<PAGE>
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                        --------------------------------
                                   FORM 10-KSB
                        --------------------------------
(Mark One)                       Amendment No.2
   (X)
                     ANNUAL REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1999
                                       OR
   ( )
               TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

             For the Transition period from ________ to ____________

                          Commission File No. 001-15179

             ------------------------------------------------------
                                HoQUOTIENT, INC.
             (Exact name of registrant as specified in its charter)
             ------------------------------------------------------

               Virginia                                       54-1947753
      (State or other jurisdiction                          (I.R.S. Employer
      of Incorporation or organization)                  Identification Number)

      12030 Sunrise Valley Drive, Suite 205                      20191
      Reston, VA                                               (Zip Code)
      (Address of principal executive offices)

          Issuer's telephone number, including area code: 703-716-0100
         Securities registered under Section 12(b) of the Exchange Act:

   Title of each class                                Name of each Exchange on
   -------------------                                   Which registered
                                                      ------------------------
   None                                                  OTC Bulletin Board

         Securities registered under Section 12(g) of the Exchange Act:
                    Common Stock, par value $.0001 per share
                    ______________(Title of class)___________

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

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. (X)

         Revenues for its most recent fiscal year were:  $1,537,535

         The aggregate market value of the voting stock held by non-affiliates
computed by reference to the closing price of such stock, as of March 31, 2000
was $29,531,992. Non-Affiliates have been determined on the basis of holdings
set forth under Item 11 of this Annual Report on Form 10-KSB.

         At March 31, 2000, 13,170,680 shares of the registrant's common stock
(par value, $0001 per share) were outstanding.

<PAGE>

                       DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of the Company's Registration Statement on Form 10-SB are
   incorporated by reference into Part III of this Form 10-KSB.

    Transitional Small Business Issuer:     Yes ( )      No (X)

================================================================================
                                TABLE OF CONTENTS

ITEM NUMBER AND CAPTION                                                     Page

Part I

1.       Description of Business                                            3

2.       Description of Properties                                          19

3.       Legal Proceedings                                                  19

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

Part II

5.       Market for Common Equity and Related Stockholder Matters           20

6.       Management's Discussion and Analysis of Financial Condition
         and Result's of Operations                                         23

7.       Financial Statements                                               26

8.       Changes in and Disagreements with Accountants on Accounting
         and Financial Data                                                 26

Part III

9.       Directors, Executive Officers, Promoters and Control               26

10.      Executive Compensation                                             28

11.      Security Ownership of Certain Beneficial Owners and Management     30

12.      Certain Relationships and Related Transactions                     31

13.      Exhibits and Reports on Form 8-K                                   31




                                       2
<PAGE>


                        Forward-Looking Statement Notice

         When used in this report, the words "may," "will," "expect,"
"anticipate," "continue." "estimate." "project." "intend." and similar
expressions are intended to identify forward-looking statements with the meaning
of Section 27(a) of the Securities Act of 1933 and Section 21(e) of the
Securities Exchange Act of 1934 regarding events, conditions, and financial
trends that may affect the Company's future plans of operations, business
strategy, operating results, and financial position. Persons reviewing this
report are cautioned that any forward-looking statements are not guarantees of
future performance and are subject to risks and uncertainties and that actual
results may differ materially from those included within the forward-looking
statements as a result of various factors. Such factors are discussed under the
headings in "Item 1. Business," and Item 6. Management's Discussion and Analysis
of Financial Condition and Results of Operations," and also include general
economic factors and conditions that may directly or indirectly impact the
Company's financial condition or results of operations.

                                     PART I

Item 1.  Description of Business

The Company

         HoQuotient, Inc., is a software development company that specializes in
designing, creating and marketing cost-effective custom software, information
collection and intranet network systems for the healthcare industry. This
includes hospitals and other healthcare facilities such as ambulatory care
centers, healthcare networks, in-home care agencies, independent practice
associations, clinics and extended care facilities (sometimes herein referred to
as "extended care facilities"). We supply hospitals and extended care facilities
with an electronic information system that provides a single access to records
of a patient's care and medical history for the medical facility and its staff.
This information includes a compilation and integration of data from all the
various departments and many other sources within or outside the hospital or
extended care facility and provides a continuing analysis and reporting of each
patient's clinical treatments and results. This data can be transmitted over an
Internet based Virtual Private Network to a central repository and is readily
accessible to the healthcare facilities' medical staff. Our proprietary
technology includes: the DataQual(R) software system, the DataQuotient software
system with the I-Linksm interface engine and the I-Linksm Enterprise, a server
on the hospital's or extended care facility's network which is connected to a
Central Data Repository. We also provide our customers software maintenance,
system designs, consulting, installation, training and support for all of our
software products.

