07              --
Diluted earnings per share                             0.06              --


BALANCE SHEET DATA:
                                                      December 31, 1998
                                                   -----------------------
                                                   Historical    Pro Forma
                                                   ----------    ---------
Current assets                                    $     1,984  $    20,713
Current liabilities                                    30,727    3,293,360
Total assets                                           31,734       50,463
Total liabilities                                      30,727    3,293,360
Stockholders' equity (deficit):
 Convertible preferred stock                             --        109,764
 Common stock                                            --         45,187
 Additional paid in capital                              --           --
 Retained earnings (deficit)                            1,007   (3,397,848)
Total Stockholders' equity                              1,007   (3,242,897)


The following  tables set forth selected  financial data of the Company for each
of the five years in the period ending  December 31, 1998,  before giving effect
to the Reorganization  and Merger Agreement.  Pursuant to the Reorganization and
Merger Agreement, (a) the Company transferred its existing business,  properties
and assets to International Healthcare Solutions,  Inc. ("IHSI") and caused IHSI
to assume the  obligations,  debts and liabilities of the Company and, then, (b)
Old  Hitsgalore.com was merged into the Company and the Company changed its name
to Hitsgalore.com, Inc.

<PAGE> 14

The Company also declared a reverse split of its issued and  outstanding  common
stock, in the ratio of one share for each seven shares, immediately prior to the
merger.

The selected  financial  data for the years ended December 31, 1997 and 1996 has
been restated to (i) reflect the operations,  assets and liabilities of CCI, and
related acquisition  indebtedness,  in the consolidated financial statements and
(ii) to value the shares of common stock  returned to the Company in  connection
with rescinded business  acquisitions at their fair market value on the dates of
the  respective  rescission  transactions  (see  Note  19  to  the  consolidated
financial statements included elsewhere herein). Earnings per share data for all
periods  presented  has  been  restated  to  reflect  the  reverse  split of the
Company's  common  stock,  in the  ratio of one  share  for each  seven  shares,
declared  effective  as of March 18, 1999.  These  tables  should be reviewed in
conjunction  with the  consolidated  financial  statements  of the Company as of
December  31,  1998 and for each of the  three  years  then  ended and the notes
thereto appearing elsewhere herein.
<TABLE>
<CAPTION>


INCOME STATEMENT DATA:
                                          Year Ended December 31,
                         -----------------------------------------------------------
                           1998        1997          1996         1995        1994
                        ---------    ---------    ----------    ---------    -------
<S>                   <C>          <C>          <C>            <C>         <C>
Net revenues          $   123,487  $ 1,498,533  $  2,832,123   $   91,106  $    --
Loss from
 continuing operations
 before income taxes   (1,034,428)  (3,644,074)  (20,488,639)  (2,004,228)   (78,233)
Loss from continuing
 operations              (772,428)  (3,038,574)  (18,048,489)  (1,989,104)   (78,233)
Income(loss) from
 operations of
 discontinued
 telecommunications
 businesses               246,243      391,752    (1,508,179)  (3,818,921)   (50,769)
Gain from disposition
 of discontinued
 telecommunication
 businesses                 --         596,648         --           --          --
                        ---------    ----------    ---------     -------     -------
Loss before
 extraordinary item      (526,185)  (2,050,174)  (19,556,668)  (5,808,025)  (129,002)
Extraordinary item        181,228        --            --           --          --
                        ---------    ---------    ----------    ---------    -------
Net loss              $  (344,957) $(2,050,174) $(19,556,668) $(5,808,025) $(129,002)
                        =========    =========    ==========    =========    =======
Basic earnings per share:
 Loss from continuing
  operations          $     (0.27) $     (1.97) $     (15.13) $     (4.35) $   (0.42)
 Income(loss) from
  operations of
  discontinued
  telecommunications
  businesses                 0.09         0.25         (1.26)       (8.35)     (0.27)
Gain from disposition
 of discontinued
 telecommunication
 businesses                  --           0.39           --           --         --
Extraordinary item           0.06          --            --           --         --
                        ---------   ----------      --------      -------    -------
Net loss              $     (0.12) $     (1.33)  $    (16.40) $    (12.70) $   (0.69)
                        =========   ==========     =========    =========  =========

</TABLE>

<PAGE> 15

<TABLE>
<CAPTION>

INCOME STATEMENT DATA (CONTINUED):

                                          Year Ended December 31,
                         -----------------------------------------------------------
                           1998         1997          1996         1995       1994
                        ---------    ---------     ---------    ---------  ---------
<S>                     <C>          <C>           <C>          <C>        <C>
Weighted average number
 of common shares
 outstanding            2,813,704    1,543,158     1,192,780      457,427    186,642
                        =========    =========     =========    =========  =========

</TABLE>


<TABLE>
<CAPTION>

BALANCE SHEET DATA:
                                               December 31,
                        ---------------------------------------------------------
                           1998       1997         1996        1995        1994
                        ---------   ---------    ---------  ----------    -------
<S>                   <C>         <C>          <C>         <C>          <C>
Current assets        $   239,660 $   256,883  $ 1,403,881 $ 4,156,868  $ 442,069
Current liabilities     4,395,567   7,028,193    8,208,138   5,417,864    652,107
Total assets              484,310     388,194    5,847,300  21,545,654    780,222
Long-term liabilities     231,617     310,794    1,207,488   4,597,671     77,750
Common stock subject
 to rescission            674,124     674,124      709,124     789,624       --
Common stock to be
 issued                      --          --      2,000,000   2,000,000       --
Stockholders' equity
 (deficiency in
 assets)               (4,816,998) (7,624,917)  (6,277,450)  8,740,495     50,365

</TABLE>










                         [REMAINDER OF PAGE LEFT BLANK]

<PAGE> 16

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The  following  discussion  and analysis of financial  condition  and results of
operations  is presented in two parts.  Part I is for the Company,  after giving
effect  to  the   Merger  and   Reorganization   Agreement.   Pursuant   to  the
Reorganization  and Merger Agreement,  (a) the Company  transferred its existing
business,  properties and assets to  International  Healthcare  Solutions,  Inc.
("IHSI") and caused IHSI to assume the obligations, debts and liabilities of the
Company and,  then, (b) Old  Hitsgalore.com  was merged into the Company and the
Company  changed  its name to  Hitsgalore.com,  Inc.  The stock of IHSI was then
placed into a constructive  trust and is to be distributed as a dividend in kind
to the Company's  stockholders.  Distribution of the dividend in kind is subject
to the  effectiveness  of a registration  statement  under the Securities Act of
1933,  which is to be filed by IHSI, of which there is no assurance (see "Item 1
-  Business").  The  effect of the  assumption  of such  obligations,  debts and
liabilities  is that  both  the  Company  and  IHSI are  jointly  and  severally
obligated. Until all of such obligations, debts and liabilities are satisfied or
the Company is released in full,  the Company is to have a security  interest in
the assets transferred to IHSI. The Company also declared a reverse split of its
issued and  outstanding  common stock,  in the ratio of one share for each seven
shares,  immediately prior to the merger. For accounting purposes, the merger of
Old  Hitsgalore.com  into the Company was treated as a  recapitalization  of Old
Hitsgalore.com,  with Old  Hitsgalore.com  as the  acquirer.  As a result of the
merger, the historical financial statements and operations of Old Hitsgalore.com
became those of the Company.  On a pro forma basis as of December 31, 1998,  the
liabilities  assumed in connection with the  Reorganization and Merger Agreement
totaled  approximately  $3.3 million and the assets  transferred to IHSI totaled
approximately $466,000, net of cash (see "Item 1 - Business").


Part II of the  discussion  and analysis of financial  condition  and results of
operations  is  for  the  Company   before  giving  effect  to  the  Merger  and
Reorganization.

Included  elsewhere  herein  is  pro  forma  information  giving  effect  to the
Reorganization and Merger Agreement as if the acquisition  (reverse merger) took
place on the date of inception  (July 21, 1998) of Old  Hitsgalore.com.  The pro
forma condensed  balance sheet  information as of December 31, 1998 includes pro
forma  adjustments to record the obligations,  debts and liabilities  assumed by
IHSI and for which the  Company  is jointly  and  severally  obligated,  and the
number and par value of the shares of common stock issued and outstanding  after
giving  effect to the Merger and  Reorganization  Agreement.  No effect has been
given to the use of proceeds, if any, from the exercise of common stock purchase
options,  warrants  and other  rights to purchase  the  Company's  common  stock
outstanding  as of the  date of the  merger.  The  proceeds,  if any,  from  the
exercise of such options,  warrants and other rights are to be used,  subject to
certain limitations, to reduce or liquidate the liabilities assumed by IHSI.

Part I

As a result of the merger of Old Hitsgalore.com into the Company, the Company is
now engaged in the business of an internet,  business-to-business  search engine
(see "Item 1 - Business").

For the  period  from  inception  (July 21,  1998) to  December  31,  1998,  Old
Hitsgalore.com  was  principally  engaged in the  development  of  software  for
business-to-business  internet commerce. Its website was launched in August 1998
and, at that time, it began  generating  revenues from the sale of sponsorships.
Net revenues for the period from inception to December 31, 1998

<PAGE> 17

were approximately $17,800. During this same period, Old Hitsgalore.com incurred
total costs and expenses of approximately $16,500, consisting primarily of sales
and occupancy expenses.

Part II

Results of Operations

The following tables set forth certain information derived from the consolidated
financial  statements of the Company before giving effect to the  Reorganization
and Merger  Agreement.  The  results  from  continuing  operations  include  the
operations of the Company and its healthcare cost containment  businesses;  and,
the results from discontinued businesses include the operations of the Company's
discontinued  telecommunications  businesses, all of which were sold, abandoned,
discontinued or otherwise disposed of in 1996 and 1997. The following discussion
should be read in conjunction with the consolidated  financial statements of the
Company as of  December  31,  1998 and for each of the three years in the period
then ended and notes thereto, appearing elsewhere herein.

                                                  Year Ended December 31,
                                            ----------------------------------
                                              1998        1997        1996
                                            ---------   ---------   ----------
Operations of continuing businesses:
 Net revenues                             $   123,487 $ 1,498,533  $ 2,832,123
 Cost of revenues                              74,092     109,563      827,063
 Selling and administrative
  expenses                                  1,244,391   3,027,384    6,322,627
 Impairment and other losses                   84,276   1,898,953   14,233,953
 Depreciation and amortization                 23,647     497,377    1,459,436
 Loss from disposition of subsidiary             --    (1,595,412)       --
 Gain from sale of license agreement             --     2,695,214        --
 Interest income                                  892       4,070        8,183
 Interest expense                             212,842     587,884      381,975
 Other income (expense), net                  480,441    (125,318)    (103,891)
 Income (loss) from continuing operations
  before income taxes                      (1,034,428) (3,644,074) (20,488,639)

Operations of discontinued
 businesses:
  Net revenues                                   --       405,617    2,177,858
  Cost of revenues                               --          --      1,320,256
  Selling and administrative expenses            1,308    449,925    2,304,059
  Impairment and other losses                    --          --        494,901
  Depreciation and amortization                  --        47,460      291,291
  Interest income                                --          --           (971)
  Interest expense                               --        32,393       38,713
  Other income (expense), net                 398,551     755,913          832
  Income (loss) from operations of
   discontinued businesses
   before income taxes                        397,243     631,752   (2,271,223)


<PAGE> 18

Operations of Continuing Businesses as of December 31, 1998-

Net revenues

Net revenues for the year ended  December  31, 1998 were  $123,487,  compared to
$1,498,533 in 1997 and  $2,832,123 in 1996. The decrease in net revenues in 1998
as  compared  to 1997 was due to the  disposition  of HMT,  together  with lower
revenues from healthcare cost  containment  agreements.  The net revenues of HMT
included in the consolidated  financial  statements were $1,311,055 in 1997. The
Company  had  no  comparable  revenues  from  HMT in  1998.  Net  revenues  from
healthcare  cost  containment  agreements  were  $123,487 in 1998 as compared to
$187,478 in 1997.  These  revenues  consisted of residual  revenues from expired
healthcare cost containment agreements.  The expiration of these healthcare cost
containment  agreements  was also the  principal  factor in the  decrease in net
revenues in 1997 as compared to 1996. Net revenues from these agreements in 1996
were $1,574,825.  The net revenues of HMT included in the consolidated financial
statements  were $1,257,298 in 1996 versus  $1,311,055 in 1997,  which partially
offset the decline in the revenues from healthcare cost containment agreements.

As of December  31,  1998,  the Company had not  realized  any  healthcare  cost
containment  revenues from its alliance agreement with HMG Health Care Auditing,
Inc. ("HMG") or from the pharmaceutical  cost containment  agreement between HMG
and Chrysler Corporation.  Under the terms of these agreements,  the Company and
HMG were to share  approximately  $1,192,000 in net revenues upon  completion of
the  cost  recovery  phase  of the  cost  containment  agreement,  which  covers
pharmaceutical  claims  paid by the auto  maker for the 1998  fiscal  year.  The
Company's   share  of  these  net  revenues  was  originally   estimated  to  be
approximately  $500,000.  As of the date hereof,  it is uncertain whether or not
the  Company  will  receive any  revenues  from these  agreements.  The right to
receive  revenues,  if any, from these  agreements  were  transferred to IHSI in
connection with the Reorganization and Merger Agreement.

Cost of revenues

Cost of revenues  were  related to revenues  from  healthcare  cost  containment
agreements and vary based on the terms of cost sharing  arrangements between the
Company and other  service  providers.  Cost of revenues as a percentage  of the
related  healthcare  cost  containment  revenues were 60.0%,  58.4% and 52.5% in
1998,  1997 and 1996,  respectively.  The  increases  in the cost of revenues as
compared to net revenues were the result of such cost sharing arrangements.

Selling, general and administrative expenses

Selling,  general and  administrative  expenses were $1,244,391,  $3,027,384 and
$6,322,627 for the years ended December 31, 1998,  1997 and 1996,  respectively.
The principal  reasons for the decrease in selling,  general and  administrative
expenses  in 1998 versus  1997 were the  effects of the  disposition  of HMT and
reduced costs, in general, from the downsizing of the Company's operations which
began in early 1997. The disposition of HMT had the effect of reducing  selling,
general and  administrative  expenses in 1998 by  approximately  $1.1 million as
compared to 1997.

The decrease in selling and administrative  expenses in 1997 as compared to 1996
was principally due to the effects of the disposition of HMT on the year to year
comparison and the consolidation and  reorganization of the Company's  remaining
business operations.  The disposition of HMT had the effect of reducing selling,
general  and  administrative  expenses  in 1997  versus  1996  by  approximately
$443,000.  After  the  effect  of the  disposition  of HMT on the  year  to year
comparison,   selling  and   administrative   expenses  in  1997   decreased  by
approximately $2.9 million as compared to 1996. This decrease

<PAGE> 19

principally  reflects  the  elimination  of  substantially  all of the  selling,
general and administrative  expenses of NSC as a result of (i) its suspension of
activities  related  to the  development,  sale and  marketing  of its  licensed
healthcare management information systems technology, (ii) the retirement of NSC
management and termination of all of NSC's employees and (iii) the consolidation
of NSC's Texas and Florida operations and facilities into the Company.

Impairment and other losses

Impairment and other losses were $84,276,  $1,898,953  and  $14,233,953 in 1998,
1997 and 1996,  respectively.  Impairment  losses  recognized in 1998 included a
provision of $151,500 for the termination of noncancellable lease agreements and
the write off of certain long-lived  healthcare assets,  which were no longer in
use.  These losses were partially  offset by  adjustments to previously  accrued
loss reserves.

Impairment and other losses recognized in 1997 included, among other things, (i)
the write-off of equipment  under capital lease and certain other assets related
to  equipment  under  capital  lease,  totaling  approximately   $768,545,  (ii)
provisions for lease termination  liabilities,  totaling approximately $227,860,
related to office  space that has been  vacated  and leased  equipment  that the
Company is no longer  using (iii) a  provision  of $162,053  for  settlement  of
actions  brought  against the Company by Timboon,  LTD (see Note 7) and (iv) the
write-off of $625,728 of deferred compensation assets (see Note 13).

As a result of the suspension of all activities related to the development, sale
and  marketing  of NSC's  licensed  healthcare  management  information  systems
technology,  the Company recognized an impairment loss of $14,233,953 in 1996 to
write off all of NSC's intangible assets, including goodwill.

Depreciation and amortization

The  decreases  in  depreciation  and  amortization   from  year  to  year  were
principally  due to the disposition of HMT in June 1997, the removal in December
1997 of repossessed capital lease assets from the Company's consolidated balance
sheet  and the  write  off in 1996  of  intangibles  and  goodwill  recorded  in
connection with the acquisition of NSC.

Interest expense

Interest  expense was  $212,842,  $587,884 and $381,975 in 1998,  1997 and 1996,
respectively.  The decrease in interest  expense in 1998 as compared to 1997 was
principally  due  to the  effects  of  lower  aggregate  amounts  of  notes  and
debentures outstanding during the respective periods and the removal in December
1997 of capital lease liabilities,  related to repossessed  leased assets,  from
the Company's  consolidated  balance sheet.  The increase in interest expense in
1997 over  1996 was  principally  the  result  of  higher  levels of  borrowings
outstanding  during  1997 as  compared  to 1996 and an  increase  the  Company's
average effective borrowing rate.

Other items

In  1998,   the  Company   reactivated  a  dormant,   wholly  owned   subsidiary
("Intelicom")  for the  purposes  of  divesting  ownership  and  control  of the
subsidiary in connection  with the  acquisition by the subsidiary of one or more
telecommunications  businesses. A majority of ownership and control in Intelicom
was sold to a group of outside  managers and investors and the Company  received
cash of  $100,000,  which  is  included  in  other  income  in the  accompanying
consolidated statement of operations for the year ended December 31, 1998. As of
December 31, 1998, the Company owned approximately 15% of

<PAGE> 20

Intelicom  which was  transferred  to IHSI in  connection  with the  Merger  and
Recapitalization  Agreement.  The  Company's  investment  in  Intelecom  had  no
accounting  basis.  Results of operations  for the year ended  December 31, 1998
also included  other income of  approximately  $380,029  from the  settlement of
liabilities previously accrued under an employment agreement between the Company
and its  former  CEO  (see  Note  13 to the  consolidated  financial  statements
included elsewhere herein).

Results of operations  for the year ended December 31, 1997 included a loss from
the  disposition of HMT of $1,595,412,  a gain of $2,695,214  from the sale of a
license  agreement and financing fees of approximately  $120,000 (see Notes 4, 5
and 7 to the consolidated  financial  statements included elsewhere herein). The
disposition  of HMT resulted in a non-cash loss which was  principally  due to a
decrease in the Company's  stock price from the date of its  acquisition  to the
date of the rescission transaction.

Income Taxes

Income tax benefits  applicable to continuing  operations were 16.6%,  12.2% and
11.9% of  pre-tax  loss  from  continuing  operations  in 1998,  1997 and  1996,
respectively.  The principal  reasons for the differences  between the effective
income tax rate and the  Federal  statutory  income tax rate were the effects of
the change in the net deferred tax asset valuation allowance and the tax effects
in 1997 and 1996 of rescinded  business  acquisitions and impairment  losses. No
provisions for taxes  currently  payable were made in 1998,  1997 or 1996. As of
December 31, 1998, the Company's  deferred tax assets  exceeded its deferred tax
liabilities by approximately $3.9 million,  for which the Company had provided a
valuation allowance.

Operations of Discontinued Businesses as of December 31, 1998-

In 1998 and 1997, the Company had income from  discontinued  operations,  before
income taxes, of approximately  $397,243 and $631,752 respectively and, in 1996,
had a loss from discontinued  operations,  before income taxes, of approximately
$2,271,223.

The results of operations of discontinued businesses for the year ended December
31, 1998 included a gain of  approximately  $398,521 from the  cancellation  and
partial  recovery of the $500,000  note  receivable  issued to TNI in connection
with the sale of  certain of its assets to  International  Teledata  Corporation
("ITD") in 1997. The  cancellation  and partial recovery of the note receivable,
which was fully  reserved by TNI as of the date of its  issuance by ITD, was the
result of the transfer, in 1998, of the assets acquired by ITD to certain former
employees  of the  Company  and  TNI.  (see  Notes 5 and 13 to the  consolidated
financial  statements  included elsewhere  herein).  In 1998, the Company had no
revenues from its discontinued telecommunications businesses.

The results of operations of discontinued businesses for the year ended December
31, 1997 included other income of approximately  $750,000 from the settlement of
an  arbitration  proceeding  between  TNI and a provider  of  telecommunications
services  to TNI.  Excluding  this  item,  the  pre-tax  loss  of the  Company's
discontinued  telecommunications businesses for the year ended December 31, 1997
was approximately  $118,000,  compared to approximately  $2,271,000 for the year
ended December 31, 1996, a decrease of approximately $2,153,000, on net revenues
of $405,617 and  $2,177,858,  respectively.  The decrease in the pre-tax loss of
the  Company's  discontinued  telecommunications  businesses  for the year ended
December 31, 1997 as compared to 1996 was  principally  due to the effect on the
year to year comparison of the discontinuance of TNI's operations,  effective as
of  December  31,  1996.  In 1996,  the  pre-tax  loss of TNI was  approximately
$1,792,795 as compared to approximately  $48,039 in 1997. The remaining decrease
in the pre-tax loss was

<PAGE> 21

principally  due to the effect on the year to year comparison of the disposition
of ATI.

Gain from disposition of telecommunications businesses-

In 1997,  the Company  recognized  gains,  before  applicable  income taxes,  of
approximately  $25,000  and  $937,148  from the  disposition  of  certain of its
telecommunication   assets  and  from  the   rescission   of  the  ATI  business
acquisition,  respectively (see Note 4 to the consolidated  financial statements
included elsewhere herein).

Extraordinary item-

Effective  March 31, 1998,  the Company  redeemed  its $450,000 10%  convertible
debentures  payable to the former  stockholders  of TNI in exchange  for 893,278
shares of its common  stock and 450,000  common  stock  purchase  warrants.  The
carrying amount of the debt  extinguished  exceeded the fair value of the common
stock and warrants issued in exchange for the debt by $292,228.  This amount was
reflected  as an  extraordinary  gain  from  the  extinguishment  of debt in the
accompanying consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

Over the past three fiscal years,  the principal  sources of liquidity have been
derived from financing  activities.  In fiscal 1998,  1997 and 1996, the Company
received cash of approximately $57,000, $232,000 and $2.2 million, respectively,
from  the  issuance  of its  common  stock in  reliance  upon  exemptions  under
Regulation D of the  Securities  Act of 1933 and  approximately  $307,600,  $1.6
million and $2.4 million,  respectively,  from the issuance of convertible notes
and debentures  payable.  All share data has been restated for the one share for
each seven shares  reverse  stock split  declared  effective  March 18, 1999. In
1997,  the  Company  also  received  cash of  approximately  $371,000  from  the
disposition of businesses, net of cash of businesses disposed of.

Payments on notes,  debentures and capital leases during the respective  periods
were  approximately  $94,600,  $687,000 and $638,000.  In 1997, the Company also
used  approximately  $75,000  and  $35,000  in  cash,  respectively,   to  repay
borrowings  outstanding  under lines of credit and for the  repurchase of common
stock subject to rescission; and, in 1996 used cash of approximately $80,500 for
the repurchase of common stock subject to rescission.  Capital expenditures were
$2,820, $7,693 and $552,718 in 1998, 1997 and 1996, respectively.

The proceeds from financing  activities were used  principally to fund operating
losses.  In 1998,  1997 and 1996,  the  Company  used net cash of  approximately
$314,507, $1.4 million and $4.2 million,  respectively, in operating activities.
See the consolidated statements of cash flows.

Over the past  several  years,  the Company has incurred  substantial  operating
losses;  and,  at  December  31,  1998,  the  Company  had an  excess  of  total
liabilities  over total  assets of  approximately  $4.8 million and an excess of
current  liabilities  over current assets of approximately  $4.2 million.  These
factors,  among  others,  required  that the Company  cease  development  of its
licensed healthcare management information systems technology and sell, abandon,
discontinue  or  otherwise   dispose  of  substantially  all  of  its  operating
businesses. As of December 31, 1998, the Company did not have any used or unused
lines of credit or any other committed and unused financing facilities.

The  Company  and its  subsidiaries  are  also  subject  to  various  legal  and
administrative  proceedings that may adversely  affect future cash flows.  These
actions and administrative proceedings arose from business acquisitions,

<PAGE> 22

disputes  with  certain  persons  formerly  associated  with the Company and its
subsidiary  companies as  employees  or who were under  contract in a consulting
capacity and from defaults under certain non-cancelable lease agreements.  As of
December 31, 1998, the Company had accrued  liabilities  totaling  approximately
$1.4 million for such loss  contingencies.  Amounts  provided as of December 31,
1998 were estimates and, as such, are subject to change upon final resolution of
the proceedings.  However, the Company does not believe that resolution of these
matters  will have a  material  adverse  effect on the  financial  condition  or
results of operations of the Company. As a part of the Reorganization and Merger
Agreement,  IHSI assumed all  obligations  related to such  proceedings  and has
indemnified  the Company for such  obligations.  The Company is also  subject to
certain  class  action  proceedings  involving  the  purchase  of the  Company's
securities in periods following the Merger (see "Item 3 - Legal Proceedings").

In  connection  with the  merger of Old  Hitsgalore.com  into the  Company,  the
proceeds,  if any,  received from the exercise of  outstanding  and  unexercised
stock purchase options,  warrants and other rights to purchase common stock were
to be used to pay the debts,  liabilities and obligations of the Company assumed
by IHSI and to provide working  capital to the Company.  As of June 30, 1999 the
Company  had  realized  net  proceeds of  approximately  $1.9  million  from the
issuance of stock upon conversion of such  outstanding  stock purchase  options,
warrants  and  other  rights  to  purchase  its  common  stock.  Of this  amount
approximately $425,779 was used to pay liabilities assumed in the merger and the
remainder was used to fund current operations.

As of the date of the merger of Old Hitsgalore.com into the Company, the Company
had no sources  of  working  capital  other  than from  operations  and from the
exercise of outstanding and  unexercised  stock purchase  options,  warrants and
other rights to purchase common stock. As of the date of the  Reorganization and
Merger Agreement,  IHSI had no significant business operations and was consuming
cash in its  operations.  Old  Hitsgalore.com,  as of the date of the Merger and
Reorganization,  was generating positive cash flows from its operations,  albeit
small.  The  intent  of  the  Merger  and   Reorganization   Agreement  and  the
transactions contemplated thereby was to provide the Company with the ability to
liquidate the debts,  liabilities  and  obligations  assumed by IHSI and provide
working capital to the Company for future  operations  (see "Item  1-Business").
However, there is no assurance that the transactions  contemplated by the Merger
and  Reorganization  Agreement  will  generate  a  sufficient  amount of working
capital for these purposes, in which case, the Company would be required to seek
additional financing sources.

Subsequent to the Merger and Reorganization  Agreement, the Company entered into
various  transactions with The Life Foundation Trust ("LFT") for the sale of its
common stock and the purchase by LFT of Local City  Editions  ("LCEs") for up to
200 major  metropolitan  areas and other  cities  (see Note 11 to the  financial
statements of  Hitsgalore.com,  Inc. (a Development Stage  Enterprise)  included
elsewhere  herein).  The  transactions  with LFT call for the  payment  of $20.0
million to the Company on April 15, 2000 as consideration for the stock acquired
by LFT and the LCE sales agreement.  The pledge and assignment of certain assets
secure this payment to the Company by LFT.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards No. 130, Reporting  Comprehensive Income ("SFAS
No. 130"),  which is effective  for fiscal years  beginning  after  December 15,
1997.  SFAS No. 130  establishes  standards  for the  reporting  and  display of
comprehensive  income  and  its  components  in a full  set  of  general-purpose
financial  statements.  Although SFAS No. 130 only impacts display as opposed to
actual  amounts  recorded,  it represents a change in financial  reporting.  The
Company has no accumulated or other comprehensive income and has no

<PAGE> 23

revenues,  expenses, gains or losses that are includable in comprehensive income
but excluded from net income (loss). Accordingly,  the Company has not presented
a statement of comprehensive income.

In June 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  No.  131,  Disclosures  about  Segments  of an
Enterprise  and Related  Information  ("SFAS No.  131"),  which is effective for
years beginning after December 15, 1997. SFAS No. 131 establishes  standards for
the way public enterprises report information about operating segments in annual
financial  statements  and  requires  that  those  enterprises  report  selected
information  about  operating  segments in interim  financial  reports.  It also
establishes  standards  for related  disclosures  about  products and  services,
geographic  areas and major  customers.  The adoption of this  statement did not
have an  effect  on the  Company's  reported  segments  or  financial  statement
disclosures.

IMPACT OF INFLATION

The impact of inflation on the costs of the Company and its business units,  and
the ability to pass on cost  increases to its  customers  over time is dependent
upon market conditions.  The Company is not aware of any inflationary  pressures
that have had any significant  impact on the Company's  operations over the past
several years and, the Company does not  anticipate  that  inflationary  factors
will have a significant impact on future operations.

YEAR 2000 ISSUES

The Year 2000 issue is the result of  shortcomings in electronic data processing
systems  and other  electronic  equipment  that may  adversely  effect  business
operations.

The  management  of both the  Company  and IHSI are  continuing  to  assess  the
possible  effects  of Year 2000  issues  on their  business  operations  and are
attempting  to determine if  significant  vendors,  service  providers and other
third parties upon which they rely have addressed or will be able to address any
affected systems that may have a bearing on the respective  companies'  business
operations.

Because  IHSI has  focused its  business on  strategic  alliances  with  service
providers and other third  parties,  it is largely  dependent upon those service
providers and third parties to ensure that shortcomings in their electronic data
processing  systems and their  electronic  equipment  that may adversely  effect
their business operations are addressed.

The Company's internet software  applications have been designed to be Year 2000
compliant  and  the  Company's  non-internet  information  and  electronic  data
processing  systems,  and  those  of  IHSI,  are  purchased  and  maintained  by
nationally  recognized  third  party  vendors.  Neither  the  Company  nor  IHSI
anticipate  spending any amounts for Year 2000  compliance over and above normal
and  recurring  maintenance,  development  and  enhancements  to  the  Company's
internet software and website.

It remains  uncertain whether the potential  disruption,  if any, from Year 2000
issues will have a material effect on the business  operations of the Company or
those of IHSI. The accompanying  financial  statements  contain no provisions or
adjustments related to the ultimate outcome of this uncertainty. The managements
of both the  Company  and  IHSI,  however,  do not  anticipate  that  Year  2000
compliance  will cause any loss of business or have any material  adverse effect
on the respective companies' operating results or financial condition.

<PAGE> 24

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
                                                                       PAGE
                                                                       ----

HITSGALORE.COM, INC.
A DEVELOPMENT STAGE ENTERPRISE),
FORMERLY SYSTEMS COMMUNICATIONS, INC.

Independent Auditors' Report                                             25

Balance Sheet as of December 31, 1998                                    26

Statement of Operations and Retained Earnings
for the period from inception (July 21, 1998) to December 31, 1998       27

Statement of Cash Flows for the period from inception (July 21, 1998)
to December 31, 1998                                                     28

Notes to Financial Statements                                            29

Unaudited Pro Forma Condensed Financial Information                      36

HITSGALORE.COM, INC. (FORMERLY SYSTEMS COMMUNICATIONS, INC.) AND
SUBSIDIARIES

Independent Auditors' Report on the Consolidated Financial
 Statements for the years ended December 31, 1998, 1997
 and 1996                                                                39

Consolidated Balance Sheets as of December 31, 1998, 1997
 and 1996                                                                40

Consolidated Statements of Operations for each of the three
 years in the period ended December 31, 1998                             42

Consolidated Statements of Changes in Stockholders' Deficit for
 each of the three years ended in the period
 December 31, 1998                                                       43

Consolidated Statements of Cash Flows for each of the three
 years ended in the period December 31, 1998                             45

Notes to Consolidated Financial Statements                               46












                         [REMAINDER OF PAGE LEFT BLANK]

<PAGE> 25

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Hitsgalore.com, Inc.
Rancho Cucamonga, CA

We have audited the balance sheet of  Hitsgalore.com,  Inc. (a Development stage
enterprise), formerly Systems Communications,  Inc., as of December 31, 1998 and
the related statement of operations and retained earnings and cash flows for the
period from  inception  (July 21, 1998) to December 31,  1998.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards.
These standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of  Hitsgalore.com,  Inc. at
December  31,  1998,  and the results of its  operations  and cash flows for the
period from inception  (July 21, 1998) to December 31, 1998, in conformity  with
generally accepted accounting principles.

The  accompanying   financial   statements  have  been  prepared  assuming  that
Hitsgalore.com,  Inc., formerly Systems Communications, Inc., will continue as a
going  concern.  As  more  fully  described  in Note 1,  the  Company  is in the
development  stage  and has  assumed a  substantial  amount  of  liabilities  in
connection with a reorganization  and merger  agreement.  These conditions raise
substantial  doubt about the Company's  ability to continue as a going  concern.
The financial  statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and  classification  of  liabilities  that may result  from the  outcome of this
uncertainty.

/s/ Pender Newkirk & Company


Tampa, Florida
November 5, 1999


<PAGE> 26

              HITSGALORE.COM, INC. (A DEVELOPMENT STAGE ENTERPRISE)
                      FORMERLY SYSTEMS COMMUNICATIONS, INC.
                                  BALANCE SHEET
                                DECEMBER 31, 1998


ASSETS

Cash                                                               $   1,013
Other current assets                                                     971
                                                                     -------
 Total current assets                                                  1,984
Property and equipment, net of accumulated
 depreciation                                                         29,750
                                                                     -------
Total assets                                                       $  31,734
                                                                     =======

LIABILITIES AND STOCKHOLDERS' EQUITY

Notes payable                                                      $   5,000
Advances from stockholders                                             2,250
Borrowings from affiliated company                                    22,699
Other current liabilities                                                778
                                                                     -------
Total current liabilities                                             30,727
                                                                     -------
Commitments and contingencies

Stockholders' equity:
 Common stock, no par value; authorized 25,000
  shares; issued and outstanding 15,000 shares                          --
 Additional paid-in capital                                             --
 Retained earnings                                                     1,007
                                                                     -------
Total stockholders' equity                                             1,007
                                                                     -------
Total liabilities and stockholders' equity                         $  31,734
                                                                     =======
See Notes to Financial Statements


<PAGE> 27


              HITSGALORE.COM, INC. (A DEVELOPMENT STAGE ENTERPRISE)
                      FORMERLY SYSTEMS COMMUNICATIONS, INC.
                  STATEMENT OF OPERATIONS AND RETAINED EARNINGS
       FOR THE PERIOD FROM INCEPTION (JULY 21, 1998) TO DECEMBER 31, 1998


Net Revenues                                                      $ 17,779
                                                                    ------
Costs and expenses:
 Selling expenses                                                    6,817
 General and administrative expenses                                 7,294
 Depreciation and amortization                                       1,883
 Interest expense                                                      526
                                                                    ------
Total costs and expenses                                            16,520
                                                                    ------
Income before income taxes                                           1,259
Provision for income taxes                                            (252)
                                                                    ------
Net income                                                           1,007
Retained earnings, at inception                                        --
                                                                    ------
Retained earnings, at December 31, 1998                           $  1,007
                                                                    ======

Basic earnings per share                                          $   0.07
                                                                    ======
Diluted earnings per share                                        $   0.06
                                                                    ======

See Notes to Financial Statements


<PAGE> 28

              HITSGALORE.COM, INC. (A DEVELOPMENT STAGE ENTERPRISE)
                      FORMERLY SYSTEMS COMMUNICATIONS, INC.
                             STATEMENT OF CASH FLOWS
       FOR THE PERIOD FROM INCEPTION (JULY 21, 1998) TO DECEMBER 31, 1998


Cash flows from operating activities:
 Net income                                                          $  1,007
 Adjustments to reconcile net income to net cash
  provided by operations:
   Depreciation and amortization                                        1,883
   Increase (decrease) in cash from change in
    operating assets and liabilities-
     Other current assets                                                (971)
     Other current liabilities                                            778
                                                                       ------
Net cash provided by operating activities                               2,697
                                                                       ------
Cash flows from investing activities:
 Capital expenditures                                                 (31,633)
                                                                       ------
Net cash used in investing activities                                 (31,633)
                                                                       ------
Cash flows from financing activities:
 Proceeds from notes payable                                            5,000
 Stockholder advances, net                                              2,250
 Borrowings from affiliated company, net                               22,699
                                                                       ------
Net cash provided by financing activities                              29,949
                                                                       ------
Net increase in cash                                                    1,013
Cash at beginning of period                                              --
                                                                       ------
Cash at end of period                                                $  1,013
                                                                       ======

See Notes to Financial Statements


<PAGE> 29

              HITSGALORE.COM, INC. (A DEVELOPMENT STAGE ENTERPRISE)
                      FORMERLY SYSTEMS COMMUNICATIONS, INC.
                          NOTES TO FINANCIAL STATEMENTS


NOTE 1  THE COMPANY AND BUSINESS

Hitsgalore.com,  Inc. (the "Company"), a Florida corporation,  formerly known as
Systems  Communications,  Inc.,  is  engaged  in the  business  of an  internet,
business-to-business  search engine. The Company began beta operations in August
1998 and launched its website in November 1998. As an internet search engine for
business-to  business  commerce,  the Company provides a searchable  database to
businesses  bringing people ("hits") to their websites.  The Company's  revenues
are principally derived from the sale of portal service sponsorships, membership
keyword bid and rank rights and local city  editions of its portal  services and
business-to  business  search  engine.  The Company's  website is located on the
world wide web at http://www.hitsgalore.com.

On March 19, 1999, the Company and  Hitsgalore.com,  a Nevada  corporation ("Old
Hitsgalore.com"), completed a reorganization and merger (the "Reorganization and
Merger Agreement"). Pursuant to the Reorganization and Merger Agreement, (a) the
Company  transferred  its then existing  business,  properties and assets to its
wholly-owned subsidiary,  International Healthcare Solutions, Inc. ("IHSI"), (b)
caused  IHSI  to  assume  substantially  all  of  the  obligations,   debts  and
liabilities of the Company and, then, (c) Old Hitsgalore.com was merged into the
Company and the Company changed its name to Hitsgalore.com,  Inc. For accounting
purposes,  the merger of Old  Hitsgalore.com  into the  Company was treated as a
recapitalization,  with Old  Hitsgalore.com as the acquirer.  As a result of the
Reorganization  and Merger Agreement,  the historical  financial  statements and
operations  of Old  Histgalore.com  prior to March 19, 1999 became  those of the
Company.

In connection with the Merger and Reorganization  Agreement, the stockholders of
Old  Hitsgalore.com  received  37,675,000  shares  of  common  stock  issued  in
connection  with the merger in conversion  of all of the issued and  outstanding
common stock of Old Hitsgalore.com.  Up to an additional 4,000,000 shares of the
Company's   common  stock  were  set  aside  for  issuance  as  compensation  to
consultants and professionals  and for merger costs and expenses.  Of the number
of shares set side for issuance as compensation to consultants and professionals
and for merger costs and expenses, 2,000,000 shares were issued.

Immediately  prior to the merger,  the Company  declared a reverse  split of its
then issued and outstanding common stock, options,  warrants and other rights to
purchase its common stock,  in the ratio of one share for each seven shares,  so
that  immediately  preceding  the merger the  Company  would have  approximately
8,000,000  shares of common stock issued and outstanding,  assuming  exercise of
all such options,  warrants and other rights.  The Company also  transferred its
then existing business,  properties and assets,  excluding cash and the business
and  assets  of  Old  Hitsgalore.com,  to  IHSI  in  exchange  for  100%  of the
outstanding common stock of IHSI. The shares of outstanding common stock of IHSI
were then transferred into a constructive trust for the benefit of the Company's
stockholders.  The  outstanding  shares  of  common  stock  of  IHSI  are  to be
distributed  as a dividend  in kind.  Distribution  of the  dividend  in kind to
stockholders is subject to the  effectiveness of a registration  statement under
the Securities Act of 1933, which is to be filed by IHSI.

In connection with the transfer of the Company's business, properties and assets
to IHSI,  IHSI assumed all of the Company's  obligations,  debts and liabilities
that  existed  as of the  March 19,  1999 and  unconditionally  and  irrevocably
indemnified the Company against all of such obligations, debts

<PAGE> 30

and liabilities,  with the result that both the Company and IHSI are jointly and
severally obligated for such debts and liabilities.

The proceeds,  if any, from the exercise of common stock  options,  warrants and
other rights to purchase the Company's  common stock  outstanding as of the date
of the merger  are to be used to pay such  obligations,  debts and  liabilities,
subject  to  certain  limitations.  Until  all of such  obligations,  debts  and
liabilities  are satisfied or the Company is released in full, the Company is to
have a security interest in the assets transferred to IHSI.

Unaudited pro forma information  giving effect to the  Reorganization and Merger
Agreement as if the acquisition of Old Hitsgalore.com  took place on date of its
inception  (July  1998)  is set  forth in Note 9. The pro  forma  balance  sheet
information as of December 31, 1998 includes pro forma adjustments to record the
obligations,  debts and liabilities  assumed by IHSI and the number of shares of
the  Company's  common stock issued and  outstanding  after giving effect to the
merger  and  reorganization  agreement.  No effect  has been given to the use of
proceeds,  if any, from the exercise of common stock purchase options,  warrants
or other rights to purchase the Company's  common stock that were outstanding as
of the date of the merger.

NOTE 2  SIGNIFICANT ACCOUNTING POLICIES

CASH EQUIVALENTS

The Company  considers  all highly liquid  investments  with a maturity of three
months or less when purchased to be cash equivalents.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost.  Depreciation  is provided  using the
straight-line  method over  periods  that  approximate  the useful  lives of the
related assets. The cost of leasehold  improvements is amortized over the lesser
of the length of the related lease or the estimated useful lives of the assets.

REVENUE RECOGNITION

The Company recognizes revenue from the sale of portal service  sponsorships and
membership  keyword bid and rank rights at the time the sponsor or member agrees
to the  terms  and  conditions  of sale.  Revenues  from  the sale of LCE's  are
recognized  upon the  execution of the LCE  agreement  and the  collection  of a
minimum cash deposit or other consideration in payment for the LCE. An allowance
for  cancellations,  returns and refunds is provided  for based on  estimates of
future cancellations, returns and requests for refunds, and for amounts that may
be returned to the LCE during the cancellation period.

IN-KIND SERVICES

The  principal  stockholders  of Old  Hitsgalore.com  provided  services  to Old
Hitsgalore.com  during its development stage without any remuneration.  No value
was assigned to such services due to the Company having been in the  development
stage  and the  inability  of the  Company  to  estimate  the fair  value of the
services provided.

INCOME TAXES

The Company  recognizes  deferred  tax assets and  liabilities  for the expected
future tax  consequences  of events  that have been  included  in the  financial
statements and tax returns.  Deferred tax assets and  liabilities are determined
based on the difference between the financial statement and tax

<PAGE> 31

bases of assets and  liabilities  using enacted tax rates in effect for the year
in which the differences are expected to reverse.

EARNINGS PER SHARE

The Company has applied the  provisions  of Statement  of  Financial  Accounting
Standards No. 128 "Earnings  Per Share"  ("SFAS No.  128"),  which  requires the
presentation  of both basic and diluted  earning per share.  Basic  earnings per
share was  computed  based on the  weighted  average  number  of  common  shares
outstanding during the period.  Diluted earnings per share was computed based on
the sum of the weighted  average  number of common shares  outstanding  plus the
additional  number of shares that would have been outstanding if all potentially
dilutive common shares had been issued.

The weighted average number of common shares  outstanding during the period from
inception to December 31, 1998 was 15,000 shares. The weighted average number of
common  shares  outstanding  during the period was increased by 1,800 shares for
purposes of the computation of diluted earnings per share to include incremental
shares from the exercise of outstanding options using the treasury stock method.
The incremental  shares  issuable upon conversion of convertible  notes were not
included in the computation of diluted  earnings per share because  inclusion of
these shares would have had been antidilutive.  Subsequent to December 31, 1998,
the Company  entered into a  Reorganization  and Merger  Agreement  that had the
effect of increasing shares outstanding by approximately  48,000,000 shares (see
Notes 1 and 9).

LONG-LIVED ASSETS

The Company has applied the  provisions  of Statement  of  Financial  Accounting
Standards No. 121,  "Accounting for the Impairment of Long-lived  Assets and for
Long-lived Assets to Be Disposed Of". This statement requires  impairment losses
to be recorded  on  long-lived  assets used in  operations  when  indicators  of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets'  carrying  amount.  Statement  No. 121
also  addresses the  accounting  for  long-lived  assets that are expected to be
disposed of.

USE OF ESTIMATES

The process of preparing financial  statements requires the use of estimates and
assumptions  regarding  certain  types  of  assets,  liabilities,  revenues  and
expenses.  Such estimates primarily relate to unsettled  transactions and events
as of the date of the financial statements. Accordingly, upon settlement, actual
results may differ from estimated amounts.

NOTE 3  PROPERTY AND EQUIPMENT

Property and equipment, net consists of the following:

Furniture and equipment                                            $   1,300
Computer software                                                     25,806
Leasehold improvements                                                 4,527
                                                                     -------
                                                                      31,633
Less: accumulated depreciation and amortization                       (1,883)
                                                                     -------
                                                                   $  29,750
                                                                     =======

<PAGE> 32

NOTE 4  NOTES PAYABLE

Notes payable at December 31, 1998 consists of two (2) $2,500 convertible notes,
bearing  interest at 10% per month until  conversion.  Each note is  convertible
into 2,500 shares of the Company's common stock at the time of an initial public
offering of the Company's  common stock or other  registration  of the Company's
common  stock for resale.  The terms of each note  contain an option  giving the
holders of the notes the right to demand that the Company  repurchase the shares
that are issuable for $2.00 per share if, on December 31, 1999,  the fair market
value of the  shares  is less than  $2.00 per  share.  If the  Company  does not
complete an initial public  offering by December 31, 1999, the note holders have
the option to cancel their agreements and receive payment of $2,500,  each, plus
any accrued and unpaid  interest or  continue to receive  monthly  interest  and
await an initial  public  offering.  The  holders of each of the notes were also
given an option to purchase up to 3,000 shares of the Company's  common stock at
a price equal to 70% of the offering price in an initial public  offering of its
securities.

NOTE 5  ADVANCES FROM STOCKHOLDERS

The advances from stockholders are due on demand.

NOTE 6  BORROWINGS FROM AFFILIATED COMPANY

Borrowings from affiliated company consist of amounts loaned to the Company by a
corporation owned by the Company's principal stockholders.  These borrowings are
due on demand.

Note 7  INCOME TAXES

Income taxes consist of taxes currently  payable.  The principal  reason for the
difference between income taxes computed by applying the U.S. Federal income tax
rate of 34% to pre-tax income is the effect of graduated income tax rates.

Note 8  LEASES

The Company leases office space under an operating lease  agreement  expiring on
October 31,  2000.  Total  minimum  future  rentals  under this lease  agreement
aggregate $11,192 in 1999 and $9,710 in 2000.

NOTE 9  UNAUDITED PRO FORMA INFORMATION

The following  unaudited pro forma balance sheet information gives effect to the
Reorganization and Merger Agreement as if the acquisition took place on December
31, 1998.

Total current assets                                       $    20,713
Total assets                                                    50,463
Total current liabilities                                    3,293,360
Total liabilities                                            3,293,360
Stockholders' deficit:
 Class A convertible preferred stock, stated value,
  and liquidation preference - $1.00 per share,
  authorized 5,000,000 shares, 500,000 shares issued
  and outstanding                                               55,000
 Class B convertible preferred stock, stated value,
  and liquidation preference - $1.00 per share,
  authorized 10,000,000 shares, 100,000 shares issued
  and outstanding                                               54,764
 Common stock, $.001 par value; authorized 50,000,000
  shares; issued and outstanding 45,187,412 shares              45,187
Additional paid-in capital                                        --
Accumulated deficit                                         (3,397,848)
Total stockholders' deficit                                 (3,242,897)
Total liabilities and stockholders' deficit                     50,463

<PAGE> 33

Pro forma operating  results are the same as those set forth in the accompanying
financial  statements,  except for earnings per share data.  The  Company's  pro
forma basic and diluted earning per share were less than $.01 per share.

For  purposes  of pro forma  operating  results,  the  Company  has not made any
adjustments for increased administrative, legal, accounting and other costs that
the Company may incur in the future as a result of the Merger and Reorganization
Agreement.

NOTE 10  COMMITMENTS AND CONTINGENCIES

On May 13, 1999, May 16, 1999 and June 11, 1999,  separate punative class action
suits were filed against the Company,  Mr. Steve Bradford and Mr. Dorian Reed in
the United States  District  Court,  Central  District of California  (Case Nos.
99-5060,  99-5151R and  99-6925R,  respectively),  involving the purchase of the
Company's  securities during periods  specified in the complaints.  On September
20, 1999, the Court entered an order  consolidating  the three lawsuits into one
and appointing the lead plaintiff and lead counsel for the consolidated  lawsuit
(the "Consolidation  Order").  Pursuant to the Consolidation  Order, on or about
October 8, 1999,  a single  consolidated  amended  class action  complaint  (the
"Amended  Complaint") was filed by the plaintiffs in the  consolidated  putative
class action under Case No. 99-5060R.