Organization and Historical Background

         HoQuotient, Inc. is a Virginia corporation, incorporated on May 12,
1999, and is the successor by merger to Integrated Healthcare Systems, Inc.
("IHS") which was a Delaware corporation organized in 1993 under the name of
Travel Technologies International, Inc. Our business and assets were owned and
operated by IHS until June 14, 1999, the effective date of the merger. Our
principal products consist of DataQual(R), DataQuotient, the I-Linksm interface
system and the I-Linksm Enterprise software system, which includes a central
data repository. DataQual is a software system designed to capture information
on quality of care, risk management, costs and other aspects of the management
of patients in hospitals. DataQuotient is a software system designed to perform
many of the same care oversight functions as our DataQual system in extended
care facilities such as nursing homes. DataQual's and DataQuotient's companion
product, I-Linksm, an interface engine, is designed to interconnect and extract
data from any and all healthcare facilities information systems in the hospitals
or extended care facilities. I-Linksm Enterprise is a system of servers
installed on the hospital's or other extended care facility's local area network
(LAN), which acts as an intelligent data collection system, to extract, cleanse,
group and map hospital wide data. This data is then transmitted over an Internet
based Virtual Private Network to a Central Data Repository. We believe there is
a great need in the healthcare industry for products of this type, and we intend
to exploit that need.

                                       3
<PAGE>


Industry Background

         Managed healthcare is having a significant impact on the $1 trillion
healthcare industry, and this impact will, in our view, increase in the coming
years. There is significant ongoing pressure to contain costs, which is changing
the structure of healthcare payment from traditional fee-for-service
reimbursements to contract care reimbursements such as "capitation". This is
creating a demand for the continuing analysis and reporting of clinical
treatments and their expected outcomes.

         To implement a program of payment based on medical outcomes, patients
must be tracked on a continuous basis, and data must be readily available in
flexible digital form. This permits monitoring of procedures used in patient
treatment and the costs and results of those procedures. While the last 10 years
have brought a dramatic improvement in medical technology, there has yet to
emerge a comprehensive electronic information system providing a single
accessible set of records of a patient's care to the hospital or extended care
facility. The result is inefficiency, lack of coordination and, at times, danger
to the patient.

         Information on patient treatments must be made accessible to doctors,
nurses and other medical decision-makers in a format that will help them to do
their jobs. This kind of clinical decision support requires the compilation and
integration of data from many sources within and outside the hospital. We
believe that this need will move healthcare providers to turn to more
sophisticated and comprehensive computer-based solutions to assist in the
medical management process.

         The increased demand for integrated information concerning patient care
has already made itself felt. The Joint Commission on Accreditation of
Healthcare Organizations ("JCAHO"), the principal national accreditation
organization for hospitals, and other private and government accrediting
organizations require increased availability of information on such matters as
the verification of physician credentials, quality improvement, risk management,
access to medical records and infection control. JCAHO has coupled these
increasingly stringent quality-control standards with a demand for delivery of
information through electronic filings. To meet these demands, hospitals and
other healthcare facilities are being forced to devote far greater attention and
resources to their data gathering and reporting programs concerning the delivery
of quality care than they have in the past.

         There are approximately 20,000 extended care facilities, and according
to the American Hospital Association, there are now approximately 5,200
hospitals in the United States. These are our primary market focus.

Our Business Strategy

         Our long-term strategy is to become a leading provider of software
information products and services in the healthcare industry by responding to
the increased demand for information and data on quality of care, risk
management, costs and other matters concerning the management of
hospital/extended care facility patient care by the designing, development,
selling and maintenance of software systems which monitor the care of patients.
This will empower the hospitals to contain costs, increase efficiency, improve
the quality of care and management of risk, management of patients. We intend to
market DataQual, DataQuotient and I-Link Systems and other derived systems to
hospitals, extended care facilities, ambulatory care centers, healthcare
networks, in-home care agencies, independent practice associations and other
healthcare clinics.

                                       4
<PAGE>


              Until recently we concentrated on the acute care hospital market,
which constitutes over 60% of the existing market for patient care information
delivery software. We have, most recently, begun to provide software systems to
the extended care market. Our strategy includes the following key elements:

              o Continue sales and installation of DataQual with the I-Link
                interface engine and provide enhancements of those products
                through additional research and development;

              o Begin sales and installations of DataQuotient with the I-Link
                interface engine to extended care facilities;

              o Continue sales and installation of I-Link Enterprise and the
                Central Data Repository and enhancements of this product through
                additional research and development;

              o Expanded marketing of these products through direct
                implementation contracts and joint marketing agreements with
                additional hospital associations, nursing home associations and
                others, as well as the expansion of our direct sales efforts
                focused on individual and groups of hospitals and other types of
                healthcare facilities;

              o Maintenance of our existing client base by providing support,
                software upgrades and consulting services;

              o Expansion of our operations through strategic mergers and
                acquisitions.

         Additionally we continue: (1) the marketing of these products to
existing customers and future customers; (2) the installation of the products in
newly licensed facilities; and, (3) the maintenance and updating of systems
already installed.