The  Amended  Complaint  seeks to assert  claims for  violations  of the federal
securities  laws  against the Company  and  Messrs.  Bradford  and Reed based on
alleged  misrepresentations  and  omissions  of  fact  purportedly  made  in the
Company's press releases and certain SEC filings during the period from February
17, 1999 through August 24, 1999 (the "Class  Period").  The Defendants  believe
the claims to be without merit and intend to vigorously contest the lawsuit.  On
November 10, 1999, a motion to dismiss the Amended Complaint was filed on behalf
of the Company and Messrs.  Bradford  and Reed.  All  discovery is stayed in the
matter pending  disposition of the motion to dismiss.  A decision on such motion
is not  expected  until  later this year or early  2000.  It is not  possible to
predict  the likely  outcome of these cases or the  likelihood  or amount of any
losses,  if any, in the event of an adverse outcome.  No provision has been made
in the  accompanying  financial  statements  related to these matters.

In 1995,  Dorian Reed was employed by a new business  called  Internet  Business
Broadcasting  ("IBB").  The  original  concept of IBB was to build web sites for
small  businesses  and create an internet  business mall for third party on-line
retailers.

In late 1996, IBB started  selling  billboard  space in IBB's internet  business
mall,  and elsewhere on the IBB site,  to companies  wishing to advertise on the
then new and growing internet.  IBB signed contracts with individuals who leased
the on-line billboards and IBB would then seek advertisers to purchase the space
on the leased billboards. The proceeds generated by selling the advertising were
to be split  between IBB and the lessee of the  billboard.  In  mid-1997,  after
failing to adequately  collect  revenues from a sufficient  number of customers,
IBB shut down its business and dissolved.

In early 1998, the Federal Trade Commission  ("FTC") filed a lawsuit against Tom
Maher,  former President of IBB, Audrey Reed, and Mr. Reed for failure to refund
money to customers and allegedly misleading investors about the potential return
on their  investment.  In  April,  1998,  Mr.  Reed  filed an  answer to the FTC
complaint,  pro se,  denying  all the  allegations,  and  did  not  receive  any
subsequent correspondence from the government.

Mr.  Reed says he was unaware  any case was  pending  against him until  stories
appeared  in the  press  and he  was  served  with  a  default  judgment  at the
Hitsgalore.com  office in Rancho  Cucamonga,  CA on May 11, 1999.  The judgement
served on Mr. Reed informed him that a federal judge in Baltimore issued an

<PAGE> 34

order  in  April  1999  for he and  his  co-defendants  to pay  $613,110  to 100
customers of IBB.

After being served on May 11, 1999, Mr. Reed immediately and pro-actively
contacted the FTC through counsel regarding the matter. As of November 30, 1999,
Mr. Reed is actively negotiating with the FTC to reach an amicable settlement of
this matter.  The FTC has acknowledged  that it did in fact receive pleadings in
this case in April 1998, from both Audrey and Dorian Reed in response to the FTC
Complaint.  However,  said  pleadings sat in an FTC office  without  having been
opened  for over a year.  Mr.  Reed and the FTC are now  exchanging  information
about the facts that gave rise to the  lawsuit,  so that the FTC can have a more
realistic  view of what  actually  happened.  Although  a mere  employee  of the
subject company, Mr. Reed is stepping forward to get this matter resolved and is
not waiting for the FTC to find the management who actually ran the corporation.
It is anticipated that a settlement will be reached in the near future.

In addition,  the following  incident  involving Mr. Reed took place more than 5
years ago, and the Company is under no  obligation to include it in this filing.
In 1992,  Mr.  Reed was  convicted  at trial of wire fraud and  unlawful  use of
access  device  and  served a 10 month  sentence  in a federal  prison  camp and
successfully completed the rest of his term on supervised release.

There were several counts amounting to approximately  $2,800.00 in losses,  plus
court and other costs,  which all have been paid.  This case did not involve the
purchase or sale of any security.

NOTE 11  SUBSEQUENT EVENTS

On April 15, 1999,  the Company agreed to issue two million shares of its common
stock  to  The  Life  Foundation  Trust  ("LFT")  for  $10.0  million.  LFT  has
collateralized its obligation to pay for the shares by assigning a collection of
postage stamps.  A third party holds the collection in  safekeeping.  LFT has an
unconditional and irrevocable  obligation to redeem the collateral by payment of
the $10.0  million  price for the shares  issued,  in cash, at the end of twelve
months. The Company issued the shares to LFT in a private transaction.

On May 15,  1999,  the Company  entered into a  non-binding  letter of intent to
issue LFT an  additional  five million  shares of its common stock at a price of
$100.0  million.  The  issuance  of the shares is subject to an  increase in the
Company's authorized shares and due diligence to the Company's satisfaction on a
$900.0 million  Promissory Oil Production Note to be delivered as collateral for
LFT's obligation to pay the purchase price. The Company's  security  interest in
the note is to be limited to $100.0  million and is to be an undivided  interest
with LFT,  who has agreed to permit the  Company  to  receive  the first  $100.0
million  paid  under the note.  There is no  assurance  the  Company  can obtain
stockholder  approval  for an  increase  in  authorized  shares or that,  if the
transaction  is  completed,  any payments will be received on the note (in which
case the Company would seek  foreclosure on certain oil and gas leases  securing
the note).  Pending such  shareholder  approval,  the Company's  Chairman of the
Board, and a principal stockholder,  has transferred shares from his own account
to LFT to hold the transaction. The Company's Chairman has retained the right to
vote  the  shares  transferred  to LFT on all  matters  requiring  the  vote  of
stockholders.  Upon completion of the transaction, the shares transferred by the
Company's Chairman to LFT will be returned to him.

LFT has reserved Local City Editions (LCEs) for up to 200 local city areas for a
total  purchase  price of $10.0  million from LFT. The  agreement  provides for,
among other things,  that the LCEs will be brought on line over the twelve-month
period  ending  April  15,  2000.  LFT's  obligation  to pay for  these  LCEs is
unconditional and irrevocable,  is collateralized by the assignment of the stamp
collection  described  above and is  payable  on April  15,  2000.  The  Company
anticipates accruing revenues from its agreement with LFT based on completion of
the LCEs.

<PAGE> 35

On April 20, 1999, the Company  completed the purchase of all rights,  title and
interest in the  internet-related  development  assets,  equipment and software,
owned or under  development,  by  Solvere,  Inc.  ("Solvere"),  a  closely  held
Delaware  corporation.  The assets  acquired  included all  computer  equipment,
software and internet technology, including, but not limited to all of Solvere's
e-commerce,  web-based e-mail,  multimedia distribution system and shopping cart
technology. The purchase price consisted of $125,000 in cash and a commitment by
the Company to issue 100,000 shares of its common stock.  The common stock which
is to be  issued to  Solvere  was  assigned  a value of  $367,200.  Of the total
purchase price, $26,500 was allocated to property and equipment and $465,700 was
allocated to intangible assets. The intangible assets acquired will be amortized
over three years.

Pursuant to the asset purchase  agreement,  the Company is to pay Solvere,  Inc.
$4,000 per month for future systems maintenance costs incurred by Solvere,  Inc.
and  $125,000  for  future   development  of  the  acquired   internet  software
technology.  The Company and Solvere,  Inc. also agreed to co-license certain of
Solvere,  Inc.'s  proprietary  technology  in return for the payment to Solvere,
Inc. of 50% of all marketing costs incurred by Solvere, Inc. and approved by the
Company.  The  Company  was  also  granted  an  unrestricted  right  to use  the
proprietary technology.

<PAGE> 36

              HITSGALORE.COM, INC. (A DEVELOPMENT STAGE ENTERPRISE)
                      FORMERLY SYSTEMS COMMUNICATIONS, INC.
               UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION


Effective March 19, 1999, Hitsgalore.com, Inc. (formerly Systems Communications,
Inc.), a Florida  corporation (the  "Company"),  acquired all of the outstanding
stock of Hitsgalore.com, a Nevada corporation ("Old Hitsgalore.com") pursuant to
a Reorganization and Merger Agreement.  For accounting purposes, the acquisition
has  been  treated  as  a  recapitalization  of  Old  Hitsgalore.com,  with  Old
Hitsgalore.com as the acquirer. Accordingly, the historical financial statements
and  operations  of the  Company  prior  to  March  19,  1999  are  those of Old
Hitsgalore.com.  The following  pro forma  condensed  balance sheet  information
gives effect to the Merger and  Reorganization  Agreement as if the  acquisition
took place on December 31, 1998. The pro forma condensed  balance sheet includes
pro forma adjustments to record the obligations,  debts and liabilities  assumed
by  IHSI,  net of cash,  and the  number  and par  value of  shares  issued  and
outstanding after giving effect to the Merger and Reorganization  Agreement.  No
effect has been  given to the use of  proceeds,  if any,  from the  exercise  of
outstanding common stock purchase options, warrants and other rights to purchase
the  Company's  common stock.  The  proceeds,  if any, from the exercise of such
options,  warrants  and  other  rights  are  to  be  used,  subject  to  certain
limitations,  to reduce or liquidate the  liabilities  assumed by IHSI for which
the Company remains jointly and severally liable.  The operations of the Company
prior to March 19, 1999 are those of Old  Hitsgalore.com.  The pro forma  income
statement  information gives effect to the equivalent number of shares of common
stock issued and  outstanding  after  giving  effect to the  Reorganization  and
Merger Agreement.

Pro Forma Condensed Balance Sheet Information:
                                                     Pro Forma
                                       Historical   Adjustments       Pro Forma
                                       ----------   -----------       ---------
             ASSETS
Cash                                  $     1,013  $     18,729 (3) $    19,742
Other current assets                          971                           971
                                       ----------   -----------       ---------
Total current assets                        1,984        18,729          20,713
Property and equipment, net                29,750                        29,750
                                       ----------   -----------       ---------
Total assets                          $    31,734  $     18,729     $    50,463
                                       ==========   ===========       =========









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<PAGE> 37

              HITSGALORE.COM, INC. (A DEVELOPMENT STAGE ENTERPRISE)
                      FORMERLY SYSTEMS COMMUNICATIONS, INC.
         UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION (CONTINUED)

Pro Forma Condensed Balance Sheet Information (Continued):

                                                     Pro Forma
                                       Historical   Adjustments       Pro Forma
                                       ----------   -----------       ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
             (DEFICIT)
Liabilities:
Current portion of notes and
 debentures payable                   $     5,000  $  1,161,364 (3) $ 1,166,364
Advances from stockholders                  2,250                         2,250
Borrowings from affiliated company         22,699                        22,699
Accounts payable                             --         312,133 (3)     312,133
Accrued expenses and other liabilities        778       430,867 (3)     431,645
Liabilities and accruals for claims,
 Assessments and other losses                --       1,358,269 (3)   1,358,269
                                       ----------   -----------       ---------
Total current liabilities                  30,727     3,262,633       3,293,360
                                       ----------   -----------       ---------
Stockholders equity (deficit):
Convertible preferred stock                  --         109,764 (2)     109,764
Common stock                                             39,675 (1)
                                                          5,512 (2)      45,187
Retained earnings (deficit)                 1,007    (3,398,855)(4)  (3,397,848)
                                       ----------   -----------       ---------
Total stockholders equity (deficit)         1,007    (3,243,904)     (3,242,897)
                                       ----------   -----------       ---------
                                      $    31,734  $     18,729      $   50,463
                                       ==========   ===========       =========


Pro Forma Income Statement Information (5):

                                       Historical        Pro Forma
                                       ----------       ----------

Net Income                            $     1,007      $     1,007
                                       ==========       ==========
Basic earnings per share              $      0.07      $       --
                                       ==========       ==========
Diluted earnings per share            $      0.06      $       --
                                       ==========       ==========
Weighted Average Number of Common
Shares Outstanding:
 Basic earnings per share                  15,000       45,187,412
 Diluted earnings per share                16,800       47,676,800

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

(1)   To record  39,675,000  shares of the  Company's  common  stock,  $.001 par
      value,  issued and outstanding  after giving effect to the  Reorganization
      and Merger Agreement.  Of the 4,000,000 of additional shares that were set
      aside for issue in payment of  acquisition  costs and expenses,  2,000,000
      shares are to be issued.

<PAGE> 38

              HITSGALORE.COM, INC. (A DEVELOPMENT STAGE ENTERPRISE)
                      FORMERLY SYSTEMS COMMUNICATIONS, INC.
         UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION (CONTINUED)


(2)   To record the  issued and  outstanding  convertible  preferred  and common
      stock of the  Company  on the  Effective  Date of the  Reorganization  and
      Merger Agreement, after giving effect to a reverse stock split of the
      Company's  outstanding  common stock,  in the ratio of one share for each
      seven shares.

(3)   To record  the  obligations,  debts  and  liabilities  assumed  by IHSI in
      connection with the Reorganization  and Merger Agreement.  Pursuant to the
      Reorganization and Merger Agreement,  the proceeds,  if any, received from
      the exercise of common stock purchase  options,  warrants and other rights
      to purchase the  Company's  common stock that were  outstanding  as of the
      Effective Date are to be used, subject to certain  limitations,  to reduce
      or liquidate such obligations,  debts and liabilities.  No effect has been
      given to the use of  proceeds,  if any,  from the  exercise of such common
      stock purchase options, warrants and other rights.

(4)    To record the effect of (1), (2) and (3) as an offset to (increase in)
       retained earnings (deficit).

(5)   The  Company  has  not  made  any  pro  forma  adjustments  for  increased
      administrative,  legal,  accounting  and other  costs that the Company may
      incur  in  the  future  as a  result  of  the  Merger  and  Reorganization
      Agreement.
-------------------











                         [REMAINDER OF PAGE LEFT BLANK]


<PAGE> 39

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Hitsgalore.com, Inc.
Rancho Cucamonga, CA

We  have  audited  the  consolidated  balance  sheets  of  Hitsgalore.com,  Inc.
(formerly  Systems  Communications,  Inc. and  Subsidiaries)  as of December 31,
1998,  1997 and 1996,  and the related  consolidated  statements of  operations,
changes in stockholders'  deficit and cash flows for the years then ended. These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Hitsgalore.com, Inc. (formerly Systems Communications, Inc. and Subsidiaries) at
December  31,  1998,  1997  and  1996,  and the  consolidated  results  of their
operations and their cash flows for the years ended December 31, 1998,  1997 and
1996 in conformity with generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that   Hitsgalore.com,   Inc.   (formerly  Systems   Communications,   Inc.  and
Subsidiaries) will continue as a going concern.  As more fully described in Note
3, the Company has  incurred  operating  losses  during each of the years in the
three years in the period  ended  December  31,  1998 and has a working  capital
deficiency  and  stockholders'  equity  deficiency  at December 31, 1998.  These
conditions raise  substantial doubt about the Company's ability to continue as a
going  concern.  The  consolidated  financial  statements  do  not  include  any
adjustments  to reflect the possible  future effects on the  recoverability  and
classification  of assets or the amounts and  classification of liabilities that
may result from the outcome of this uncertainty.


/s/ Pender Newkirk & Company


Tampa, Florida
November 5, 1999

<PAGE> 40

  HITSGALORE.COM, INC. (FORMERLY SYSTEMS COMMUNICATIONS, INC. AND SUBSIDIARIES)
                           CONSOLIDATED BALANCE SHEETS

                                                     DECEMBER 31,
                                       ----------------------------------------
                                          1998           1997          1996
                                       ----------     ----------    -----------
ASSETS

Current assets:
 Cash                                 $    18,729    $    65,556   $     61,039
 Trade accounts receivable, less
  allowance for doubtful accounts of
  $28,074 in 1996                          34,500           --          802,079
 Notes and accounts receivable from
  officers and employees                     --           60,908        102,000
 Other current assets                     186,431        130,419        438,763
                                       ----------     ----------    -----------
Total current assets                      239,660        256,883      1,403,881
                                       ----------     ----------    -----------
Furniture and equipment, at cost           75,162        130,162      1,812,867
 Less accumulated depreciation            (46,035)       (56,774)      (587,598)
                                       ----------     ----------    -----------
Net furniture and equipment                29,127         73,388      1,225,269
Note receivable from sale of assets,
 less allowance of $500,000 in 1997          --             --            --
Deferred compensation                     215,523         52,941        662,199
Intangible assets, net of accumulated
 amortization of $566,666 in 1996            --             --        1,083,334
Excess of cost over fair value of net
 assets acquired, net of accumulated
 amortization of $75,034 in 1996             --             --        1,298,950
Other non-current assets                     --            4,982        173,667
                                       ----------     ----------    -----------
Total assets                          $   484,310    $   388,194   $  5,847,300
                                       ==========     ==========    ===========

See Notes to Consolidated Financial Statements

<PAGE> 41

  HITSGALORE.COM, INC. (FORMERLY SYSTEMS COMMUNICATIONS, INC. AND SUBSIDIARIES)
                     CONSOLIDATED BALANCE SHEETS (Continued)

<TABLE>
<CAPTION>

                                                               DECEMBER 31,
                                                 --------------------------------------
                                                    1998           1997         1996
                                                 ----------     ----------  -----------
LIABILITIES AND STOCKHOLDERS' DEFICIT

<S>                                            <C>           <C>          <C>
Current liabilities:
 Borrowings under lines of credit               $     --      $     --     $    182,651
 Current portion of notes and debentures
  payable                                         1,311,364     3,661,700     3,480,758
 Current portion of obligations under
  capital lease                                       --            --          242,477
 Accounts payable                                   600,118       535,516     1,452,192
 Accrued compensation and employee
  benefits                                          534,970     1,176,578     1,528,153
 Accrued interest                                   312,318       497,514       286,312
 Liabilities and accruals for claims,
  assessments and other losses                    1,358,269     1,129,823          --
 Other current liabilities                          192,528        27,062       595,363
 Deferred revenue                                    86,000          --         440,232
                                                 ----------    ----------   -----------
Total current liabilities                         4,395,567     7,028,193     8,208,138
Obligations under capital lease, less current
 portion                                              --             --         458,654
Deferred liabilities under employment
 agreements                                         231,617       310,794       676,261
Other liabilities                                     --             --          72,573
                                                 ----------    ----------   -----------
Total liabilities                                 4,627,184     7,338,987     9,415,626
                                                 ----------    ----------   -----------
Common stock subject to rescission                  674,124       674,124       709,124
                                                 ----------    ----------   -----------
Common stock to be issued                             --             --       2,000,000
                                                 ----------    ----------   -----------
Commitments and Contingencies

</TABLE>

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

Stockholders' deficit:
 Class A convertible preferred stock, stated
  value and liquidation  preference - $1.00 per
  share;  authorized 5,000,000 shares,  issued
  and outstanding 500,000 shares in 1998,
  200,000 shares in 1997 and 392,000 shares in
  1996                                               55,000          --             630
 Class B convertible preferred stock, stated
  value and  liquidation  preference  - $1.00 per
  share;  authorized 10,000,000 shares, issued
  and outstanding 100,000 shares in 1998,
  2,953,125 shares in 1997 and 4,550,000 in 1996     54,764     1,617,260     2,491,745
 Common stock - $.001 par value; authorized
  50,000,000 shares, issued and outstanding
  5,512,412 shares in 1998, 1,726,235 shares
  in 1997 and 1,518,125 shares in 1996                5,512         1,726         1,518
 Additional paid in capital                      23,066,835    18,410,249    16,832,635
 Accumulated deficit                            (27,999,109)  (27,654,152)  (25,603,978)
                                                 ----------    ----------    ----------
Total stockholders' deficit                     ( 4,816,998)   (7,624,917)   (6,277,450)
                                                 ----------    ----------    ----------
Total liabilities and stockholders' deficit     $   484,310   $   388,194   $ 5,847,300
                                                 ==========    ==========    ==========

</TABLE>

See Notes to Consolidated Financial Statements

<PAGE> 42

  HITSGALORE.COM, INC. (FORMERLY SYSTEMS COMMUNICATIONS, INC. AND SUBSIDIARIES)
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                 Year Ended December 31,
                                       ---------------------------------------
                                          1998           1997          1996
                                       ----------     ----------    ----------
Net revenues                          $   123,487    $ 1,498,533   $ 2,832,123
                                       ----------     ----------    ----------
Costs and expenses:
 Cost of revenues                          74,092        109,563       827,063
 Selling and administrative expenses    1,244,391      3,027,384     6,322,627
 Impairment and other losses               84,276      1,898,953    14,233,953
 Depreciation and amortization             23,647        497,377     1,459,436
                                       ----------     ----------    ----------
  Total operating costs and expenses    1,426,406      5,533,277    22,843,079
                                       ----------     ----------    ----------
                                       (1,302,919)    (4,034,744)  (20,010,956)
Loss from disposition of subsidiary          --       (1,595,412)        --
Gain from sale of license agreement          --        2,695,214         --
Interest income                               892          4,070         8,183
Interest expense                         (212,842)      (587,884)     (381,975)
Other income (expense), net               480,441       (125,318)     (103,891)
                                       ----------     ----------    ----------
Loss from continuing
 operations before income taxes        (1,034,428)    (3,644,074)  (20,488,639)
Income tax benefit                     (  262,000)      (605,500)   (2,440,150)
                                       ----------     ----------    ----------
Loss from continuing operations        (  772,428)    (3,038,574)  (18,048,489)

Discontinued operations:
 Income (loss) from operations of
  discontinued telecommunications
  businesses, less income tax expense
  (benefit) of $151,000, $240,000
  and ($763,044) in 1998, 1997 and
  1996, respectively                      246,243        391,752   ( 1,508,179)
 Gain from disposition of
  telecommunication businesses, less
  income tax expense of $365,500
  in 1997                                    --          596,648          --
                                       ----------     ----------    ----------
Loss before extraordinary item           (526,185)    (2,050,174)  (19,556,668)
Extraordinary item - Gain from
 extinguisment of debt, less income
 tax expense of $111,000                  181,228           --            --
                                       ----------     ----------    ----------
Net loss                              $  (344,957)   $(2,050,174) $(19,556,668)
                                       ==========     ==========    ==========
Basic and diluted earnings per share:
 Loss from continuing operations      $     (0.27)   $     (1.97) $     (15.13)
 Income (loss) from operations of
  discontinued telecommunications
  businesses                                 0.09           0.25         (1.26)
 Gain from disposition of
  telecommunications businesses               --            0.39           --
 Extraordinary item - Gain from
  extinguishment of debt                     0.06            --            --
                                       ----------     ----------    ----------
 Net loss                             $     (0.12)   $     (1.33) $     (16.39)
                                       ==========     ==========    ==========
See Notes to Consolidated Financial Statements

<PAGE> 43

<TABLE>
<CAPTION>

                            HITSGALORE.COM, INC. (FORMERLY SYSTEMS COMMUNICATIONS, INC. AND SUBSIDIARIES)
                                     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT


                                             CLASS A               CLASS B
                                            PREFERRED             PREFERRED           COMMON STOCK
                                        ------------------  --------------------  ------------------
                                         SHARES     AMOUNT    SHARES     AMOUNT      SHARES   AMOUNT
                                        ---------  -------  ---------  ---------  ----------  ------
<S>                                    <C>       <C>       <C>       <C>          <C>       <C>
Balance at December 31, 1995            4,800,000 $178,125  4,690,000 $2,728,345   1,060,828 $ 1,061
Issuance of common stock and warrants
 for cash                                    --        --       --         --         59,098      59
Conversion of preferred stock          (4,408,000)(177,495)  (140,000)  (236,600)    322,130     322
Issuance of common stock as
 compensation                                --        --       --         --          5,965       6
Issuance of common stock in connection
 with business acquisitions                  --        --       --         --         40,454      40
Issuance of stock for debt                   --        --       --         --         29,650      30
Net loss                                     --        --       --         --           --       --
                                        ---------  -------  ---------  ---------  ----------  ------
Balance at December 31, 1996              392,000      630  4,550,000  2,491,745   1,518,125   1,518
Issuance of common stock and warrants
 for cash                                    --        --       --         --         29,365      29
Conversion of preferred stock            (192,000)    (630)(1,596,875)  (874,485)     96,668      97
Issuance of common stock as
 compensation                                --        --       --         --        142,980     143
Issuance of stock for debt                   --        --       --         --         82,489      82
Rescission of business acquisitions          --        --       --         --       (142,035)   (142)
Repayment of loan to officer                 --        --       --         --         (1,357)    ( 1)
Net loss                                     --        --       --         --           --       --
                                        ---------  -------  ---------  ---------  ----------   -----
Balance at December 31, 1997              200,000      --   2,953,125  1,617,260   1,726,235   1,726
Issuance of common stock for cash            --        --        --        --        122,619     123
Conversion of preferred stock            (200,000)     --  (2,853,125)(1,562,496)    100,255     100
Issuance of common stock as
 compensation                                --        --        --        --        582,855     583
Issuance of stock and warrants in
 conversion of notes and debentures          --        --        --        --      2,215,437   2,215
Issuance of stock and warrants in
 extinguishment of debt                      --        --        --        --        127,611     128
Issuance of stock in settlement of
 other obligations                        500,000   55,000       --        --        708,374     708
Common stock received in partial
 recovery of note receivable                 --        --        --        --       ( 70,974)   ( 71)
Net loss                                     --        --        --        --           --       --
                                        ---------  -------  ---------  ---------  ----------  ------
Balance at December 31, 1998              500,000 $ 55,000    100,000 $   54,764   5,512,412 $ 5,512
                                        =========  =======  =========  =========  ==========  ======

</TABLE>

See Notes to Consolidated Financial Statements

<PAGE> 44

<TABLE>
<CAPTION>
                           HITSGALORE.COM, INC. (FORMERLY SYSTEMS COMMUNICATIONS, INC. AND SUBSIDIARIES)
                              CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (Continued)


                                                              Additional
                                                               Paid-In     Accumulated
                                                               Capital       Deficit       Total
                                                             ----------    ----------    ----------
<S>                                                       <C>           <C>           <C>
Balance at December 31, 1995                               $ 11,880,274  $ (6,047,310) $  8,740,495
Issuance of common stock and warrants
 for cash                                                     2,187,214          --       2,187,273
Conversion of preferred stock                                   413,773          --            --
Issuance of common stock as
 compensation                                                   260,187          --         260,193
Issuance of common stock in connection
 with business acquisitions                                   1,892,067          --       1,892,107
Issuance of stock for debt                                      199,120          --         199,150
Net loss                                                           --     (19,556,668)  (19,556,668)
                                                             ----------    ----------    ----------
Balance at December 31, 1996                                 16,832,635   (25,603,978)  ( 6,277,450)
Issuance of common stock and warrants
 for cash                                                       231,471          --         231,500
Conversion of preferred stock                                   875,018          --           --
Issuance of common stock as
 compensation                                                   384,092          --         384,235
Issuance of stock for debt                                      716,236          --         716,318
Rescission of business acquisitions                            (572,849)         --        (572,991)
Repayment of loan to officer                                    (56,354)         --         (56,355)
Net loss                                                           --      (2,050,174)   (2,050,174)
                                                             ----------    ----------    ----------
Balance at December 31, 1997                                 18,410,249   (27,654,152)   (7,624,917)
Issuance of common stock for cash                                57,377         --           57,500
Conversion of preferred stock                                 1,562,396         --             --
Issuance of common stock as
 compensation                                                   216,344         --          216,927
Issuance of stock and warrants in
 conversion of notes and debentures                           2,048,848         --        2,051,063
Issuance of stock and warrants in
 extinguishment of debt                                         308,806         --          308,934
Issuance of stock in settlement of
 other obligations                                              554,655         --          610,363
Common stock received in partial
 recovery of note receivable                                    (91,840)        --          (91,911)
Net income (loss)                                                  --        (344,957)     (344,957)
                                                             ----------    ----------     ---------
Balance at December 31, 1998                               $ 23,066,835 $ (27,999,109) $ (4,816,998)
                                                             ==========    ==========     =========

</TABLE>

See Notes to Consolidated Financial Statements

<PAGE> 45

<TABLE>
<CAPTION>
                    HITSGALORE.COM, INC. (FORMERLY SYSTEMS COMMUNICATIONS, INC. AND SUBSIDIARIES)
                                        CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                    Year Ended December 31,
                                                            -------------------------------------
                                                               1998          1997         1996
                                                            ---------     ---------    ----------

<S>                                                      <C>          <C>           <C>
Cash flows from operating activities:
Net loss                                                  $  (344,957) $ (2,050,174) $(19,556,668)
 Adjustments to reconcile net income (loss)
  to net cash used in operations:
  Depreciation and amortization                                23,647       544,839     1,750,727
  Amortization of deferred compensation, net                  (89,200)     (125,503)      (16,552)
  Gain from settlement of employment
   agreement                                                 (380,029)         --            --
  Recovery of note receivable from sale of assets            (398,521)         --            --
  Provision for bad debts                                      34,269        39,816       522,687
  Stock and warrants issued for compensation
   and as consideration for extension of debt                  22,788       384,235       260,193
  Deferred income taxes                                          --            --      (3,203,194)
  Impairment losses                                            84,276     1,898,953    14,728,854
  Loss from disposition of subsidiary                            --       1,595,412         --
  Gain from sale of license agreement                            --      (2,695,214)        --
  Gain from disposition of telecommunications
   businesses                                                    --        (962,148)        --
  Gain from extinguishment of debt                           (292,228)         --           --
  Increase (decrease) in cash from change
   in operating assets and liabilities:
    Accounts receivable                                        (7,774)      148,912       214,330
    Equipment inventories                                        --            --          73,211
    Deferred expenses                                            --            --         498,697
    Other assets                                              (43,668)       52,252        67,037
    Accounts payable                                          436,491      (484,304)      (39,308)
    Accrued expenses and other liabilities                    554,399       401,162     1,060,019
    Deferred revenue                                           86,000      (109,957)     (553,982)
                                                            ---------     ---------    ----------
Net cash used in operating activities                        (314,507)   (1,361,719)   (4,193,949)
                                                            ---------     ---------    ----------
Cash flows from investing activities:
 Acquisition of businesses                                       --            --         (46,854)
 Disposition of businesses                                       --         370,844          --
 Expenditures for furniture and equipment                      (2,820)       (7,693)     (552,718)
 Notes receivable from officers and employees                    --            --         (50,000)
                                                            ---------     ---------    ----------
Net cash provided by (used in) investing
 activities                                                    (2,820)      363,151      (649,572)
                                                            ---------     ---------   -----------
Cash flows from financing activities:
 Proceeds from issuance of common stock                        57,500       231,500     2,187,273
 Proceeds from notes and debentures payable                   307,600     1,568,443     2,422,752
 Payments on notes payable and capital leases                 (94,600)     (686,858)     (637,596)
 Payments on shares subject to rescission                        --         (35,000)      (80,500)
 Proceeds from (payments on) borrowings under
  line of credit                                                 --         (75,000)       47,917
                                                            ---------     ---------    ----------
Net cash provided by financing activities                     270,500     1,003,085     3,939,846
                                                            ---------     ---------    ----------
Net increase (decrease) in cash                               (46,827)        4,517      (903,675)
Cash at beginning of the
 period                                                        65,556        61,039       964,714
                                                            ---------     ---------    ----------
Cash at end of the
 period                                                   $    18,729   $    65,556  $     61,039
                                                            =========     =========    ==========

</TABLE>

See Notes to Consolidated Financial Statements

<PAGE> 46

  HITSGALORE.COM, INC. (FORMERLY SYSTEMS COMMUNICATIONS, INC. AND SUBSIDIARIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 FORMATION OF THE COMPANY AND DESCRIPTION OF BUSINESS

Hitsgalore.com,  Inc., a Florida  corporation (the "Company"),  formerly Systems
Communications,  Inc., was  incorporated  as Florida One Capital  Corporation in
1987 and made an initial public  offering of its common stock in 1988 as a blank
check  company  for the  purpose  of  acquiring  other  companies.  The  Company
underwent  several  corporate name changes from its inception until 1991 when it
changed its name to Systems Communications,  Inc. On March 19, 1999, the Company
and  Hitsgalore.com,  a Nevada corporation ("Old  Hitsgalore.com"),  completed a
reorganization and merger (the "Reorganization and Merger Agreement").  Pursuant
to the  Reorganization  and Merger  Agreement,  (a) the Company  transferred its
existing  business,  properties  and  assets  to  its  wholly-owned  subsidiary,
International Healthcare Solutions, Inc. ("IHSI"), (b) caused IHSI to assume the
obligations,   debts  and   liabilities  of  the  Company  and,  then,  (c)  Old
Hitsgalore.com  was merged into the Company and the Company  changed its name to
Hitsgalore.com, Inc. The Company also declared a reverse split of its issued and
outstanding  common  stock,  in the ratio of one share  for each  seven  shares,
immediately prior to the merger.

During 1990 and 1991, the Company acquired and divested companies engaged in the
eye glass  distribution  and  residential  building  industries  and for a brief
period of time, operating under the name of Highland Healthcare Corporation, was
under the control of another  publicly-owned  blank check company formed for the
purpose of acquiring  healthcare related  businesses.  Beginning in August 1994,
the Company acquired various  businesses engaged in the  telecommunications  and
healthcare  cost  containment   industries.   These  acquisitions  included  (i)
Ameristar   Telecommunications,   Inc.  ("ATI"),  a  reseller  of  long-distance
telephone and pay-per-view television services and products,  principally to the
hospitality industry,  (ii) Coast Communications,  Inc. ("CCI"), whose principal
business  was  the  installation   and  servicing  of  pay-per-view   television
equipment,  (iii) LCI  Communications,  Inc. ("LCI"),  Comstar Network Services,
Inc. ("Comstar"), Intelicom International Holding, Inc. ("Intelicom"),  formerly
Affiliated Communications,  Inc., and Telcom Network, Inc. ("TNI"), all of which
were  engaged in the  business of reselling  telecommunications  services,  (iv)
National Solutions Corporation ("NSC"),  which is engaged in the healthcare cost
containment  business,  and (v) Health Management  Technologies  ("HMT"),  whose
principal  business  was  the  development,  sale  and  maintenance  of  medical
management computer software. All of these acquisitions were accounted for using
the purchase method of accounting.

In 1996 and 1997,  the Company  sold,  abandoned  or  otherwise  disposed of its
ownership  interests  in ATI,  CCI and HMT  and  sold  substantially  all of the
operating assets of TNI. As of December 31, 1998, NSC, LCI, Comstar, TNI and two
newly-formed  subsidiaries,  IHSI  and  Ameritel  Communications  Systems,  Inc.
("Ameritel"),  all of which are wholly owned  subsidiaries,  and  Intelicom,  in
which the Company has an approximate 15.0% minority interest, are all inactive.

As of December  31,  1998,  the  Company's  principal  business was to develop a
network  of  healthcare  management  companies,   third-party   healthcare  plan
administrators  and  other  healthcare   management   organizations  that  would
collectively  offer  a wide  array  of  healthcare  cost  containment  and  case
management services and products for resale by the Company to large self insured
companies.  This business and all of the inactive  subsidiaries were transferred
to IHSI in connection with the Reorganization and Merger Agreement.

<PAGE> 47

Pursuant to the Merger and  Reorganization  Agreement,  Old  Hitsgalore.com  was
merged into the  Company in  exchange  for  37,675,000  shares of the  Company's
common stock. Up to an additional 4,000,000 shares of the Company's common stock
were set aside for issuance as compensation to consultants and professionals and
for merger costs and expenses.  Of the number of shares set side for issuance as
compensation to consultants and professionals and for merger costs and expenses,
2,000,000 shares were issued.

Immediately  prior to the merger,  the Company  declared a reverse  split of its
issued and  outstanding  common  stock,  options,  warrants  and other rights to
purchase its common stock,  in the ratio of one share for each seven shares,  so
that  immediately  preceding  the merger the  Company  would have  approximately
8,000,000  shares of common stock issued and outstanding,  assuming  exercise of
all such options,  warrants and other rights.  The Company also  transferred its
existing business,  properties,  assets and liabilities,  excluding those of Old
Hitsgalore.com,  to IHSI in exchange for 100% of the outstanding common stock of
IHSI.  The  result of the  assumption  of  liabilities  by IHSI is that both the
Company and IHSI are jointly and severally  obligated for such liabilities.  The
shares of outstanding  common stock of IHSI were then transferred into trust for
the benefit of the  Company's  stockholders.  The  outstanding  shares of common
stock of IHSI  are to be  distributed  as a  dividend  in kind to the  Company's
stockholders, subject to the effectiveness of a registration statement under the
Securities Act of 1933, which is to be filed by IHSI.

After giving effect to these transactions, the remaining business of the Company
consists of the business of Old  Hitsgalore.com.  For accounting  purposes,  the
merger of Old Hitsgalore.com  into the Company was treated as a recapitalization
of Old Hitsgalore.com, with Old Hitsgalore.com as the acquirer. Accordingly, the
historical  financial  statements and operations of Old Hitsgalore.com  prior to
March  19,  1999  became  those  of the  Company  and the  historical  financial
statements and operations of the Company prior to March 19, 1999 became those of
IHSI.

NOTE 2  SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

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

The Company's minority interest in Intelicom is carried at zero. See Note 4.

CASH EQUIVALENTS

The Company  considers  all highly liquid  investments  with a maturity of three
months or less when purchased to be cash equivalents.

FURNITURE AND EQUIPMENT

Furniture and equipment are stated at cost.  Depreciation  is provided using the
straight-line method over periods that approximate the assets' useful lives.

Capitalized  lease assets are recorded at the lower of present  value of minimum
future  lease  payments at inception of the lease or the fair value of the asset
and are amortized  straight-line over the shorter of the lease term or estimated
useful life of the asset.

<PAGE> 48

INTANGIBLE ASSETS

The  Company  assesses  the  recoverability  of  intangible  assets,   including
goodwill,  if facts  and  circumstances  suggest  that the  carrying  amount  of
intangible assets may have been impaired. In making its assessment,  the Company
gives  consideration to the undiscounted cash flows from the use of such assets,
the  estimated  fair value of such assets and other  factors that may affect the
recoverability of such assets. If such an assessment indicated that the carrying
value  of  intangible  assets  may not be  recoverable,  the  carrying  value of
intangible assets was reduced.

In  connection  with  business  acquisitions  during 1995 and 1996,  the Company
recorded  intangible  assets totaling  $14,050,000.  Such intangible assets were
being  amortized over periods ranging from 3 to 20 years.  Amortization  expense
charged  to  operations  in  1997  and  1996  was  approximately   $208,333  and
$1,036,666,  respectively. In addition, the Company reduced intangible assets by
approximately  $875,001  in  1997  as a  result  of the  rescission  of the  HMT
acquisition  agreement (see Note 4) and by approximately  $11,676,667 in 1996 to
write off, as an impairment  loss, the unamortized  cost of acquired  healthcare
management  information  software  technology  that has not and is not likely to
produce any significant amounts of future revenues.  As of December 31, 1998 and
1997, the Company had fully amortized or written off all intangibles  associated
with  acquired  businesses.  As of December  31,  1996,  the  amortized  cost of
intangible  assets consisted of approximately  $1,083,000 of medical  management
computer software acquired in connection with the acquisition of HMT.

GOODWILL

In  connection  with  business  acquisitions  during 1995 and 1996,  the Company
recorded goodwill  totaling  $7,124,182.  Goodwill  represents the excess of the
cost of businesses acquired over the fair value of their net assets at the dates
of acquisition and was being amortized on the straight-line  method over periods
ranging from 3 to 20 years.  Amortization  expense charged to operations in 1997
and 1996 was approximately $114,499 and $279,253, respectively. In addition, the
Company  reduced the carrying value of goodwill by  approximately  $1,184,451 in
1997 as a result of the rescission of the HMT acquisition agreement (see Note 4)
and by approximately $2,752,187 in 1996 to reflect an impairment in the value of
the  Company's  healthcare  management  and  telecommunications  assets.  As  of
December 31, 1998 and 1997,  the Company had fully  amortized or written off all
goodwill  associated  with  acquired  businesses.  Goodwill at December 31, 1996
consisted of amounts recorded in connection with the acquisition of HMT.

REVENUE RECOGNITION

The  Company  recognizes  revenue in the period in which the service is provided
or,  in the case of  software  sales,  at the time the  software  is  delivered.
Revenues related to audit or retroactive claims review services, which are based
on a  percentage  of the  savings,  are  recognized  at the time of third  party
approval of the reimbursable amounts.

STOCK PURCHASE OPTIONS AND WARRANTS

The Company follows Accounting  Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25") and related  Interpretations in accounting
for employee  stock  options.  Under APB 25, if the  exercise  price of employee
stock  options  equals the market price of the  underlying  stock on the date of
grant, no compensation expense is recognized.

<PAGE> 49

The  Company  follows  FASB  Statement  No.  123,  "Accounting  for  Stock-Based
Compensation"  ("Statement  No.  123") for stock  purchase  warrants and options
issued as consideration in transactions with non-employees.  Under Statement No.
123,  stock  purchase  warrants  and options are  recorded  using the fair value
method of accounting based on the use of option pricing models.  For purposes of
valuing  warrants  and options  issued as  consideration  in  transactions  with
non-employees, the Company uses the Black-Scholes option pricing model.

INCOME TAXES

The Company has applied, for all years presented, the provisions of Statement of
Financial  Accounting  Standards No. 109,  "Accounting  for Income Taxes," which
requires an asset and liability approach in accounting for income taxes.

EARNINGS PER SHARE DATA

The Company has applied, for all years presented, the provisions of Statement of
Financial  Accounting  Standards  No. 128 "Earnings Per Share" ("SFAS No. 128"),
which requires the  presentation  of both basic and diluted  earnings per share.
Basic  earnings per share is computed  based on the weighted  average  number of
common  shares  outstanding  during  each year.  Diluted  earnings  per share is
computed  based on the sum of the  weighted  average  number  of  common  shares
outstanding  plus  the  additional   number  of  shares  that  would  have  been
outstanding  if all  potentially  dilutive  common  shares,  pursuant  to  stock
purchase warrants and options, convertible preferred stock and convertible notes
and debentures, had been issued.

Basic and diluted  earnings  per share for each of the three years in the period
ended December 31, 1998 are the same because the inclusion of incremental shares
in the computation of diluted earnings per share from the assumed  conversion of
convertible  notes,  debentures and preferred  stock and exercise of outstanding
options and warrants and warrants to be issued in connection  with conversion of
convertible  notes and debentures  would have had the effect of reducing the per
share loss from continuing operations for the respective periods.

Common  stock and  earnings  per share data for all periods  presented  has been
adjusted to reflect the reverse  split of the Company's  issued and  outstanding
common stock,  in the ratio of one share for each seven shares,  effective as of
the close of  business  on March 18,  1999 (see  Notes 1 and 17).  The  weighted
average number of common shares outstanding,  after giving effect to the reverse
split,  were 2,813,704  shares in 1998,  1,543,158  shares in 1997 and 1,192,780
shares in 1996.

STATEMENT OF CASH FLOWS

The operating,  investing and financing  activities included in the consolidated
statements  of cash  flows  are  presented  net of the  assets  and  liabilities
acquired in connection with business combinations and the assets and liabilities
disposed of in  connection  with the  rescission  of business  acquisitions.  As
permitted by Statement of Financial Accounting Standards No. 95, cash flows from
operations of  discontinued  telecommunications  businesses  are not  separately
presented.

LONG-LIVED ASSETS

The  Company  follows  the  provisions  of  Statement  of  Financial  Accounting
Standards No. 121,  "Accounting for the Impairment of Long-lived  Assets and for
Long-lived Assets to Be Disposed Of". This statement requires  impairment losses
to be recorded on long-lived assets used in operations when indicators

<PAGE> 50

of  impairment  are  present and the  undiscounted  cash flows  estimated  to be
generated by those assets are less than the assets' carrying  amount.  Statement
No. 121 also addresses the accounting for long-lived assets that are expected to
be disposed of.

DISCLOSURES ABOUT OPERATING SEGMENTS

The Company has adopted  Statement of Financial  Accounting  Standards  No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS No.
131"). SFAS No. 131 establishes  standards for the way public enterprises report
information about operating segments in annual financial statements and requires
that those enterprises  report selected  information about operating segments in
interim financial reports. It also establishes standards for related disclosures
about products and services,  geographic areas and major customers. The adoption
of this  statement did not have a significant  effect on the Company's  reported
segments and related disclosures see Note 15).

USE OF ESTIMATES

The process of preparing financial  statements requires the use of estimates and
assumptions  regarding  certain  types  of  assets,  liabilities,  revenues  and
expenses.  Such estimates primarily relate to unsettled  transactions and events
as of the date of the financial statements. Accordingly, upon settlement, actual
results may differ from estimated amounts.

RECLASSIFICATIONS

Certain amounts in the 1997 and 1996 and consolidated  financial statements have
been reclassified to conform to the 1998 presentation.

NOTE 3  GOING CONCERN

The  accompanying  financial  statements  have been  prepared on a going concern
basis  which   contemplates   the  realization  of  assets  and  liquidation  of
liabilities in the ordinary course of business. The Company and its subsidiaries
have incurred  losses from  continuing  operations of $772,428,  $3,038,574  and
$18,048,489 in 1998, 1997 and 1996,  respectively,  and have used  approximately
$314,507, $1,361,719 and $4,193,949,  respectively, of cash in their operations.
The  Company  and its  subsidiaries  have a net working  capital  deficiency  of
approximately  $4.2 million and a  deficiency  in assets of  approximately  $4.8
million as of December  31, 1998 and were in default of certain  obligations  to
their  creditors.  Additionally,  as  discussed  in Note 14, the Company and its
subsidiaries  are subject to various legal and  administrative  proceedings.  An
unfavorable outcome in one or more of these actions or proceedings could have an
adverse  effect on the  Company's  liquidity  and  ability to  maintain  current
business operations.

The intent of the Merger and  Reorganization  Agreement  between the Company and
Old   Hitsgalore.com,   a  development  stage  company,   and  the  transactions
contemplated thereby is to provide the Company with the ability to liquidate the
debts,  liabilities and obligations  assumed by IHSI and provide working capital
to  the  Company.   However,   there  is  no  assurance  that  the  transactions
contemplated  by the Merger and  Reorganization  Agreement will provide the cash
required by the Company to sustain future operations, in which case, the company
would be  required to seek  additional  financing  sources.  In the absence of a
sufficient  amount  of cash  flows  from  operations  or from  future  financing
transactions, the Company would be required to seek other alternatives.

<PAGE> 51

Based on the foregoing factors,  it is uncertain whether or not the Company will
be able  generate  adequate  cash  flows  from  operations,  or  from  financing
transactions,  to carry on or maintain  business  operations.  If the Company is
unable to  generate  adequate  cash  flows  from  operations  or from  financing
transactions to support its business  operations,  the Company would be required
to  seek  other  alternatives,  including  sale,  merger  or  discontinuance  of
operations. The consolidated financial statements do not include any adjustments
that might result from the outcome of these uncertainties.

NOTE 4  ACQUISITIONS AND DISPOSITIONS OF BUSINESSES

In  1998,   the  Company   reactivated  a  dormant,   wholly  owned   subsidiary
("Intelicom")  for  the  purpose  of  divesting  ownership  and  control  of the
subsidiary in connection with the acquisition of one or more  telecommunications
businesses. A majority of ownership and control in Intelicom was sold to a group
of outside managers and investors and the Company received cash of $100,000.  As
of December  31,  1998,  the  Company  owns  approximately  370,000  shares,  or
approximately 15%, of the total issued and outstanding shares of common stock of
Intelicom.  Of the total number of shares owned by the Company,  300,000  shares
are to be distributed to the Company's  stockholders of record as of October 30,
1998 and the remaining shares are to be retained by the Company. The Company had
no accounting  basis in its  investment in Intelicom;  accordingly,  the Company
recognized,  as other income,  the $100,000 it received in  connection  with the
change in ownership. As of December 31, 1998, Intelicom had no operations.

Effective March 12, 1996, the Company  acquired all of the outstanding  stock of
Health Management  Technologies,  Inc. ("HMT"),  whose principal business is the
development,  sale and maintenance of medical management computer software,  for
309,837 pre reverse  split shares,  or 44,262 post reverse split shares,  of its
common stock valued at $2,000,000.  The  acquisition was accounted for using the
purchase  method  of  accounting.  The  total  purchase  price  was  $2,140,000,
including  costs of  $140,000.  The excess of the  purchase  price over the fair
value of the net assets  acquired was  $1,373,984 and was assigned a useful life
of 15 years.  The net assets acquired  included  $1,500,000 of medical  computer
software, which was assigned a useful life of 3 years.

The results of operations of HMT since the date of acquisition,  and through the
date of its  disposition  have been  included in the  accompanying  consolidated
financial  statements.  The  following  unaudited  pro forma  summary  operating
results  are for the year ended  December  31,  1996 and  include the results of
operations of HMT (with pro forma  adjustments for  amortization of goodwill and
intangible  assets  acquired) as if HMT was acquired as of January 1, 1996.  The
pro forma  summary is provided for  information  purposes  only.  It is based on
historical  information and does not necessarily reflect the actual results that
would have occurred nor is it necessarily indicative of future operating results
of the combined companies.

Net revenues from continuing
 operations                                               $  3,035,195
Loss from continuing operations                            (18,161,892)
Loss from operations of discontinued
 telecommunications businesses                              (1,508,179)
Basic and diluted earnings per share:
 Loss from continuing operations                                (15.23)
 Loss from operations of
  discontinued telecommunications
  businesses                                                     (1.26)
 Net loss                                                       (16.49)

<PAGE> 52

As more fully discussed below, in 1996 and 1997, the Company sold,  abandoned or
otherwise  disposed  of its  ownership  interests  in HMT,  ATI and CCI and sold
substantially all of the operating assets of TNI. As a result of the disposition
or  discontinuance  of  the  operations  of  the  Company's   telecommunications
businesses,  the  results  of  operations  of  those  businesses  are  shown  as
discontinued in the accompanying consolidated financial statements.

In June 1997, the Company entered into an agreement with the former shareholders
of HMT to  rescind  the  Company's  March  1996  acquisition  of  HMT.  The  HMT
rescission agreement provided for the return of all of the HMT stock acquired by
the Company to the former  shareholders  of HMT in exchange for $450,000 in cash
(in payment of  inter-company  loans to HMT from the Company) and 44,262  shares
(after giving  effect to the reverse stock split) of the Company's  common stock
issued in connection with the acquisition. In connection with the disposition of
HMT, the Company recognized a pre-tax loss of approximately $1,595,412, which is
included as a component of loss from continuing  operations in the  accompanying
consolidated  statement of operations  for the year ended December 31, 1997. The
loss was based on the fair value of the Company's  common stock  returned to the
Company  by the former  stockholders  of HMT in  exchange  for the return of the
stock of HMT to the former  stockholders  of HMT. On the  effective  date of the
rescission  agreement,  HMT had net assets of approximately  $1,740,647,  net of
cash  received,  and the fair value of the shares of the Company's  common stock
that were  returned  to the  Company by the former  shareholders  of HMT totaled
approximately $145,235, based on the quoted market price of the Company's common
stock on the OTC Bulletin  Board as of the date of the  rescission  transaction.
The  return of the  shares  was  recorded  as a  reduction  in common  stock and
additional paid in capital in the amounts of $310 and $144,925, respectively.

The operating results of HMT included in the accompanying consolidated financial
statements  for the years  ended  December  31,1997 and 1996 are  summarized  as
follows:
                                                     1997         1996
                                                  ---------    ---------
Net revenues                                    $ 1,311,055  $ 1,257,298
Loss from continuing operations,
 before income taxes                               (153,656)    (828,895)

In January  1997,  the Company sold (a) TNI's  long-distance  customer  base and
existing  customer  receivables  for $76,000 in cash and (b) TNI's utility audit
division customer base,  agreements and  work-in-process in exchange for $25,000
in cash and a $500,000  convertible  debenture issued by International  Teledata
Corporation  ("ITD").  In connection with the sale of these assets,  the Company
recorded a gain of  approximately  $25,000,  which is  included in the gain from
disposition of  telecommunications  businesses in the accompanying  consolidated
financial statements for the year ended December 31, 1997. No value was assigned
to the  $500,000  convertible  debenture  issued to the Company by ITD (the "ITD
Note", see Note 5).

In May 1997,  the Company  and the former  stockholders  of ATI entered  into an
agreement to rescind the August 1994 acquisition of ATI by the Company (the "ATI
rescission agreement").  The ATI rescission agreement provided for the return of
the ATI stock  acquired  by the  Company to the former  stockholders  of ATI. In
exchange for the return of the ATI stock, the ATI stockholders  were required to
return to the Company,  for  cancellation,  684,410 pre reverse split shares, or
97,772 post reverse split shares,  of the  Company's  common stock,  unexercised
warrants to purchase  24,095 shares of the Company's  common stock (after giving
effect to the reverse stock split) and $250,000 of 6% acquisition notes payable.
Included in the gain from  disposition of  telecommunications  businesses in the
accompanying  consolidated  statement of operations  for the year ended December
31, 1997 is a pre-tax gain of approximately  $937,148 from the rescission of the
ATI acquisition agreement. The gain from the disposition

<PAGE> 53

of ATI was based on the fair value of the Company's common stock returned to the
Company  by the former  stockholders  of ATI in  exchange  for the return of the
stock of ATI to the former  stockholders  of ATI. On the  effective  date of the
rescission   agreement,   ATI  had  net   liabilities,   including   acquisition
indebtedness,  of approximately $509,392 and the fair value of the shares of the
Company's  common  stock  that  were  returned  to the  Company  by  the  former
stockholders of ATI totaled approximately  $427,756,  based on the quoted market
price of the Company's  common stock on the OTC Bulletin Board as of the date of
the rescission transaction. The return of the shares was recorded as a reduction
in common  stock and  additional  paid in  capital  in the  amounts  of $684 and
$427,072, respectively.

In May 1996,  the Company  informed the  principals of CCI that it was canceling
the acquisition of CCI, terminating all of the related acquisition documents and
abandoning CCI's business. In connection with the abandonment of CCI's business,
the Company wrote off its remaining  investment in CCI and  recognized a loss of
approximately  $300,000.  The  principals  of CCI  filed  suit  to  enforce  the
acquisition  notes issued by the Company in connection  with the CCI acquisition
(see  Note 7) and the  issuance  of  200,000  shares  of the  Company's  Class A
preferred  stock.   This  matter  was  referred  by  court  order  to  mandatory
arbitration in the State of Florida (the Arbitration").

On  February  3,  1998,  the  Arbitrators'   awarded  in  favor  of  the  former
shareholders of CCI (the "Award"). The Award required the Company (i) to convert
200,000 shares of previously  issued Class A Preferred Stock into 100,000 shares
of common stock (14,286  shares after giving effect to the reverse stock split),
(ii) to issue another  200,000  shares of Class A Preferred  Stock to the former
stockholders  (which are also  convertible into 14,286 post reverse split shares
of the  Company's  common  stock)  and (iii) gave the  former  stockholders  the
ability to (a) seek a summary judgment against the Company for $500,000, without
opposition or (b) accept 500,000 shares of Class A Preferred  Stock in lieu of a
summary  judgment.  As of  December  31,  1997,  the  Company  had  $300,000  of
acquisition  notes  outstanding  in  addition to a loss  contingency  reserve of
approximately $111,000, related to this action.

During 1998,  the Company (a)  converted  200,000  shares of  previously  issued
preferred  stock into  14,286  shares of common  stock and (b) issued (i) 14,286
shares of its common stock in conversion of another  200,000 shares of preferred
stock and (ii) 500,000  shares of its  preferred  stock in  satisfaction  of the
arbitration settlement.  The fair value of the securities issued pursuant to the
Arbitrators'  award  totaled  approximately  $83,000  and  was  charged  against
previously  recorded loss  reserves.  As a result of the Award,  the Company was
relieved from the  obligations  due under the  acquisition  notes payable to the
former stockholders of CCI.

As of December 31, 1998,  the Company  believed it had complied  with all of the
provisions and terms contained in the Arbitrator's award. Subsequent to December
31,  1998,  the former  shareholders  of CCI filed an action to seek the summary
judgement  in lieu of the shares of  preferred  stock  issued to them and to set
aside the Company's  compliance with the terms of the Award. As a result of this
uncertainty,  the Company  relieved the  obligations  due under the  acquisition
notes payable to the former  stockholders of CCI from its  consolidated  balance
sheet as of December 31, 1998 and increased its accrual for claims,  assessments
and other liabilities by $300,000 (see Note 14).

In October  1999,  the  Circuit  Court of  Pinellas  County,  Florida,  Case No.
99-3990-CI-20,  ruled in favor of the former  shareholders  of CCI and granted a
summary  judgement in favor of the former  stockholders  of CCI in the amount of
$500,000.  In the post merger financial statements of Hitsgalore.com,  Inc., the
difference  between the amounts that were previously accrued for this action and
the amount of the summary judgement will be treated as an adjustment to retained
earnings and additional paid in capital.

<PAGE> 54

The  consolidated  operating  results  of the  Company  for all years  presented
segregate,  as  discontinued  operations,  the  results  of  operations  of  the
Company's discontinued telecommunications businesses. The assets and liabilities
of the  telecommunications  segment,  included in the accompanying  consolidated
balance  sheets as of  December  31,  1998,  1997 and 1996,  are  summarized  as
follows:

                                             1998       1997       1996
                                           -------    -------   ---------
      Current assets                     $    --    $     539  $  332,856
      Total assets                            --          539     660,094
      Current liabilities                  422,526    494,133   1,186,206
      Total liabilities                    422,526    494,133   1,378,026

The   revenues,    costs   and   expenses   of   the   Company's    discontinued
telecommunications  businesses for years ended December 31, 1998, 1997 and 1996,
are summarized as follows:

                                        1998        1997         1996
                                      --------    --------    ----------
Net revenues                        $     --     $ 405,617   $ 2,177,858
Cost of revenues                          --         --        1,320,256
Selling and administrative expenses      1,308     449,925     2,304,059
Impairment and other losses               --         --          494,901
Depreciation and amortization             --        47,460       291,291
Interest income                           --         --             (971)
Interest expense                          --        32,393        38,713
Other income (expense), net            398,551     755,913           832
Income (loss) from operations of
 discontinued businesses, before
 income taxes                          397,243     631,752    (2,271,223)

Other  income  (expense),  net of  discontinued  businesses  for the years ended
December 31, 1998 and 1997 includes  income of  approximately  $398,521 from the
partial recovery of the ITD note and net proceeds of approximately $750,000 from
the settlement of an arbitration award, respectively (see Note 5).

NOTE 5  OTHER GAINS AND IMPAIRMENT AND OTHER LOSSES

In March 1998, the Company, TNI, ITD and certain former employees of the Company
(the "Employees") entered into an agreement (the "Agreement") which provided for
the  transfer to the  Employees  of certain of the TNI assets sold to ITD by the
Company in January 1997 (see Note 4). In  connection  with the transfer of these
assets,  the Company  canceled the ITD Note. In exchange for cancellation of the
ITD Note, the Company  received  70,974 shares of its common stock (after giving
effect to the one share for each  seven  shares  reverse  stock  split  declared
effective as of March 18, 1999) beneficially owned by the Employees,  waivers by
the Employees of accrued and unpaid compensation due to them and cancellation of
their  employment  agreements  with the Company.  Included in income (loss) from
operations  of  discontinued  telecommunications  businesses  for the year ended
December 31, 1998 is income of approximately  $398,521 from the cancellation and
partial recovery of the ITD Note (see Note 4).

After  the  sale of the TNI  assets  described  in Note 4,  the  only  remaining
significant asset of TNI was an award in the amount of $1,250,000 granted to TNI
in  a  binding  arbitration   proceeding  between  and  among  TNI,  GE  Capital
Communications  Services  Corporation  ("GECCS")  and New  Enterprise  Wholesale
Services, Limited Partnership ("NEWS").

<PAGE> 55

On December 24, 1997, TNI, GECCS and NEWS entered into a Confidential Settlement
Agreement  and Mutual Full and Final  Releases  and the award was  satisfied  in
full.   After  legal  fees  and  other  costs,  TNI  received  net  proceeds  of
approximately  $750,000,  which are included in other income  (expense),  net of
discontinued businesses for the year ended December 31, 1997 (see Note 4).

In connection with the Company's acquisition of NSC in October 1995, the Company
recorded  $2,000,000  of common stock which was to be issued to the founders and
management  of NSC.  The  dollar  amount of the  common  stock to be issued  was
reflected as common  stock to be issued in the  Company's  consolidated  balance
sheet as of December 31, 1996. In January 1997,  the founders and  management of
NSC (the "Retiring  Management")  resigned in a negotiated agreement between the
Company and Retiring Management. The material features of the agreement included
the  waiver  by  Retiring  Management  of (a) all  accrued  and  unpaid  bonuses
($695,214)  and (b) the  $2,000,000  of common  stock  which was to be issued to
Retiring Management pursuant to the NSC acquisition agreement.  In exchange, the
Company granted Retiring Management a license agreement for the exclusive use of
NSC's  healthcare  management  software  and  technology,   subject  to  certain
limitations. As a result of this agreement, the Company removed the common stock
to be issued and accrued and unpaid bonuses from its consolidated  balance sheet
and recognized a gain, in 1997 from the sale of the license  agreement  totaling
approximately $2,695,214.

During  each of the three  years in the period  ended  December  31,  1998,  the
Company recognized various losses to reflect, among other things,  impairment in
the   carrying   values   of   the   Company's    healthcare    management   and
telecommunications   assets,   potential  lease   termination   liabilities  and
elimination of deferred  compensation  assets as a result of the  resignation of
certain employees subject to employment agreements.  Impairment and other losses
included  in  the  accompanying   consolidated   statements  of  operations  are
summarized as follows:

                                                  Year Ended December 31,
                                             ----------------------------------
                                               1998        1997         1996
                                             --------    ---------   ----------
Impairment and other losses included
 in loss from continuing operations:
  Write-off of capital lease and related
    assets                                 $     --    $  768,545  $    --
  Provisions for lease termination
   liabilities                                151,500     227,860       --
  Write-off of deferred compensation
   assets                                        --       625,728       --
  Write-down of other assets                   23,136      67,345       --
  Accrual of Timboon settlement liability        --       162,053       --
  Write-off of intangibles and goodwill          --          --     14,233,953
  Other accruals and adjustments             ( 90,360)     47,422       --
                                             --------   ---------   ----------
                                               84,276   1,898,953   14,233,953
                                             --------   ---------   ----------
Impairment and other losses included
 in loss from discontinued operations:
  Write off of intangibles and goodwill          --          --        194,901
  Write off of Investment in CCI                 --          --        300,000
                                             --------   ---------   ----------
                                                 --          --        494,901
                                             --------   ---------   ----------
                                           $   84,276  $1,898,953  $14,728,854
                                             ========   =========   ==========

For  descriptions of the write off of intangibles  and goodwill,  the accrual of
the Timboon  settlement  liability  and the write off of  deferred  compensation
assets, see Notes 2, 7 and 13, respectively.

<PAGE> 56

Prior to the  rescission  of the ATI  acquisition  agreement  (see Note 4),  the
Company obtained and guaranteed an equipment lease financing  facility for ATI's
use. The lessor subsequently  terminated the financing facility, took possession
of the  equipment  under lease and  initiated  an action  against the Company to
enforce the provisions of the guaranty agreement.  In 1998, the Company recorded
a loss provision of $151,500  pursuant to the guaranty  agreement (see Note 14).
This loss provision was partially  offset by  adjustments to previously  accrued
loss reserves.  In March 1999,  the Company  settled its  obligations  under the
guarantee agreement, and other lease defaults with the same lessor in the amount
of approximately $41,000, by the payment of $28,600, in cash. In the post merger
financial  statements of  Hitsgalore.com,  Inc., the difference  between amounts
accrued and the amount paid in settlement of this  obligation will be treated as
an adjustment to retained earnings and additional paid in capital.

In 1997, the Company removed,  from its consolidated  balance sheet, the capital
lease and other assets related to equipment under lease from Boston  Financial &
Equity  Corporation  ("BFC")  due to BFC  having  taken  possession  of  certain
computer equipment leased by NSC from BFC and the initiation by BFC of an action
filed in the State of Texas against the Company seeking approximately  $500,000,
due under the lease agreement. The removal of the capital lease and other assets
related to equipment  under lease  resulted in a loss of  $768,545.  The Company
also  recorded a loss  contingency  of  approximately  $500,000  and removed the
related capital lease obligation from the Company's  consolidated balance sheet,
which resulted in an additional loss provision for lease termination liabilities
of approximately $122,986.  Subsequent to December 31, 1998, the Company settled
its  obligation  to BFC for  $125,000  in  cash.  In the post  merger  financial
statements of  Hitsgalore.com,  Inc., the difference between amounts accrued and
the  amount  paid  in  settlement  of this  obligation  will  be  treated  as an
adjustment to retained earnings and additional paid in capital.

NOTE 6  FURNITURE AND EQUIPMENT

Furniture and equipment consists of the following:

                                                  DECEMBER 31,
                                         -------------------------------
                                          1998        1997        1996
                                         -------     -------   ---------
Furniture and equipment                 $ 75,162    $130,162  $  917,869
Equipment under capital lease               --          --       880,163
Leasehold improvements                      --          --        14,835
                                         -------     -------   ---------
                                          74,162     130,162   1,812,867
Less: accumulated depreciation          ( 46,035)    (56,774)   (587,598)
                                         -------     -------   ---------
Net furniture and equipment             $ 29,127    $ 73,388  $1,225,269
                                         =======     =======   =========

Depreciation expense was $23,647,  $174,545 and $327,897 in 1998, 1997 and 1996,
respectively.

In 1997, the Company removed, from its consolidated balance sheet, capital lease
assets with a net carrying  amount of $579,681  related to equipment under lease
from BFC. See Notes 5 and 14.

Included in furniture and  equipment,  net, as of December 31, 1996 is $327,237,
applicable to discontinued telecommunications businesses.

<PAGE> 57

NOTE 7  NOTES AND DEBENTURES PAYABLE

Notes and debentures payable consist of the following:

                                  DECEMBER 31,
                                            -----------------------------------
                                               1998        1997         1996
                                            ---------   ---------     ---------
4% Cumulative convertible debentures
 due October 1, 1998                       $  791,664  $1,200,000  $      --
10% Cumulative convertible debentures
 due on November 26, 1997                     170,000     170,000       200,000
10% Cumulative convertible debentures
 due on November 21, 1997                        --          --         300,000
Notes payable to former shareholders of
 NSC in equal monthly installments of
 $20,000, non-interest bearing                150,000     150,000       150,000
Acquisition notes payable to the former
 stockholders of CCI                             --       300,000       300,000
6% Acquisition notes payable to former
 stockholders of ATI, secured by the
 stock of ATI                                    --          --         250,000
18% Cumulative Convertible Debenture
 Note due January 15, 1999                     80,000      80,000          --
10% cummulative convertible debenture note
 due on June 7, 1999                           50,000        --            --
12% Convertible Promissory Note
 due March 28, 1997, in default                30,000      30,000          --
10% Cumulative Convertible Debenture
 Note due September 1998                       30,000      30,000          --
10% Cumulative convertible debentures
 due on various dates through
 November 1997                                   --     1,195,000     1,279,000
10% Convertible debentures payable to
 former shareholders of TNI                      --       450,000       450,000
12% Cumulative Convertible Debenture
 Notes due on various dates through
 November 1998                                   --        50,000          --
8%-10% Notes payable to stockholders             --          --         162,741
Promissory note in default                       --          --         200,000
10.75% demand note payable, secured
 by certain accounts receivable                  --          --         100,000
5% Note to former stockholder of CCI, due
 on demand, secured by certain equipment         --          --          75,000
Other                                           9,700       6,700        14,017
                                            ---------   ---------     ---------
                                            1,311,364   3,661,700     3,480,758
Less: current portion                      (1,311,364) (3,661,700)   (3,480,758)
                                            ---------   ---------     ---------
Long-term portion                         $     --     $     --    $      --
                                            =========   =========     ========


On February 24, 1997, the Company issued $1,120,000 of 4% cumulative convertible
debentures due October 1, 1998 (the "4% Debentures") to Timboon, LTD ("Timboon",
a non U.S.  person)  in  reliance  upon  exemptions  under  Regulation  S of the
Securities Act of 1933. The 4% Debentures were  convertible at any time after 45
days from the date of their issuance,  until maturity, into the Company's common
stock at a  conversion  price  equal  to the  lesser  of (a) 80% of the  average
closing bid price of the Company's  common stock for the five days preceding the
issuance of the  debentures  or (b) 70% of the average  closing bid price of the
Company's  common stock for the five days  preceding the  conversion  date.  The
Company  incurred  costs in  connection  with this  financing  of  $120,000  and
received net proceeds of $1,000,000.

<PAGE> 58

As of December 31, 1997, the Company had converted $120,000 of the 4% Debentures
into 36,623  shares of the Company's  common stock,  as adjusted for the reverse
stock split.  On June 6, 1997, as a result of the  Company's  refusal to convert
additional  debentures,  Timboon,  as  Plaintiff,  filed an action in the United
District  Court,  Southern  District  of  New  York,  against  the  Company,  as
Defendant,  seeking the delivery of 23,348 shares of common  stock,  as adjusted
for the reverse stock split,  in conversion of $150,000 of 4% Debentures and the
payment of $970,000,  plus  damages.  The Company filed a  counterclaim  against
Timboon alleging that Timboon breached the representations and covenants it made
in the Off-Shore Securities  Subscription  Agreement.  These representations and
covenants  related  to,  among  other  things,  Timboon's  investment  intent in
acquiring the  Company's  securities,  its possible  "shorting" of the Company's
common stock in  contemplation  of conversion and  manipulative  market activity
with the intent to artificially depress the market price of the Company's common
stock.

Effective  March 2, 1998,  the  Company and Timboon  entered  into a  Settlement
Agreement and Release (the "Settlement Agreement"),  in settlement of all claims
brought against each other in connection with the 4% Debentures.  The Settlement
Agreement  provided for a cash payment of $1,200,000 in full satisfaction of the
outstanding  debt to Timboon  or the  issuance  of such  number of shares of the
Company's  common  stock as  could  be sold by  Timboon  with  net  proceeds  of
$1,200,000.  In connection with the Settlement Agreement,  the Company increased
the principal  balance of the 4% Debentures to equal $1,200,000 and recognized a
charge to income of approximately $162,053.

As of  December  31,  1998,  the  Company  had  issued and  Timboon  had sold an
aggregate of 714,286  shares of common stock,  as adjusted for the reverse stock
split. Timboon realized net proceeds of approximately  $408,336 from the sale of
the  shares.  The  Company  treated  an equal  amount  of the 4%  Debentures  as
converted,  leaving  debentures  outstanding  of  approximately  $791,664  as of
December  31,  1998.  These  debentures  were  to be  settled  in cash or by the
issuance of additional  shares of the Company's common stock. In March 1999, the
Company  issued  142,857  shares of its common stock (after giving effect to the
reverse  split in the  Company's  common  stock) in  conversion  of  $200,000 in
principal amount of such outstanding debentures,  leaving debentures outstanding
of  approximately  $591,664  after such  conversion.  In April 1999, the Company
issued an additional  145,000 shares of its common stock (after giving effect to
the reverse split in the Company's  common  stock) in full  satisfaction  of all
outstanding debenture indebtedness owed to Timboon.

On November 21, 1996 and November 26, 1996,  the Company  privately  placed,  in
reliance  upon  exemptions  under  Regulation S of the  Securities  Act of 1933,
$300,000 and  $200,000,  respectively,  of 10% one-year  cumulative  convertible
debentures.  These  debentures  were  convertible  into shares of the  Company's
common stock at any time after 45 days from the date of their issuance and prior
to their  scheduled  one-year  maturity  dates.  The  conversion  price of these
debentures, plus accrued and unpaid interest, was equal to the lesser of (a) 70%
of the average closing bid price of the Company's common stock for the five days
preceding the conversion date or (b) 80% of the average closing bid price of the
Company's common stock for the five days prior to issuance of the debentures. In
connection with the issuance of these debentures, the Company incurred placement
fees and other costs of  approximately  $50,000  and  received  net  proceeds of
approximately  $450,000.  As of  December  31,  1998 and 1997,  the  Company had
converted  $330,000  of these  debentures  into 17,429  shares of the  Company's
common stock (after  giving  effect to the reverse  stock split in the Company's
common stock) leaving debentures outstanding of approximately $170,000. In April
1999,  the Company issued 27,500 shares of its common stock (after giving effect
to the reverse split in the Company's common stock) in full  satisfaction of all
of this outstanding debenture indebtedness.

<PAGE> 59

The notes  payable  to the  former  shareholders  of NSC,  due in equal  monthly
installments  of $20,000,  are in default.  No payments on these notes have been
made by NSC since April 1996. NSC is accruing interest on these notes at 18% per
annum, the default rate of interest as called for by the notes.

The acquisition notes payable to the former  stockholders of CCI were treated as
extinguished in 1998 as a result of the arbitration  proceeding  brought against
the Company by the former stockholders of CCI (see Notes 4 and 14).

The  6%  acquisition  notes  payable  to the  former  shareholders  of ATI  were
originally  due within 90 days of the date of  acquisition  of ATI.  These notes
were  subsequently  modified  to  delay  their  due date to the date of a public
offering of the Company's  common stock or upon placement of a bridge  financing
facility to  refinance  the debt.  These notes were also  extended  from time to
time. In consideration of these extensions, the Company issued 140,000 shares of
its Class B preferred  stock and 23,810 stock purchase  warrants  exercisable at
$10.50 per share (after  giving  effect to the reverse  stock split) to the note
holders. The 140,000 shares of Class B preferred stock were converted into 7,273
shares of the  Company's  common stock (after giving effect to the reverse stock
split) in September  1996. The  acquisition  notes  payable,  the stock purchase
warrants and 97,773  shares of the  Company's  common stock issued to the former
shareholders of ATI in connection with the acquisition and as consideration  for
extension of  indebtedness  are to be returned to the Company in connection with
the May 1997 rescission of the ATI acquisition agreement (see Note 4).

The $80,000 18% Cumulative  Convertible  Debenture Note due January 15, 1999 was
convertible into the Company's common stock, at the election of the holder, at a
conversion  price of $17.50 per share (after  giving effect to the reverse stock
split).  The loan was guaranteed by the Company's  Chairman of the Board and was
collateralized  by 71,429  shares of the  Company's  common stock (after  giving
effect to the  reverse  stock  split),  which was held in escrow  pursuant to an
escrow  agreement.  On  January  25,  1999,  the  Company  received a demand for
repayment of this loan and on February 23, 1999,  the lender took  possession of
the escrowed shares in full payment of the note.

The $50,000 10%  cumulative  convertible  debenture note due on June 7, 1999 was
convertible into 750,000 shares of the Company's common stock and 750,000 common
stock  purchase  warrants,  at the  election  of the holder.  The 750,000  stock
purchase   warrants   issuable  upon  conversion  of  the  debenture  note  were
exercisable  at prices  ranging from $0.875 to $1.40 per share,  as adjusted for
the reverse stock split,  and had expiration dates of two years after their date
of issue. This note was paid, in cash, in 1999.

The $30,000 12%  Convertible  Promissory  Note due March 28, 1997 was  converted
into 58,309  shares of the  Company's  common stock (after  giving effect to the
reverse  stock  split) in March  1999.  Such  conversion  was made on terms more
favorable  than those  contained in the original note  agreement for purposes of
inducing conversion. In connection with the conversion of this note, the Company
recorded debt conversion  expense of  approximately  $46,938 for the cost of the
inducement offer.

The $30,000 10% Convertible Debenture Note due September 1998 was converted into
50,000 shares of the Company's  common stock (after giving effect to the reverse
stock split) in March 1999.  Such  conversion  was made on terms more  favorable
than those  contained in the original  note  agreement  for purposes of inducing
conversion. In connection with the conversion of this note, the Company recorded
debt conversion expense of approximately  $46,836 for the cost of the inducement
offer.

<PAGE> 60

During 1996, the Company  privately placed with Nidan  Corporation,  in reliance
upon  exemptions  under  Regulation D of the Securities Act of 1933, a series of
one-year 10% cumulative convertible debentures in the aggregate principal amount
of $1,279,000 (the "Nidan  Debentures").  The Nidan  Debentures were convertible
into shares of the Company's common stock on various dates through November 1997
or on the effective date of a registration statement under the Securities Act of
1933, if earlier.  The number of shares of common stock issuable upon conversion
of these debentures,  in either case, was generally to be determined by dividing
the principal amount of the debentures, plus accrued and unpaid interest, by the
lesser of (a) the fixed  conversion  prices set forth in the  debentures,  which
ranged from $10.50 to $35.00 per share, as adjusted for the reverse stock split,
or (b) a conversion price equal to 50% of the average closing bid and ask prices
of the Company's  common stock at the close of trading on the next day following
the maturity date as set forth in the respective  debenture.  As of December 31,
1997, the Company had converted $84,000 of these debentures, leaving a principal
balance of $1,195,000.

In 1997,  Nidan  Corporation  transferred  $845,000 in principal amount of these
debentures  to  residents  of the State of  Michigan  without the consent of the
Company. The Company believed that the conversion of these debentures could have
constituted  a violation of Michigan  securities  law as a result of the Company
being subject to a consent order (see Note 14); accordingly, the Company refused
to convert these debentures at maturity.  Subsequently, the note holders and the
Company determined that the offer to Michigan residents of the underlying common
stock was made by the conversion feature of the debentures and that the issuance
of common stock in conversion  would not  in-of-itself  constitute an additional
violation under the consent order.

In 1998,  the Company  issued  748,990  shares of its common stock (after giving
effect to the reverse stock split) upon  conversion of the $845,000 in principal
amount of Nidan  Debentures  transferred  to residents of the State of Michigan,
according  to the  original  conversion  feature  contained  in  the  respective
debenture note. The Company also issued,  effective as of June 30,1998,  357,143
shares of its common stock (after  giving effect to the reverse stock split) and
285,714 common stock purchase warrants, as adjusted for the reverse stock split,
upon  conversion  of all  remaining  Nidan  Debentures  pursuant to a settlement
agreement.  The fair  value of the  securities  issued  upon  conversion  of the
remaining  debenture notes approximated the carrying value of the debt converted
and no gain or loss was recognized.  The warrants issued have an expiration date
of June 29, 2000 and are  exercisable  at prices ranging from $1.40 to $1.70 per
share.

The $450,000 10% convertible  debentures  payable to the former  shareholders of
TNI that were outstanding as of December 31, 1997 were  extinquished,  effective
as of March 31, 1998  pursuant to a redemption  offer made to the holders of the
notes.  Pursuant to the  redemption  offer,  the Company  issued an aggregate of
127,611  shares of its common stock (after  giving  effect to the reverse  stock
split) and 64,286 stock  purchase  warrants,  as adjusted for the reverse  stock
split. Of the stock purchase  warrants issued,  32,143 warrants,  exercisable at
$10.50 per share, expire in March 2000 and 32,143 warrants, exercisable at $1.40
per share,  expire in March 2003. The carrying  amount of the debt  extinquished
exceeded the fair value of the common stock and warrants  issued in exchange for
the debt by $292,228.  This excess is classified as an extraordinary gain in the
accompanying  consolidated  statement of operations  for the year ended December
31, 1998.

The $50,000 12% Cumulative  Debenture Notes  outstanding as of December 31, 1997
consisted of two notes in the  principal  amount of $25,000,  each.  These notes
were due in October and November  1998,  respectively,  and were  converted into
71,547 shares of the Company's  common stock (after giving effect to the reverse
stock split) and 71,429 common stock purchase warrants  exercisable at $0.70 per
share,  as adjusted  for the  reverse  stock  split.  The  warrants  issued upon
conversion of these notes expire in the year 2000.

<PAGE> 61

As of December  31,  1996,  the Company had  $162,741 of 8-10% notes  payable to
stockholders  due on various  dates  through  December  1997.  These  notes were
generally due one year after the date of their  issuance and provided the holder
with the right to convert the  principal  amount of the note,  plus  accrued and
unpaid  interest,  into shares of the  Company's  common stock at  predetermined
conversion prices at any time prior to maturity. During 1997, these stockholders
loaned the Company an additional  $91,443,  the Company made payments of $84,484
and $168,000 of such notes, plus accrued interest, were converted into shares of
the Company's common stock at a negotiated  conversion prices ranging from $6.30
to $7.00 per share, as adjusted for the reverse stock split.

The $200,000  promissory  note in default and the 10.75%  demand note payable in
the amount of $100,000 that were  outstanding  as of December 31, 1996 were paid
in December 1997 from the proceeds of the  Settlement  Agreement  with GECCS and
News (see Note 5).

The 5% note payable to a former  shareholder  of CCI in the amount of $75,000 at
December 31, 1996 was relieved,  in full,  as a result of the  rescission in May
1997 of the ATI acquisition (see Note 4).

Except for the guaranty  and security  agreements  described  above,  all of the
notes  and  debentures  outstanding  as  of  December  31,  1998  are  unsecured
obligations of the Company and its subsidiaries.


NOTE 8  BORROWINGS UNDER LINES OF CREDIT

As of  December  31, 1998 and 1997,  the Company had no used or unused  lines of
credit.  As of December 31, 1996, the Company,  through two of its subsidiaries,
had $182,651  outstanding under lines of credit. Such lines of credit were fully
utilized at December 31, 1996.


NOTE 9  FINANCIAL INSTRUMENTS

Statement of Financial  Accounting  Standards  No. 107  "Disclosures  about Fair
Value of Financial  Instruments" requires disclosure of the estimated fair value
of financial  instruments.  It is not  practicable to estimate the fair value of
the Company's debt  instruments  because most of the debt  instruments that have
been issued by the Company are unique due to their terms being  negotiated  as a
part of the  acquisition of companies or in connection  with private  placements
and, in many cases,  comparable instruments do not exist. The carrying amount of
the  Company's  other  financial  instruments,  cash  and cash  equivalents  and
accounts receivable, are a reasonable estimate of their fair value.

NOTE 10  INCOME TAXES

Income taxes reflected in the accompanying consolidated statements of operations
consist  of  deferred  income  taxes  and are  allocated  among  (i)  continuing
operations,   (ii)  the   components  of   discontinued   operations  and  (iii)
extraordinary  gains in  proportion  to their  individual  effects on income tax
expense,  after  allocation  of income  tax  expense  applicable  to  continuing
operations.  No provisions for income taxes currently payable have been made due
to operating losses for tax purposes.

<PAGE> 62

The allocation of income taxes is summarized as follows:

                                            YEAR ENDED DECEMBER 31,
                                     -----------------------------------
                                        1998        1997           1996
                                     --------    --------     ----------
Loss from continuing operations       $(262,000) $(605,500) $(2,440,150)
Discontinued operations:
 Income (loss) from operations of
  discontinued telecommunications
  businesses                            151,000    240,000     (763,044)
 Gain from disposition of
  telecommunications businesses            --      365,500         --
Extraordinary item - Gain from
 extinguishment of debt                 111,000       --           --
                                        -------    -------    ---------
Income tax expense (benefit)          $    --    $    --    $(3,203,194)
                                        =======    =======    =========

Income  taxes  applicable  to  continuing  operations  differs  from the amounts
computed  by  applying  the U.S.  Federal  income tax rate of 34 percent to loss
before income taxes as a result of the following:

                                                  YEAR ENDED DECEMBER 31,
                                             ---------------------------------
                                               1998        1997         1996
                                             -------    ---------    ---------
Amount computed at statutory rate          $(351,700) $(1,239,000) $(6,966,137)
Increase (reduction) in taxes
 resulting from:
State income taxes                           (41,400)    (120,400)    (819,546)
Amortization of goodwill                        --         38,900       80,158
Rescission of business acquisitions             --        176,900         --
Impairment losses                               --           --        971,769
Change in valuation allowance                131,100      538,190    4,125,702
Other                                           --            (90)     167,904
                                             -------     -------     ---------
                                           $(262,000) $  (605,500) $(2,440,150)
                                             =======    =========    =========

The  Company  has  temporary  differences  between  the  amounts  of assets  and
liabilities for financial  reporting purposes and the amounts of such assets and
liabilities  as measured by enacted tax laws. The Company also has net operating
loss  carryforwards  available to reduce future taxable income.  The significant
components of the Company's  deferred tax assets and  liabilities as of December
31, 1998 and 1997 are as follows:

<PAGE> 63


                                                        December 31,
                                            ---------------------------------
                                               1998        1997       1996
                                            ---------   ---------   ---------
Deferred tax assets:
Net operating loss carryforwards           $3,427,000  $4,034,296  $4,113,122
Allowance for doubtful accounts                 --        190,000      10,668
Accrued compensation and liabilities under
 employment agreements                        143,000     257,000     777,922
Accrued expenses and other current
 liabilities                                  435,000     250,800        --
                                            ---------   ---------   ---------
Total deferred tax assets                   4,005,000   4,732,096   4,901,712
Less-valuation allowance                   (3,870,000) (4 663 996) (4,125,806)
                                            ---------   ---------   ---------
Net deferred tax assets                       135,000      68,100     776,007
                                            ---------   ---------   ---------
Deferred tax liabilities:
Intangible assets                                --          --       371,029
Deferred compensation                         135,000      68,100     389,401
Other                                            --          --        15,577
                                            ---------   ---------   ---------
Total deferred tax liabilities                135,000      68,100     776,007
                                            ---------   ---------   ---------
Net deferred income taxes                  $    --     $    --     $     --
                                            =========   =========   =========

At December 31, 1998, the Company and its  subsidiaries had unused net operating
loss  carryforwards  of  approximately  $9 million,  expiring  on various  dates
through 2018. Of this amount,  approximately  $8 million is not restricted as to
use. The balance of the  carryforwards  amounting to approximately $1 million is
restricted  to  offsetting  future  taxable  income,  if any, of the  respective
companies  which  generated the  carryforwards  and may be further limited as to
utilization in any one year by existing tax laws.

NOTE 11 - STOCKHOLDERS' EQUITY

CLASS A PREFERRED STOCK

The  Company's  Class A preferred  stock is  non-voting,  has a stated value and
liquidation preference of $1.00 per share, is convertible into one-half share of
the Company's  common stock at the election of the holder at any time prior to a
public offering of the Company's  common stock and  automatically  converts into
common stock at the time of such public  offering.  As of December 31, 1998, the
Company had 500,000 shares of Class A preferred stock outstanding.  These shares
were issued during the year to the former  stockholders of CCI as a result of an
arbitration proceeding brought against the Company by the former stockholders of
CCI (see Notes 4 and 14).

CLASS B PREFERRED STOCK

The  Company's  Class B preferred  stock is  non-voting,  has a stated value and
liquidation  preference of $1.00 per share,  is  convertible  into shares of the
Company's  common stock (with such number of shares to be  determined  as of the
date of  issuance),  based on the stated  value  divided  by the 10-day  average
closing bid price of the  Company's  common stock) at the election of the holder
at any  time  prior to a public  offering  of the  Company's  common  stock  and
automatically converts into common stock at the time of such public offering. As
of December  31,  1997,  the Company had  2,953,125  shares of Class B preferred
stock outstanding. During 1998, 2,853,125 shares of Class B preferred stock were
converted into 100,255 shares of common stock (after giving effect to the

<PAGE> 64

reverse  stock  split).  As of  December  31,  1998,  100,000  shares of Class B
preferred stock were outstanding and are convertible into 5,195 shares of common
stock.

STOCK PURCHASE OPTIONS AND WARRANTS

The Company has issued common stock purchase  warrants in  conjunction  with the
sale  and  issuance  of  common  and  preferred  stock  and upon  conversion  of
convertible  debentures.  The exercise  price of warrants  issued was determined
based  upon the  issue and  market  prices of the  Company's  other  securities.
Warrants outstanding are exercisable at any time until their expiration date and
entitle the holder to receive one share of common stock for each warrant.  After
giving effect to the reverse split of the Company's common stock in the ratio of
one share for each seven shares,  declared effective March 18, 1999, the Company
has approximately 924,483 warrants  outstanding.  Of the warrants outstanding as
of December 31, 1998, 342,340 warrants, exercisable at prices ranging from $0.70
to $31.50 per share,  expire in 1999,  566,071  warrants,  exercisable at prices
ranging  from  $0.35 to $10.50 per  share,  expire in 2000 and 16,072  warrants,
exercisable at $1.40 per share, expire in 2003.

The Company has issued stock options to certain officers, employees, consultants
and directors.  Options outstanding as of December 31, 1998, after giving effect
to the reverse split of the Company's common stock, include:  options,  expiring
in February  1999, to acquire  16,786  shares at $10.50 per share;  and options,
expiring in August 2002, to acquire 185,714 shares at $0.70 per share.

During 1998, the Company  registered  636,946 shares of its common stock,  after
giving effect to the reverse split of the Company's  common stock, for resale by
certain  of its  officers,  employees,  consultants  and  directors.  The shares
registered for resale were issued upon exercise of  non-statutory  stock options
granted  to those  persons  during  1998 in  exchange  for  services  previously
rendered to the Company.  The exercise  price of such stock options was equal to
the market  price of the  Company's  stock on the date of grant and ranged  from
$0.70 to $0.77 per share.

Options and warrants are  summarized as follows.  All data has been restated for
the reverse stock split,  declared  effective as of March 18, 1999, in the ratio
of one share for each seven shares.

<PAGE> 65



                                                                  Weighted
                                                   Exercise       Average
                                                   Price Range    Exercise
                                         Shares    per share      Price
                                        ---------  ------------   ---------
Warrants and options
 outstanding at December 31, 1995         240,229  $10.50-$56.00     $19.11
Warrants issued                           260,300  $10.50-$70.00     $28.00
Options issued                            142,857  $42.00            $42.00
                                        ---------
Warrants and options
 outstanding at December 31, 1996         643,386  $10.50-$70.00     $26.46
Warrants issued                           313,972  $ 0.70-$31.50     $ 7.42
Warrants canceled                         (23,810) $10.50            $10.50
Options issued                            202,500  $ 0.70-$10.50     $ 1.54
Options canceled                         (142,857) $42.00            $42.00
                                        ---------
Warrants and options
 outstanding at December 31, 1997         993,191  $ 0.70-$70.00     $13.51
Warrants issued                           582,142  $ 0.35-$10.50     $ 1.33
Warrants expired                         (448,350) $10.50-$70.00     $20.79
Options issued                            636,946  $ 0.70-$ 0.77     $ 0.77
Options exercised                        (636,946) $ 0.70 $ 0.77     $ 0.77
                                        ---------
Warrants and options
 outstanding at December 31, 1998       1,126,983  $ 0.35-$31.50     $2.06
                                        =========

The Company follows Accounting  Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25") and related  Interpretations in accounting
for employee  stock  options.  Under APB 25,  because the exercise  price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized.

FASB Statement No. 123,  "Accounting for Stock-Based  Compensation"  ("Statement
No.  123")  provides for an  alternative  fair value  method of  accounting  for
recognizing stock option expense.  The fair value method of accounting  requires
the use of complex  option  pricing  models that were  originally  developed for
valuing  publicly traded options.  Option pricing models also require the use of
subjective  assumptions about the Company's stock and do not necessarily provide
a reliable single measure of the fair value of the Company's stock options.

Companies  that have not adopted  Statement  No. 123 are required to present pro
forma  disclosure  of what net income and earnings per share would have been had
the fair value method of accounting been used to recognize stock option expense.
For purposes of pro forma  disclosure,  the Company uses a Black-Scholes  option
pricing  model.  The pro forma  disclosures  are based upon the terms of options
granted during the year,  the price of the Company's  stock on the date of grant
and certain other assumptions, including the following:


                                          1998     1997   1998
                                          ----     ----   ------
Risk-free interest rate                   6.50%    6.50%    6.66%
Dividend yield                             --       --       --
Volatility                                1.96     1.73   0.4077
Expected life (in years)                   N\A     4.50      2.0

<PAGE> 66

The  compensation  cost of options  granted in 1998 as measured under APB 25 and
under Statement No. 123 were the same, accordingly,  no pro forma information is
presented  for the year ended 1998.  The  Company's pro forma net loss and basic
and diluted earnings per share data after giving effect to the charges to income
that would have been necessary had the Company adopted Statement No. 123 for the
years ended  December 31, 1997 and 1996 and,  after giving effect to the reverse
split in the ratio of one share for each seven shares  effective as of March 18,
1999, are summarized as follows:

                                                     1997          1996
                                                  ---------     ----------
Loss from continuing operations                 $(3,319,331)  $(19,728,489)
                                                  ---------     ----------
Income from operations of discontinued
 telecommunications businesses                      391,752     (1,508,179)
Gain from disposition of discontinued
 telecommunications businesses                      596,648          --
                                                  ---------     ----------
Net income (loss)                               $(2,330,820)  $(21,236,668)
                                                  =========     ==========

Basic and diluted earnings per share:
 Loss from continuing operations                 $    (2.15)  $      (2.36)
 Income from operations of discontinued
  telecommunications businesses                         .25          (0.18)
 Gain from disposition of discontinued
  telecommunications businesses                         .39           --
                                                  ---------     ----------
      Net loss                                   $    (1.51)  $      (2.54)
                                                  =========     ==========

NOTE 12  LEASES

As of December  31,  1998,  the Company  leases  office space under an operating
lease agreement  expiring on May 31, 1999.  Minimum future rental payments under
this lease agreement as of December 31, 1998 total $8,441.

Rental expense under all operating leases was $34,209,  $167,354 and $359,474 in
1998, 1997 and 1996, respectively.

As of December 31, 1998, the Company and its  subsidiaries  have vacated certain
leased  premises and abandoned  certain  equipment  leased under non  cancelable
lease  agreements  and were  subject to actions  brought by certain  lessors for
lease payments and other charges due under the leases.  As of December 31, 1998,
the  Company  and  its  subsidiaries  have  liabilities  totaling  approximately
$841,000 for the  estimated  obligations  due under such lease  agreements  (see
Notes 5 and 14). Certain of these actions were settled in 1999 for approximately
$209,600  in  cash.   Amounts  previously  accrued  for  those  actions  totaled
approximately   $786,000.   In  the  post   merger   financial   statements   of
Hitsgalore.com, Inc., the difference between amounts accrued and amounts paid in
settlement  of these  obligations  will be treated as an  adjustment to retained
earnings and additional paid in capital.

NOTE 13 - EMPLOYMENT AGREEMENTS

As of December 31, 1998,  1997 and 1996, the Company had  employment  agreements
with certain of its key employees.  These  employment  agreements  provided for,
among other things,  the payment of compensation  over five years from the dates
of the  respective  employment  agreements  regardless  of  whether  or not  the
employees remained in the employ of the Company. The present value of future

<PAGE> 67

obligations  under such  agreements  as of December 31, 1998,  1997 and 1996 was
approximately $376,559,  $675,966 and 1,020,913,  respectively,  and the Company
had  deferred   compensation   assets  related  to  these  agreements   totaling
approximately  $354,494,   $179,568  and  $1,002,770,   respectively.   Deferred
compensation  assets  are  reported  on the basis that the  related  employee(s)
continue  to provide  meaningful  service to the  Company and are reduced in the
event the employee(s) cease to provide such service.  In 1997, certain employees
subject to employment  agreements  resigned and the Company reduced, as a charge
to income, deferred compensation assets by approximately $625,728 (see Note 5).

In March 1998, the Company, TNI,  International Teledata Corporation ("ITD") and
certain  former  employees  of the Company  (the  "Employees")  entered  into an
agreement  (the  "Agreement")  which  provided  for the  transfer of certain ITD
assets to the  Employees  (see Note 5). In  connection  with the  Agreement  the
Employees  waived all unpaid  compensation  due to them by the  Company  and all
obligations due to them under their employment agreements.  Included in the gain
from  partial  recovery  of the ITD Note is  approximately  $159,104  related to
future  obligations  under  employment  agreements  and  approximately  $147,506
related to obligations to the Employees for past service (see Note 5).

On June 30,  1998,  the  Company and its former  Chief  Executive  Officer  (the
"Former  CEO")  entered into an agreement  and mutual  release (the  "Release").
Pursuant to the Release, the Company agreed to issue 42,857 shares of its common
stock (after  giving  effect to the reverse  stock split) and release the Former
CEO from any and all claims,  demands,  contracts,  and  obligations of any kind
whatsoever  which the  Company  had,  has or may have  against the Former CEO in
exchange  for a release  from the  Former  CEO of any and all  claims,  demands,
contracts and obligations of any kind  whatsoever  which the Former CEO had, has
or may have against the Company arising out of the employment  agreement between
the Company and the Former CEO (the "Employment Agreement").  As a result of the
Release,  the Company removed all liabilities  previously accrued by the Company
under the Employment  Agreement from its consolidated balance sheet and recorded
a gain, which is included in other income,  of approximately  $380,029.  Of this
amount,   approximately   $226,029  related  to  future  obligations  under  the
Employment  Agreement and  approximately  $154,000 related to obligations to the
Former CEO for past service.

For  the  years  ended  December  31,  1998  and  1997,  the  Company  amortized
approximately  $256,121  and  219,734,  respectively,  in deferred  compensation
assets and  approximately  $345,321  and  $344,946,  respectively,  in  deferred
compensation  liabilities  related to  employment  agreements.  The Company also
wrote off deferred  compensation  assets of  approximately  $625,728 in 1997 and
recorded gains totaling  approximately $385,133 in 1998 from the cancellation of
employment agreements. As a part of the above described agreements,  the Company
also  recognized  gains totaling  approximately  $301,506 from the waiver by the
employees of compensation previously accrued for past service.

<PAGE> 68

Following  is a summary of amounts  included  in the  accompanying  consolidated
balance sheets for  outstanding  employment  agreements as of December 31, 1998,
1997 and 1996:
<TABLE>
<CAPTION>

                                                       1998       1997        1996
                                                    ---------   ---------   ---------
<S>                                               <C>         <C>         <C>
Deferred compensation assets included in:
 Other current assets                              $  138,971  $  126,627  $  355,415
 Deferred compensation (non-current)                  215,523      52,941     647,355
                                                    ---------   ---------    --------
                                                   $  354,494  $  179,568  $1,002,770
                                                    =========   =========   =========


Deferred compensation liabilities included in:
 Accrued expenses and other current liabilities    $  144,942  $  365,172  $  344,652
 Deferred liabilities under employment agreements     231,617     310,794     676,261
                                                    ---------   ---------   ---------
                                                   $  376,659  $  675,966  $1,020,913
                                                    =========   =========   =========

</TABLE>

NOTE 14  COMMITMENTS AND CONTINGENCIES

As of December  31,  1998,  the Company was subject to an  Involuntary  Petition
under Chapter 7 of the U.S.  Bankruptcy  Code (the  "Petition")  which was filed
against the Company on June 1, 1998 in the United  States  Bankruptcy  Court for
the Middle  District of Florida  (Case No.  98-09299-8P7).  The Petition did not
include any of the Company's subsidiary  companies.  On April 20, 1999, the U.S.
Bankruptcy Court issued an order dismissing the Petition.

In October 1997, Boston Financial Corporation ("BFC") took possession of certain
computer  equipment  leased by NSC from BFC as a result of the default by NSC of
payments due under the lease. On December 11, 1997, BFC filed an amended suit in
District  Court,  45th  Judicial  District,   Bexar  County,   Texas  (Case  No.
97CI-14567) against NSC and, as guarantors of the lease agreement,  the Company,
ATI and TNI. This action  sought  approximately  $500,000 in lease  payments and
other charges due under the lease  agreement.  As of December 31, 1998 and 1997,
the  Company  had  accrued  a loss  reserve  for this  action  of  approximately
$500,000, which is included in liabilities and accruals for claims,  assessments
and other losses in the accompanying  consolidated balance sheets. Subsequent to
December 31, 1998, the Company  settled all actions  brought against the Company
and its  subsidiaries by BFC for a cash payment of $125,000.  In the post merger
financial  statements of  Hitsgalore.com,  Inc., the difference  between amounts
accrued and amounts paid in settlement of this  obligation  will be reflected as
an adjustment to retained earnings and additional paid in capital.

On May 21,  1997,  Mr. Jeff Good,  as  Plaintiff,  filed an action in the United
States District Court,  Southern District of Iowa,  Davenport Division (Case No.
3-97-CV-80085)  against the Company, as Defendant,  for amounts Mr. Good alleges
are due under an alleged  employment  agreement  between Mr. Good and one of the
Company's subsidiaries (which subsidiary is no longer conducting business). This
action seeks compensation and benefits under the employment  agreement in excess
of $200,000. The Company believes this action to be without merit and intends to
vigorously  defend it. The  outcome of this  action,  favorable  or not,  is not
expected  to  have  any  material  adverse  impact  on the  Company's  financial
condition or future results of operations.

On April 15, 1997,  Mr. Ken Lame,  as  Plaintiff,  filed an action in the United
States  District  Court,  District  Court of Utah,  Central  Division  (Case No.
2:97CV0292W) against the Company and NSC, as Defendants. This action arises from
a consulting  agreement between Mr. Lame and NSC. The action seeks approximately
$250,000,  plus interest and attorney's  fees, for payments Mr. Lame alleges are
due him under a consulting agreement. The accompanying

<PAGE> 69

consolidated  financial  statements  include  a loss  reserve  of  approximately
$118,500  related  to this  action.  Resolution  of this  matter  adverse to the
Company  could  result in an  additional  loss  accrual but the Company does not
anticipate  that it will  incur a  liability  materially  in excess  of  amounts
recorded.  Mr. Lame was a  petitioner  in the Chapter 7  involuntary  bankruptcy
proceeding  filed  against the Company and had a valid claim against the Company
in the bankruptcy in the amount of approximately $5,000.

Prior to the rescission of the ATI acquisition  agreement,  the Company obtained
and  guaranteed  an  equipment  lease  financing  facility  for ATI's  use.  The
financing facility was subsequently  terminated by the lessor due to non payment
by ATI of payments due under the related lease  agreements.  In connection  with
the rescission of the ATI acquisition agreement, ATI issued a promissory note to
the  Company  in the  amount of  $180,000,  payable  upon the  default by ATI of
payments  due under the lease  financing  facility.  Payments due to the Company
under the  promissory  note were to be equal to the amount,  if any, the Company
was required to pay under the lease guaranty agreement.  Included in liabilities
and  accruals  for  claims,  assessments  and other  losses in the  accompanying
consolidated  balance  sheet  as of  December  31,  1998  is a loss  reserve  of
approximately   $151,500  for  the  estimated   liability  under  the  guarantee
agreement.  Subsequent to December 31, 1998, the Company settled all obligations
due to the lessor under the  guarantee  agreement and  approximately  $41,000 in
other  lease  termination  liabilities  to  the  lessor  for a cash  payment  of
approximately   $28,600.   In  the   post   merger   financial   statements   of
Hitsgalore.com, Inc., the difference between amounts accrued and amounts paid in
settlement  of these  obligation  will be reflected as an adjustment to retained
earnings and additional paid in capital.

The Company is subject to a consent order,  executed in December  1996,  between
the Company and the State of Michigan. The consent order requires the Company to
use its best efforts to satisfy the  prerequisites  of the Security and Exchange
Commission and the Michigan  Securities Bureau for registering common stock sold
to Michigan  purchasers for resale by them in the public market.  This action is
the result of the sale by the Company of its securities in the State of Michigan
without an exemption from  registration  under the Michigan  Uniform  Securities
Act. In the event the Company is unable to effect a registration  statement,  or
such purchasers are unable to resell their shares pursuant to such  registration
statement,  at a higher  price than their cost,  then the Company is required to
use its best efforts to satisfy the prerequisites of the Securities and Exchange
Commission  and the State of Michigan for making a rescission  offer to all such
purchasers.  Pursuant to the consent order,  the Company ceased the unregistered
sale of  securities  in  Michigan,  was  censured and paid costs to the state of
$2,500. Upon satisfaction of the consent order, all sanctions are terminated. As
of December 31, 1998, the Company estimates its maximum potential  exposure as a
result  of  a  rescission  offer  to  residents  of  State  of  Michigan  to  be
approximately  $848,931,  including accrued interest of approximately  $174,807.
The  interest  amount  is  included  in  accrued  interest  in the  accompanying
consolidated balance sheet. The number of shares the Company believes is subject
to a  rescission  offer in the State of  Michigan,  if such an offer  were to be
made,  totals  approximately  31,286  shares (after giving effect to the reverse
stock  split);  and,  the  weighted  average  purchase  price of such  shares is
approximately  $22.75 per share,  as adjusted for the reverse stock split. As of
December 31, 1998, the Company has not satisfied the requirements of the consent
order. Due to the "best efforts" nature of the Company's compliance  obligation,
the Company  believes that its  performance of the terms of the consent order is
deferred until such time it is able to both financially and functionally  comply
with the consent order. In 1998 and 1997, the Company accrued  interest  expense
of $53,192 and $52,396, respectively, related to its rescission obligation.

<PAGE> 70

As of December  31,  1998,  the Company  believes  that  certain  holders of the
Company's  securities  residing in the State of Michigan have sold shares of the
Company's common stock that are subject to the consent order. To the extent that
residents  of the State of  Michigan  have sold  shares  subject to the  consent
order, the holders of such shares,  to the Company's  knowledge and belief,  are
not entitled to relief  under the consent  order  inasmuch as the consent  order
provides for a rescission  offer and not for damages  arising out of the sale of
such shares.  Accordingly,  the Company  believes that, as of December 31, 1998,
its obligations under the consent order have been reduced. The Company, however,
is not able to determine  the effect of the sale of such shares,  if any, on the
Company's rescission obligation under the consent order.

In May 1996,  the Company  informed the  principals of CCI that it was canceling
the acquisition of CCI, terminating all of the related acquisition documents and
abandoning CCI's business. In connection with the abandonment of CCI's business,
the Company wrote off its remaining  investment in CCI and  recognized a loss of
approximately  $300,000.  The  principals  of CCI  filed  suit  to  enforce  the
acquisition  notes issued by the Company in connection  with the CCI acquisition
(see  Note 7) and the  issuance  of  200,000  shares  of the  Company's  Class A
preferred  stock.   This  matter  was  referred  by  court  order  to  mandatory
arbitration in the State of Florida (the Arbitration").

On  February  3,  1998,  the  Arbitrators'   awarded  in  favor  of  the  former
shareholders of CCI (the "Award"). The Award required the Company (i) to convert
200,000 shares of previously  issued Class A Preferred  Stock into 14,286 shares
of common stock (after giving effect to the reverse stock split),  (ii) to issue
another  200,000  shares of Class A Preferred  Stock to the former  stockholders
(which  are also  convertible  into  14,286  post  reverse  split  shares of the
Company's  common stock) and (iii) gave the former  stockholders  the ability to
(a) seek a summary judgment against the Company for $500,000, without opposition
or (b) accept  500,000  shares of Class A  Preferred  Stock in lieu of a summary
judgment. As of December 31, 1997, the Company had $300,000 of acquisition notes
outstanding in addition to a loss contingency reserve of approximately $111,000,
related to this action.

During 1998,  the Company (a)  converted  200,000  shares of  previously  issued
preferred  stock into  14,286  shares of common  stock and (b) issued (i) 14,286
shares of its common stock in conversion of another  200,000 shares of preferred
stock and (ii) 500,000 shares of its preferred stock pursuant to the Award.  The
fair value of the securities issued pursuant to the Award totaled  approximately
$83,000 and was charged against previously  recorded loss reserves.  As a result
of the Award,  the  Company  was  relieved  from the  obligations  due under the
acquisition notes payable to the former stockholders of CCI.

As of December 31, 1998,  the Company  believed it had complied  with all of the
provisions and terms contained in the Arbitrator's award. Subsequent to December
31,  1998,  the former  shareholders  of CCI filed an action to seek the summary
judgement  in lieu of the shares of  preferred  stock  issued to them and to set
aside the Company's  compliance with the terms of the Award. As a result of this
uncertainty,  the Company  relieved the  obligations  due under the  acquisition
notes payable to the former  stockholders of CCI from its  consolidated  balance
sheet as of December 31, 1998 and increased its accrual for claims,  assessments
and other  liabilities  by  $300,000.  In October  1999,  the  Circuit  Court of
Pinellas County,  Florida, Case No. 99-3990-CI-20,  ruled in favor of the former
shareholders  of CCI and  granted a  summary  judgement  in favor of the  former
stockholders  of CCI in the amount of  $500,000.  In the post  merger  financial
statements of Hitsgalore.com, Inc., the difference between the amounts that were
previously  accrued for this action and the amount of the summary judgement will
be treated as an adjustment to retained earnings and additional paid in capital.

<PAGE> 71

The Company is also involved in certain other legal and  administrative  actions
incurred in the ordinary course of business,  none of which are expected to have
a material impact on the Company's future results of operations.


NOTE 15  SEGMENT INFORMATION

In 1997 and 1996, the Company sold or otherwise disposed of substantially all of
the assets of its  telecommunications  businesses.  As of December 31, 1998, the
Company business  activities were in the healthcare cost  containment  industry,
only.

The  operations of the Company's  telecommunications  segment are  classified as
discontinued   operations  in  the  accompanying   consolidated   statements  of
operations  for all  periods  presented.  For summary  operating  results of the
Company's discontinued telecommunications businesses, see Note 4.

For the years  ended  December  31,  1998 and 1997,  the  Company had no capital
expenditures applicable to its discontinued  telecommunications  businesses.  In
1996,  capital  expenditures  applicable  to  the  Company's  telecommunications
businesses were $12,561.

The  identifiable  assets  of  the  Company's  discontinued   telecommunications
businesses are disclosed in Note 4.

In 1998,  the Company and its  subsidiaries  had one customer that accounted for
approximately  100% of the Company's  consolidated  net revenues from continuing
operations and, in 1997, had another  customer that accounted for  approximately
53% of the Company's  consolidated net revenues from continuing  operations.  In
1996,  the Company had one customer  that  accounted  for  approximately  47% of
consolidated net revenues.

The Company had no inter-segment revenues during the periods presented.


NOTE 16  STATEMENTS OF CASH FLOWS SUPPLEMENTAL INFORMATION


                                         YEAR ENDED DECEMBER 31,
                                     ------------------------------
                                       1998       1997        1996
                                     --------   --------   --------
Non-cash investing and financing activities:

  Equipment capital leases         $     --    $  73,184  $ 703,215
  Issuance of stock and warrants
   in conversion of notes and
   and debentures payable           2,051,063    716,318    199,150
  Issuance of stock and warrants
   in extinquishment of debt          308,934       --         --
  Issuance of stock in settlement
   of other obligations and accruals  827,290       --         --
  Recovery of note receivable
   from the sale of assets             91,911       --         --

Cash paid during the period for:
 Interest                               9,148    131,635       --
 Income taxes                                       --         --


<PAGE> 72

NOTE 17 EVENTS SUBSEQUENT TO DECEMBER 31, 1998

On March 19, 1999 (the  "Effective  Date"),  the Company and  Hitsgalore.com,  a
Nevada Company ("Old  Hitsgalore.com"),  completed a  reorganization  and merger
(the   "Reorganization   and  Merger   Agreement").   In  connection   with  the
Reorganization and Merger Agreement, the Company:

(i)      declared,  effective  as of the close of business on March 18,  1999, a
         reverse split of its issued and outstanding common stock and the common
         stock  underlying all issued,  outstanding  and unexpired  common stock
         purchase  options,  warrants  and other  rights to purchase  its common
         stock  in the  ratio  of one  share  for  each  seven  shares,  so that
         immediately  preceding the merger the Company would have  approximately
         8,000,000  shares of common  stock  issued  and  outstanding,  assuming
         exercise of all such options, rights and other rights;
(ii)     transferred all of its existing business, property and assets, tangible
         and   intangible,   excluding   the   business   and   assets   of  Old
         Hitsgalore.com, to International Healthcare Solutions, Inc. ("IHSI"), a
         newly-formed  wholly-owned  subsidiary of the Company,  in exchange for
         20.0 million shares of IHSI's common stock;
(iii)    caused IHSI to assume all of the debts,  liabilities and obligations of
         the  Company  outstanding  as of the  Effective  Date  and  irrevocably
         indemnify  the  Company  against  all of such  debts,  liabilities  and
         obligations; and
(iv)     transferred  into trust for the benefit of the  Company's  stockholders
         the 20.0 million shares of IHSI common stock referred to in (ii) above,
         which  shares  are  restricted  and  represented  by a  single,  global
         certificate.  The shares of IHSI common stock are to be  distributed to
         the  Company's  stockholders  as a  dividend  in  kind  subject  to the
         effectiveness of a registration statement to be filed by IHSI under the
         Securities Act of 1933, as amended.

Pursuant to the  Reorganization  and Merger Agreement,  Old  Hitsgalore.com  was
merged into the Company on the Effective  Date in exchange for the conversion of
all of the  issued  and  outstanding  stock of Old  Hitsgalore.com  into  37.675
million  shares of the Company's  common stock.  The  Reorganization  and Merger
Agreement  also  provided  for the issuance of up to an  additional  4.0 million
shares of the Company's common stock to consultants and professionals  rendering
services in connection  with the  reorganization  and merger and for acquisition
costs and fees, of which  2,000,000  shares were issued.  On the Effective Date,
the name of the Company was changed to Hitsgalore.com, Inc.

The Reorganization and Merger Agreement also provided that the proceeds, if any,
from the exercise of outstanding  common stock purchase  options and warrants be
used to pay the debts,  liabilities  and  obligations of the Company  assumed by
IHSI pursuant to the  Reorganization and Merger Agreement and to provide working
capital to the Company.

<PAGE> 73

NOTE 18 - Valuation and Qualifying Accounts

Valuation and qualifying  accounts  (which are deducted from the assets to which
they apply) consist of an allowance for doubtful accounts.

Following is a summary of the allowance for doubtful accounts:

Balance, December 31, 1996                     $ 28,074
 Additions:
  Provision for bad debts charged
    to operations                                46,816
 Deductions:
  Write-offs                                    (70,214)
  Discontinued operations                        (4,676)
                                                 ------
Balance, December 31, 1997                         --
Additions:
  Provision for bad debts charged
    to operations                                34,269
 Deductions:
  Write-offs                                    (34,269)
                                                 ------
Balance, December 31, 1998                    $    --
                                                 ======

The provision for bad debts  charged to  operations  applicable to  discontinued
operations was $475,711 in 1996.

NOTE 19  RESTATEMENT OF FINANCIAL RESULTS

The Company  restated  its  consolidated  financial  results for the years ended
December  31, 1997 and 1996.  The 1996  financial  statements  were  restated to
reflect the business,  assets and liabilities of CCI. The assets and liabilities
of CCI had previously been removed from the Company's  balance sheet,  effective
May 1996, as a result of the Company having abandoned the business of CCI. As of
the date the Company  abandoned the business of CCI, CCI had ceased  operations.
Accordingly,  the inclusion of the business of CCI in the consolidated financial
statements  had no effect on the Company's  operations or cash flows for periods
after May 1996. As a result of the  reinstatement  of the assets and liabilities
of CCI, the Company retroactively  recorded, as a charge to income,  $300,000 to
fully  reserve  the  carrying  value of CCI's  assets.  This had the  effect  of
increasing  the Company's loss from  continuing  operations and net loss for the
year ended December 31, 1996, as previously reported,  by $114,000 and $300,000,
respectively.

The 1997 financial  statements were restated to retroactively  record the shares
of the Company's  common stock  returned to the Company in  connection  with the
rescission  of business  acquisitions  at fair value (see note 4). The shares of
common  stock  returned  to the Company in  connection  with the  rescission  of
business  acquisitions  were  previously  valued and recorded at their  original
issue prices at the time of the respective business acquisitions.  The effect of
adjusting  the value  assigned  to the  shares  of the  Company's  common  stock
returned  to  the  Company  in  connection   with  the  rescission  of  business
acquisitions  was to increase the Company's loss from continuing  operations and
net loss,  for the year ended  December 31, 1997,  as  previously  reported,  by
$1,732,264 and $1,533,008,  respectively, and increase the gain from disposition
of telecommunication  businesses,  as previously reported, by $199,256.  The per
share effects were to increase the loss from continuing  operations and net loss
by $0.16 and $0.14,  respectively,  and  increase the gain from  disposition  of
telecommunications businesses by $0.02.

<PAGE> 74


The  adjustments  to the statement of operations for the year ended December 31,
1997  were  offset  by a  corresponding  increase  in the  Company's  previously
reported  amount of additional paid in capital.  As a result,  the Company's net
assets as of December 31, 1997 were unchanged by the restatement.



















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<PAGE> 75

ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE.

Effective  February 20, 1998, Ernst & Young LLP resigned as independent  auditor
of the  Registrant.  The  report  of  Ernst  &  Young  LLP  on the  Registrant's
consolidated  financial  statements for the year ended December 31, 1996 did not
contain an adverse  opinion or a disclaimer  of opinion and was not qualified or
modified as to audit scope or accounting principles. The report of Ernst & Young
LLP included an explanatory  paragraph  expressing  substantial  doubt about the
Registrant's ability to continue as a going concern.

In  connection  with  the  audit  of  the  Registrant's  consolidated  financial
statements for the year ended  December 31, 1996, and in the subsequent  interim
periods,  there were no  disagreements  with Ernst & Young LLP on any matters of
accounting principles or practices,  financial statement disclosure, or auditing
scope and procedures which, if not resolved to the satisfaction of Ernst & Young
LLP,  would have  caused  Ernst & Young LLP to make  reference  to the matter in
their report.

Ernst & Young LLP has  furnished a letter  addressed to the  Commission  stating
that it agrees with the  statements  contained  herein.  A copy of that  letter,
dated  February 25, 1998, is filed as an exhibit to the Company's Form 8-K dated
February 25, 1998.

Effective March 4, 1998, the Registrant engaged Moore Stephens Lovelace, P.A. to
audit its 1997  consolidated  financial  statements.  The  decision to cease the
registrant-auditor relationship between Registrant and Ernst & Young LLP and the
engagement of Moore Stephens  Lovelace,  P.A. was not recommended or approved by
the Registrant's Board of Directors.

On July 26, 1999,  the  Registrant  received  written notice from Moore Stephens
Lovelace,  P.A. that it was withdrawing as auditor of record for Hitsgalore.com,
Inc. The notice  received from Moore Stephens  Lovelace was dated as of July 19,
1999, and mailed on July 21, 1999. The reports of Moore Stephens Lovelace,  P.A.
on  the  financial   statements  of   Hitsgalore.com,   Inc.  (formerly  Systems
Communications,  Inc.)  as of  December  31,  1998 and for the  period  from its
inception (July 21, 1998) to December 31, 1998 and on the consolidated financial
statements of Systems  Communications,  Inc. (the Registrant's  predecessor) for
each of the two years in the period  ended  December 31, 1998 did not contain an
adverse opinion or a disclaimer of opinion and were not qualified or modified as
to audit scope or accounting principles. The reports of Moore Stephens Lovelace,
P.A. included an explanatory  paragraph  expressing  substantial doubt about the
Registrant's and its predecessor's ability to continue as a going concern.

In connection with the audits of the financial  statements of the Registrant and
it's  predecessor  referred to above, and in subsequent  interim periods,  there
were no  disagreements  with Moore  Stephens  Lovelace,  P.A.  on any matters of
accounting principles or practices,  financial statement disclosure, or auditing
scope  and  procedures  which,  if not  resolved  to the  satisfaction  of Moore
Stephens Lovelace,  P.A. would have caused Moore Stephens Lovelace, P.A. to make
reference to the matter in their report.

Moore Stephens  Lovelace,  P.A.  stated that its withdrawal as auditor of record
for  Hitsgalore.com,  Inc. was due to changes in management  of  Hitsgalore.com,
Inc.  and  information  which arose  regarding  new  management  which led Moore
Stephens  Lovelace,  P.A. to be unwilling to be  associated  with the  financial
statements of  Hitsgalore.com,  Inc.  There were no reportable  events that were
required to be reported pursuant to Items 304(a) (1) (v) of Regulation S-X.

Moore Stephens Lovelace, P.A. has furnished a letter addressed to the Commission
stating that it agrees with the statements contained herein. A copy

<PAGE> 76

of that letter,  dated  September 7, 1999 has been filed with the Securities and
Exchange Commission.

The withdrawal of Moore Stephens Lovelace,  P.A. as the Registrant's  auditor of
record was not recommended or approved by the  Registrant's  Board of Directors.
The Company  authorized  Moore Stephens  Lovelace,  P.A. to respond fully to the
inquiries  of  a  successor   accountant   concerning   its  withdrawal  as  the
Registrant's auditor of record.

On September 2, 1999, the Company  engaged  Pender Newkirk & Company,  Certified
Public  Accountants,  to  audit  and  report  on  the  financial  statements  of
Hitsgalore.com,  Inc. for each of the three years in the period  ended  December
31, 1998. The Company has not consulted with Pender Newkirk & Company  regarding
the  application  of accounting  principals and has not received any advice from
Pender  Newkirk  & Company  regarding  any  accounting,  auditing  or  financial
reporting  issue or any other matter that was the subject of a  disagreement  or
reportable event.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The names  and ages of  directors  (including  the year in which  each  became a
director)  and  executive  officers of the Company as of the date hereof are set
forth in the following table:

          Name            Age                Positions              Since
----------------------    ---  --------------------------------   ---------
Dorian Reed (1)           44   Chairman of the Board              March 1999
Steve Bradford            43   President, Principal Executive     March 1999
                               Officer, Secretary and Director
Robert A. Thompson        47   Vice President, Treasurer,         Sept. 1999
                               Chief Financial Officer and
                               Director
Melvyn L. Price, Jr.      43   Director                           April 1999
Phillip Lloyd Kaich       46   Director                           April 1999
Daniel Melvin Grant       45   Director                           April 1999

(1) Dorian  Reed was a founding  stockholder  of Old  Hitsgalore.com.  Mr.  Reed
resigned as Chairman of the Board on May 13, 1999 and was reinstated as Chairman
of the Board on July 8, 1999 by unanimous consent of the Company's  independent,
outside Directors.

Each  director is elected by holders of a majority of the Common  Stock to serve
for a term  of  one  year  ending  on  the  next  following  annual  meeting  of
stockholders and until his successor is elected and qualified. Officers serve at
the will of the board.  None of the incumbent  directors  have been elected by a
majority of the Company's stockholders. They have been appointed by the Board to
fill vacancies created by the resignations of their predecessors.  Directors are
not compensated for their services apart from their executive  officer salaries,
if the  Director  is also an  executive  officer.  In the event the  Company has
directors who are not also  officers,  the Company may reimburse  such directors
for travel expenses related to Company  business.  The directors and officers of
the Company are  indemnified  against  liabilities  that they incur by virtue of
being  directors and officers  under the corporate laws of the State of Florida.
The  articles  of  incorporation  and bylaws of the  Company do not  contain any
provisions  with respect to  indemnification  of  directors  and  officers.  The
Company has been  advised  that in the opinion of the  Securities  and  Exchange
Commission, indemnification for liabilities arising under the federal securities
laws is against public policy and may be  unenforceable.  The Company would seek
approval of any such indemnification by a court of competent jurisdiction.

<PAGE> 77

Mr.  Dorian  Reed is a  principal  stockholder  and  Chairman  of the  Board  of
Directors.  Mr. Reed is also the Company's  Director of Technology.  In 1994 Mr.
Reed was  engaged  in  internet  consulting  and  research,  primarily  studying
internet market trends for  not-for-profit  entities.  The business Mr. Reed was
involved in was incorporated in January 1995 as Angel Industries,  Inc. Mr. Reed
became an employee of Angel  Industries  until a new business,  incorporated  in
1995 by the  President  of Angel  Industries,  Inc.,  called  Internet  Business
Broadcasting ("IBB") became his employer. See "Disclosure of Past Investigations
Involving  Dorian Reed".  Prior to  Hitsgalore.com,  Mr. Reed and Steve Bradford
together  owned I Wonder  Technologies,  a now-dormant  business that focused on
satellite applications for long distance learning and the transmission of voice,
data, video and the internet.

Disclosure of Past Investigations Involving Dorian Reed-

In 1995,  Dorian Reed was employed by a new business  called  Internet  Business
Broadcasting  ("IBB").  The  original  concept of IBB was to build web sites for
small  businesses  and create an internet  business mall for third party on-line
retailers.

In late 1996, IBB started  selling  billboard  space in IBB's internet  business
mall,  and elsewhere on the IBB site,  to companies  wishing to advertise on the
then new and growing internet.  IBB signed contracts with individuals who leased
the on-line billboards and IBB would then seek advertisers to purchase the space
on the leased billboards. The proceeds generated by selling the advertising were
to be split  between IBB and the lessee of the  billboard.  In  mid-1997,  after
failing to adequately  collect  revenues from a sufficient  number of customers,
IBB shut down its business and dissolved.

In early 1998, the Federal Trade Commission  ("FTC") filed a lawsuit against Tom
Maher,  former President of IBB, Audrey Reed, and Mr. Reed for failure to refund
money to customers and allegedly misleading investors about the potential return
on their  investment.  In April  1998,  Mr.  Reed  filed  an  answer  to the FTC
complaint,  pro se,  denying  all the  allegations,  and  did  not  receive  any
subsequent correspondence from the government.

Mr.  Reed says he was unaware  any case was  pending  against him until  stories
appeared  in the  press  and he  was  served  with  a  default  judgment  at the
Hitsgalore.com  office in Rancho  Cucamonga,  CA on May 11, 1999.  The judgement
served on Mr. Reed  informed  him that a federal  judge in  Baltimore  issued an
order  in  April,  1999  for he and his  co-defendants  to pay  $613,110  to 100
customers of IBB.

After being served on May 11, 1999, Mr. Reed immediately and pro-actively
contacted the FTC through counsel regarding the matter. As of November 30, 1999,
Mr. Reed is actively negotiating with the FTC to reach an amicable settlement of
this matter.  The FTC has acknowledged  that it did in fact receive pleadings in
this case in April 1998, from both Audrey and Dorian Reed in response to the FTC
Complaint.  However,  said  pleadings sat in an FTC office  without  having been
opened  for over a year.  Mr.  Reed and the FTC are now  exchanging  information
about the facts that gave rise to the  lawsuit,  so that the FTC can have a more
realistic  view of what  actually  happened.  Although  a mere  employee  of the
subject company, Mr. Reed is stepping forward to get this matter resolved and is
not waiting for the FTC to find the management who actually ran the corporation.
It is anticipated that a settlement will be reached in the near future.

In addition,  the following  incident  involving Mr. Reed took place more than 5
years ago, and the Company is under no  obligation to include it in this filing.
In 1992,  Mr.  Reed was  convicted  at trial of wire fraud and  unlawful  use of
access  device  and  served a 10 month  sentence  in a federal  prison  camp and
successfully completed the rest of his term on supervised release.

<PAGE> 78

There were several counts amounting to approximately  $2,800.00 in losses,  plus
court and other costs,  which all have been paid.  This case did not involve the
purchase or sale of any security.

Steve Bradford is the Company's Chief Executive Officer and a Director.  For the
past  5  years  Mr.   Bradford  has  primarily   been   self-employed,   in  the
telecommunications  and internet areas. Prior to being a founding stockholder of
Old  Hitsgalore.com,  Mr. Bradford and Mr. Reed, a principal  stockholder of Old
Hitsgalore.com  and  the  Company,  together  owned  I  Wonder  Technologies,  a
now-dormant  business that focused on satellite  applications  for long distance
learning and the  transmission  of voice,  data,  video and the  internet.  From
January 1994 to January 1995,  Mr.Bradford also was employed by Biomat,  Inc., a
privately held  manufacturer  of lawn and garden products during its development
stage and  assisted it to develop its  business  plans and other  administrative
functions.  Beginning  July  1996,  Mr  Bradford  served  for one  year as Chief
Operations  Officer of OUP,  Inc.,  a closely held direct mail company in Kansas
City with  annual  sales in  excess  of $10  million.  Mr.  Bradford  was also a
director and President of Wamego Real Estate Development,  Co., Inc., a Missouri
corporation,  then owned by Mr. Bradford's wife. After sale of that company to a
third party and Mr. Bradford's  resignation as President,  the company filed for
protection  under  the  Bankruptcy  Code on  September  28,  1995,  case  number
95-42574,  in the Western  District of  Missouri.  The case was  converted  to a
liquidation on October 8, 1996 and is closed.  Mr. Bradford holds a BS degree in
Business Administration and a JD from the University of Kansas.

Robert A. Thompson was named Vice President,  Treasurer, Chief Financial Officer
and a Director  in  September  1999.  From  February  1996 until June 1998,  Mr.
Thompson served as the Chief Financial Officer of Systems  Communications,  Inc.
Since June 1998, Mr.  Thompson  served as an accounting and financial  reporting
consultant  to  Systems   Communications,   Inc.   and,   since  March  1999  to
Hitsgalore.com.  From  February  1991 to February  1996,  Mr.  Thompson was Vice
President and  Treasurer of Anchor Glass  Container  Corporation,  a Fortune 500
manufacturer  of glass  containers.  Mr. Thompson has 12 years of accounting and
audit experience with two of the "Big 5" international  public  accounting firms
and since 1986 has held senior financial positions with companies engaged in the
banking, retail, printing and publishing industries.

Melvyn L.  Price,  Jr.  was  elected to serve on the Board of  Directors  by the
standing  directors to fill  vacancies on April 28, 1999.  Since June 1998,  Mr.
Price has been  Manager  of  Workstation  Services  for PCS  Health  Systems  in
Phoenix, AZ, and prior thereto,  since August 1985, was Systems Administrator of
Desktop Support for Electronic Data Systems.

Phillip  Lloyd  Kaich  was  elected  to serve on the Board of  Directors  by the
standing directors to fill vacancies on April 28, 1999. Mr. Kaich has previously
been an employee benefits insurance broker for certain major insurance companies
and operated a company in the business of  purchasing,  installing and operating
public payphones  throughout southern  California.  For the past five years, Mr.
Kaich has also been engaged in real estate sales and  service.  Since 1998,  Mr.
Kaich has been a  franchisee  and owner,  operator of Red Carpet  Inland  Empire
Realty, in Rancho Cucamonga, CA.

Daniel  Melvin  Grant  was  elected  to serve on the Board of  Directors  by the
standing  directors to fill  vacancies on April 28, 1999.  Since 1991, Mr. Grant
has been the  proprietor  of D. Grant  Glass,  Crestline,  CA.,  involved in the
national sales and installation of glass and other products.  Mr. Grant has been
involved  in  numerous  prominent  construction  projects,  including  the Getty
Museum, the LA Coliseum and for Marriott Hotels, Sheraton Hotels and Macys, with
as many as 54 skilled craftsman employees under his supervision.

The members of the Company's audit committee include Messrs. Grant, Kaich, Price
and a stockholder.

<PAGE> 79

ITEM 11.  EXECUTIVE COMPENSATION.

The  following  table sets forth the  compensation  paid or accrued to the chief
executive officer of the Registrant or person discharging  comparable duties and
to the executive officers of the registrant whose compensation exceeded $100,000
for each of the three years in the period ending December 31, 1998.


                                            Annual Compensation
                            ---------------------------------------------------
                                                                     Long-Term
Name & Principal Positions  Year     Salary    Bonus      Other    Compensation
--------------------------  ----     ------    -----      -----    ------------
Steve Bradford
Chief Executive Officer (1) 1998   $   --     $  --      $  --      $    --

Stephen E. Williams         1998     75,000      --         --           --
Chief Executive             1997    150,000      --         --           --
Officer (2)(3)              1996    177,500      --       7,500          --

James T. Kowalczyk          1998    110,000      --         --           --
President (4)               1997     32,500      --         --           --
                            1996       N\A       --         --           --

Edwin B. Salmon, Jr.        1998    150,000      --         --           --
Chief Financial Officer,    1997    150,000      --         --           --
Treasurer and Chairman of   1996    177,000      --       7,500          --
the Board (2)(4)


(1) Mr. Steve Bradford  became the Chief  Executive  Officer of the Company as a
result of the completion of the Merger and Reorganization  Agreement between the
Company and Old  Hitsgalore.com,  which was effective as of March 19, 1999. As a
principal  stockholder of Old Hitsgalore.com,  Mr. Bradford was not compensated.
The  Company  and Mr.  Bradford  had no  arrangements  as of  December  31, 1998
regarding future  compensation  for the services of Mr.  Bradford,  as its Chief
Executive Officer.

(2) The Company  entered into  employment  agreements  with Mr. Williams and Mr.
Salmon.  These  agreements  provided  for,  among other  things,  the payment of
compensation  over 5 years  from  the date of their  employment,  regardless  of
whether or not these executive  officers  remained in the employ of the Company.
On June 30, 1998, the Company and Mr. Stephen Williams entered into an agreement
and mutual release (the "Release").  Pursuant to the Release, the Company issued
300,000  shares of its common stock and released Mr.  Williams  from any and all
claims,  demands,  contracts,  and obligations of any kind whatsoever  which the
Company had, has or may have against Mr. Williams in exchange for a release from
Mr.  Williams of any and all claims,  demands,  contracts and obligations of any
kind  whatsoever  which Mr.  Williams  had,  has or may have against the Company
arising  out  of his  employment  with  the  Company.  In  connection  with  the
Reorganization and Merger Agreement, Mr.
Salmon resigned all of his positions with the Company.

(3)In April and June 1997, Mr. Williams resigned as the Company's  President and
CEO and Director, respectively.

(4)In August 1997, each of Messrs.  Kowalczyk and Salmon were granted options to
purchase 500,000 shares of the Registrant's  common stock,  exercisable at $0.10
per share at any time over five years.

N/A means the  respective  officer was not  employed by the Company  during that
period.

<PAGE> 80

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The  following  table  sets  forth  certain  information   regarding  beneficial
ownership  of the  Company's  common  stock  as of  September  30,  1999 by each
shareholder  known by the  Company  to be a  beneficial  owner of more than five
percent  of the  Company's  common  stock,  by  each of the  registrant's  named
directors and executive officers, and by all directors and executive officers of
the  registrant as a group.  Except as indicated in the footnotes to this table,
the Company  believes  that the persons  named in the table have sole voting and
investment   power  with  respect  to  all  shares  of  common  stock  shown  as
beneficially owned by them.


      Name of                             Amount and Nature       Percent
  Beneficial Owner                    of Beneficial Interest(1)  of Class(1)
----------------------                -------------------------  ---------
Dorian Reed                                   28,150,000 (2)          59.9%
Steve Bradford                                 6,100,000 (3)          13.0
+
All Directors and Executive Officers
  as a Group( 4 persons)                       6,130,000 (3)(4)       13.0

(1)  Based on information  available to the Company,  unless otherwise indicated
     such shares are owned of record by the named  beneficial owner or the named
     beneficial  owner and spouse,  and  represent  sole  voting and  investment
     power. Such person's percentage ownership has been calculated assuming that
     all warrants and options held by such person that are exercisable  within 6
     months have been exercised.
(2)  Includes  2,000,000 shares owned by Audrey M. Reed, spouse of Mr. Reed. Mr.
     Reed disclaims beneficial ownership of these shares.
(3)  Includes 2,250,000 and 1,850,000 shares, respectively,  owned by Rose Grace
     Faith Holdings,  LLC and Diana R. Bradford,  spouse of Mr.  Bradford.  Rose
     Grace Faith Holdings,  LLC is owned by Mr. Bradford and his minor children.
     Mr Bradford disclaims  beneficial ownership of all of these shares with the
     exception of the shares owned by Rose Grace Faith Holdings, LLC.
(4)  Includes the shares referred to in (3) and 10,000 shares awarded to each of
     Messrs.  Price,  Kaich and  Grant for  serving  on the  Company's  Board of
     Directors  (see  "Item  10.  -  Directors  and  Executive  Officers  of the
     Registrant").


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

During 1998,  Mr. Reed and Mr.  Bradford,  each,  advanced the Company,  without
interest,  $2,500.  As of December 31, 1998,  these advances had been reduced to
$2,250, in the aggregate.  Mr. Reed and Mr. Bradford, as principal  stockholders
of Old  Hitsgalore.com,  provided  their  services  to the  Company  during  its
development stage without compensation and Mr. Reed made available equipment, at
no charge, for use by the Company during its development stage. Mr. Reed and Mr.
Bradford also caused I Wonder Technologies, an affiliated company through common
ownership, to advance the Company $22,699 in cash during its development stage.











<PAGE> 81

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)    1. Financial Statements
                                                                      PAGE
                                                                      ----
HITSGALORE.COM, INC., FORMERLY SYSTEMS COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

Independent Auditors' Report                                             25

Balance Sheet as of December 31, 1998                                    26

Statement of Operations and Retained Earnings
for the period from inception to December 31, 1998                       27

Statement of Cash Flows for the period from inception
to December 31, 1998                                                     28

Notes to Financial Statements                                            29

Pro Forma Condensed Financial Information                                36

HITSGALORE.COM, INC.(FORMERLY SYSTEMS COMMUNICATIONS, INC.)
AND SUBSIDIARIES

Independent Auditors' Report on the Consolidated Financial
Statements for the years ended December 31, 1998, 1997
and 1996                                                                 39

Consolidated Balance Sheets as of December 31, 1998, 1997
and 1996                                                                 40

Consolidated Statements of Operations for each of the three
years in the period ended December 31, 1998                              42

Consolidated Statements of Changes in Stockholders' Deficit for
each of the three years ended in the period
December 31, 1998                                                        43

Consolidated Statements of Cash Flows for each of the three
years ended in the period December 31, 1998                              45

Notes to Consolidated Financial Statements                               46


(a)    2. Financial Statement Schedules

No  financial  statement  schedules  are being filed as a part of this report as
such schedules are not applicable,  are not required or the related  information
is included in the consolidated financial statements or notes thereto.

(a)    . Exhibits

     2.1 xx  Reorganization and Merger Agreement, dated February 11, 1999,
             between Systems Communications, Inc. and Hitsgalore.com
     3.i. *  Articles of Incorporation, as amended
     3.ii.*  By-laws, as amended
     4.      Convertible Debentures
     P 1. *  Convertible  Debenture Note,  dated December 5, 1995,  between
             the Company and Telcom United North, Inc.

<PAGE> 82

     P 2.* Convertible  Debenture Note,  dated December 5, 1995,  between
              the Company and Donald T. McAllister, M.D
     P 3.* Convertible  Debenture Note,  dated December 5, 1995,  between
              the Company and David Fisk.
     P 4.* Convertible  Debenture Note,  dated December 5, 1995,  between
              the Company and Leonard F. D'Innocenzo
     P 5.* Convertible  Debenture Note,  dated December 5, 1995,  between
              the Company and Dean Charles Colantino
     P 6.* Convertible  Debenture Note,  dated December 5, 1995,  between
              the Company and Donald P. Dugan.
     P 7.*    Convertible Debenture Note, dated December 5, 1995,
              between the Company and Comgi Retirement Trust,
              John R. Lang, M.D./Sharon B. Lang: Trustees
     P 8.* Convertible  Debenture Note,  dated December 5, 1995,  between
              the Company and John R. Lang, M.D./Sharon B. Lang.
     P 9.*    Convertible Debenture Note, dated December 5, 1995,
              between the Company and Dale D. Higgins
     P 10.*  Convertible  Debenture Note dated December 5, 1995,  between
              the Company and R. Thomas Jannarone.
       11.#   Form of Offshore Offering Distribution agreement by and
              between Systems Communications, Inc. and Victory
              Investments, LLC.
       12.#   Form of 10%  cumulative  Convertible  Debentures  due November 21,
              1997 in the aggregate amount of $500,000.
       13.#   Form of Offshore  Securities  Subscription  Agreement for $500,000
              10% Cumulative Convertible Debentures.
       14.#   Form of Offshore Securities  Subscription Agreement for $1,120,000
              4% Convertible Debentures.
       15.####Form of 10% Cumulative Convertible Debenture Note.
       16.++         Form of  Settlement  Agreement  dated as of  March 2,  1998
                     between the Company and Timboon LTD, including Joint Escrow
                     Instructions and Revocable Proxy.
       17.+++ Form of Non-Statutory Incentive Stock Option Agreement
    10.       Material Contracts
     P 1.*  Ameristar  Stock  Acquisition  Agreement
     P 2.* HMT  Stock  Purchase Agreement  (March 12, 1996)
     P 3.* NSC  Agreement to Exchange  Stock (August 24, 1995)
     P 4.* NSC Restated Agreement to Exchange Stock (October 13, 1995)
     P 5.* NSC Assignment and Amendment of Restated Agreement to
               Exchange Stock (October 20, 1995)
     P 6.*     Telcom Restated Stock Purchase Agreement (June 16, 1995)
       7.      Employment Contracts
      P (a)*   Robert L. Alexander
      P (b)*   Russell H. Armstrong
      P (c)*   Edwin B. Salmon
      P (d)*   Stephen E. Williams
      P (e)*   Mark Woodward
      P (f)*   John D. Looney
      P (g)*   John A. Paolicelli
      P (h)*   James L. Tolley
      P (i)*   David J. Olivet
        (j)##  Karen Wolfe
        (k)##  James W. Wolfe
        (l)##  Eric R. Wolfe
    P  8.* HMT  Trademark  Registration  for "RETURN"  Software  Program
               (December 8, 1992)
    P  9.*     HMT - Medicode Value-Added Reseller Software Development,
               Marketing, and Maintenance Agreement (March 9, 1995)
    P 10.* NSC Cooperative  Research and Development  Agreement Between
               NSC and the U.S. Army (June 2, 1994)
    P 11.*     Services and Marketing Agreement By and Among GE Capital
               Communication Services Corporation and Telcom
               (March 31,1995)

<PAGE> 83

    P 12.*     Joint Venture Agreement Between Universal Network
               Services, Inc. and Telcom (February 13, 1995).
    P 13.* Comstar Acquisition Agreement
    P 14.* Coast Communications Acquisition Agreement
    P 15.* Teaming  Agreement with Health Management  Systems,  Inc.
    P 16.** Authorized sales agent agreement between MCI
               Telecommunications Corporation and Ameristar, dated June 12, 1995
    P 17.** Zero Plus-Zero Minus billing and information management
               agreement between Zero Plus Dialing, Inc. and Ameristar,
               dated May 16, 1996
    P 18.**    Telecommunications Agreement between U.S. Long Distance,
               Inc. and Ameristar
    P 19.**    Tri-Party Agreement among Ameristar, U.S. Long Distance,
               Inc. and Zero Plus Dialing, Inc.
    P 20.**    Telephone Agreement between Ameristar and U.S. Long
               Distance, Inc., dated July 10, 1996
    P 21.** License Agreement between Ameristar and VCA Pictures, dated
               February 13, 1996
    P 22.**  Agreement  between  Ameristar  and  United   International
               Pictures, dated April 1, 1996
    P 23.**    Marketing Agreement, dated October 2, 1995, between
               Ameristar and U.S. Osiris Corporation
    P 24.**    Operator Service Agreement dated April 15, 1995, between
               Opticom and Ameristar
    P 25.** Mitel OSS  Servicing  Agreement,  dated  September  1, 1993
               between MasterCorp, Inc. and Ameristar
    P 26.**    Telecommunications Agreement, dated January 15, 1996
               between Long Distance Exchange Corp. and Ameristar
    P 27.** Agreement, dated January 1995, between LDOS Communications,
               Inc. and Ameristar
    P 28.**    Agreement, dated February 28, 1994, between L.D.
               Communications, Inc. and Ameristar
    P 29.** Contract Operator Services  Agreement for Public Pay Phones
               and  Letters of Agency,  dated  January  7,  1992,  between  Fone
               America, Inc. and Ameristar
    P 30.** Payphone Aggregator Agreement, dated July 22, 1993, between
               Communication TeleSystems International and Ameristar
    P 31.**    Operator Service Agreements between Capital Network
               System, Inc. and Ameristar
    P 32.**    Agreements between Ameristar Network Exchange, Inc. and
               Ameristar
    P 33.**  Agreement  dated  November 11, 1991 between  Ameristar  and
              Access Telecommunications, Inc.
    P 34.**   Agreement dated September 16, 1991 between Conquest
              Operator Services Corporation and Ameristar
      35.##   Heads of Agreement for change in Management of National  Solutions
              Corporation.
      36.##   Rescission Agreement, dated May 21, 1997 by and between the
              Company, Ameristar Telecommunications, Inc., Mark Woodward
              and Russell Armstrong.
      37.##   Promissory note dated May 21, 1997 between ATI and the Company.
      38.##   Agreement dated as of June 9,1997 by and among the Company,  Karen
              Wolfe and Eric  Wolfe,  Eric  Wolfe,  on behalf of his infant son,
              Tyler  Wolfe,  and Lori Wolfe,  wife of Eric  Wolfe,  on behalf of
              herself and her infant son Tyler Wolfe.
      39.##  Cooperative  Marketing  and  Option  Agreement  dated  June 9, 1997
             between HMT and the Company.
      40.##  Purchase and Sale Agreement between TNI and International
             TeleData Corporation dated January 31, 1997.
      41.##  Form of Convertible Debenture in the amount of $500,000

<PAGE> 84

              between International TeleData Corporation and TNI.
      42.##   Memorandum  dated June 16, 1997 from the  Department of the
              Army  regarding  renewal of the  Cooperative  Research  and
              Development   Agreement   between   the   Company  and  the
              Department of the Army.
      43.###  Agreement to Exchange  Stock,  dated  November 14, 1997, by
              and between Grant Kolb and Patrick  Loeprich (as "Sellers")
              and the Company
      44.x    Letter of Intent,  Subscription  for Stock dated  April 15,  1999,
              between Hitsgalore.com, Inc and The Life Foundation Trust.
      45.x    Subscription Agreement and Investment Representations dated
              April 15, 1999 between Hitsgalore.com, Inc. and The Life
              Foundation Trust.
      46.x    Purchase  Agreement  dated March 29, 1999 between  Hitsgalore.com,
              Inc. and Solvere, Inc.
   16.1.+     Letter re change in certifying accountants
   16.2       Letter re change in certifying accountants
   17.1.##    Resignation Letter of Stephen Williams.
   17.2.##    Resignation Letter of David J. Olivet
P  21 *       List of Subsidiaries of Registrant
   27.13 x    Financial Data Schedule (Year ended December 31, 1998)
   99.        Additional Exhibits
      1.***   Arbitration award in the matter of the Arbitration between
              Telcom Network, Inc. and GE Capital Communication Services
              ("GECCS") and New Enterprise Wholesale Services, Ltd. (News")

*    Incorporated by reference to the Company's  Registration  Statement on Form
     10 as filed with the Commission on July 23, 1996.

**   Incorporated by reference to the Company's  Registration  Statement on Form
     10/A as filed with the Commission on September 17, 1996.

***  Incorporated by reference to the Company's Current Report on Form 8-K dated
     October 29, 1996.

#    Incorporated  by reference to the Company's  Current  Report on Form 8-K as
     filed on March 27, 1997.

##   Incorporated  by reference to the Company's  Current Report on Form 8-K, as
     filed on July 28,1997.

###  Incorporated  by reference to the Company's  Current Report on Form 8-K, as
     filed on November 21,1997.

#### Incorporated  by reference to the Company's  Annual Report on Form 10-K for
     the year ended December 31, 1996.

+    Incorporated  by reference to the Company's  Current Report on Form 8-K, as
     filed on February 25, 1998.

++   Incorporated  by reference to the Company's  Current Report on Form 8-K, as
     filed on March 10, 1998.

+++  Incorporated by reference to the Company's registration statement on
     Form S-8, File No. 333-52455.

x    Filed herewith.

xx   Incorporated  by reference to the Company's  Current  Report on Form 8-K as
     filed on February 16, 1999.

xxx  Incorporated  by reference to the Company's  Current  Report on Form 8-K as
     filed on July 27, 1999.

<PAGE> 85

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the 4th quarter of 1998.

The Company  filed a Form 8-K on February  16,  1999.  The event  reported was a
Reorganization  and Merger  Agreement  entered  into  between  the  Company  and
Hitsgalore.com,  Inc.  on  February  11,  1999.  The  Reorganization  and Merger
Agreement was completed on March 19, 1999.

The  Company  filed a Form 8-K on March 10,  1999.  The event  reported  was the
dismissal of the involuntary  proceeding filed against the Company under Chapter
7 of the U.S.  Bankruptcy  Code.  The U.S.  Bankruptcy  Court  issued  the order
dismissing the bankruptcy petition on April 20, 1999.

The  Company  filed a Form 8-K on July 27,  1999.  The  event  reported  was the
withdrawal  of Moore  Stephens  Lovelace,  P.A.  as the  auditor  of record  for
Hitsgalore.com, Inc.

The  Company  filed a Form  8-K\A on  September  9, 1999.  The  events  reported
included additional  disclosure about the withdrawal of Moore Stephens Lovelace,
P.A. as the auditor of record and the  engagement of Pender Newkirk & Company as
the  Company's  auditors.  Pender  Newkirk & Company was engaged on September 2,
1999,  to audit and report on the  financial  statements  of the for each of the
three years in the period ended December 31, 1998.


                                   SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.  The  undersigned  persons  were not  officers or  directors  of the
Registrant  for the period  covered by this report and became the  officers  and
directors of the Registrant upon consummation of the  Reorganization  and Merger
Agreement.

HITSGALORE.COM, INC.                  Date: December 1, 1999



/s/ Dorian Reed
---------------------------------
Chairman of the Board


/s/ Steve Bradford
---------------------------------
Steve Bradford
Principal Executive Officer,
Secretary and Director

/s/ Robert A. Thompson
---------------------------------
Vice President, Principal Accounting
Officer and Director

/s/ Melvyn L. Price
---------------------------------
Melvin L. Price
Director


<PAGE> 86


/s/ Phillip Lloyd Haich
---------------------------------
Phillip Lloyd Haich
Director


/s/ Daniel Melvin Grant
---------------------------------
Daniel Melvin Grant
Director