Products

DataQual

         DataQual is a modular healthcare system that can supply many of a
hospital's quality and risk management and analytical and reporting needs. Built
around the DataQual Data Repository, a relational database that runs stand-alone
or on local area networks (LANs) at the hospital, the system can gather data
from all information systems in a hospital, via the I-Link interface engine.
DataQual then integrates this data with pertinent quality and risk management
data, performs sophisticated analysis of the data and provides reports thereon,
in either paper or electronic form.

         The software system runs on an included Windows NT server, allowing it
to economically meet the hospital quality improvement and risk management needs
of many different size institutions. Its modular technology allows smaller
hospitals to buy the DataQual components they need and add more as their needs
change or their budget allows. The system is an integrated, standard-based
technology, highly adaptable to changing demands.

                                       5
<PAGE>


         Additionally, the DataQual system can take the hospital's sophisticated
quality and risk information that has been privacy formatted and send it, using
I-Link Enterprise, over an Internet based Virtual Private Network to our Central
Data Repository located at their affiliated healthcare group, to a state-wide
healthcare association and/or to an insurance company for performance
measurement and statistical analysis purposes.

         The DataQual system is composed of several modular systems and
sub-systems:

              o DataQual - Quality Improvement System (QIS)
              o DataQual - Risk Management System (RMS)
              o I-Link interface engine

DataQual  - (QIS)

         DataQual QIS is a Windows-based, fully integrated software system,
which gathers and reports data on the quality of care delivered. The system
automates one of the most labor-intensive aspects of a hospital's operation:
data collection, assessment, tracking and reporting. DataQual QIS tracks the
entire quality improvement process from data collection, through data analysis
and problem identification to final problem resolution. The major modules
available with the DataQual QIS System are:

              o Quality Improvement
              o Staff Credentialing
              o Utilization Management
              o Infection Control

         Each module is priced and installable independently. This allows a
hospital to configure the system according to their initial quality improvement
requirements and then add other function system modules as they grow or as the
need arises. The system provides vital quality of care data to hospital
management and affiliated outside organizations for comparative analysis of
quality against costs in an era of great concern for the total quality of the
delivery of healthcare.

DataQual - (RMS)

         Tracking, comparing, reporting and evaluating the factors related to a
liability risk occurrence, incident or claim within or across hospitals is the
function performed by the DataQual Risk Management System (RMS). RMS brings
integrated occurrence, incident and claims tracking from hospital or groups of
hospitals through insurance carriers. RMS integrates into one unified risk
management system:

              o Risk management
              o Staff credentialing
              o Worker's compensation features
              o Quality monitoring and adjustment
              o A risk data repository

         By capturing and tracking occurrences and incidents prior to becoming
claims, a hospital and its insurance carrier can identify the steps needed to
improve the quality of care delivered and, therefore, reduce risk occurrences
and costs. This process improvement can have dramatic effects on the delivery of
healthcare and provide significant cost savings.

                                       6
<PAGE>


         After risk related data capture at the hospital(s), DataQual- RMS can
feed information, using I-Link Enterprise, via an Internet based Virtual Private
Network into a Central Data Repository focused on risk, where risk information
analysis and reporting is performed. This analysis can incorporate other
hospitals privatized data and be shared with the hospitals for the purpose of
additionally reducing the risks associated with delivering cost-effective
quality healthcare.

         The DataQual Risk Management System runs on an included Windows NT
server in a stand-alone or networked mode. It also is available with the I-Link
interface engine, which provides non-invasive data connectivity and data
interchange with any number of disparate hospital information systems available
in the hospital. With I-Link in place, the entire spectrum of staff, patient and
visitor information is made available for context analysis and reporting by the
Risk Management System. The RMS system thus provides a unified and cost
effective hospital Risk Management System.

I-Link interface engine

         I-Link interface engine connects the DataQual quality and risk hospital
based data repositories to the disparate mainframe and client/server systems in
most hospitals, including the new automated patient records systems. This
recently redesigned interface engine is a non-invasive, intelligent software
module adhering to and complying with the healthcare industry standards for
electronic data interchange. I-Link is a sophisticated data capture tool, which
transfers data between disparate software applications, regardless of software
languages, operating systems or hardware platforms.

         We can customize I-Link to automatically query any hospital system for
the specific data required and then send that data to the hospital DataQual
repository. I-Link creates an interface without invading or altering host
applications and without the need to know an application's software source code,
file layouts or structures. I-Link is designed to fully address and resolve a
broad range of real-time interface requirements within a hospital environment.

         We believe that if combined, DataQual QMS, DataQual RMS, and I-Link
interface engine can meet the overall quality and risk data analysis and
reporting needs of hospitals and affiliated organizations.

DataQuotient

         The DataQuotient system, like its sister system DataQual, is a modular
healthcare system that can supply many of an extended care facilities quality
and risk management and analytical and reporting needs. Built around a data
repository, a relational database that runs stand-alone or on local area
networks (LANs) at the facility, the system can gather data from any available
information systems, via the I-Link interface engine. DataQuotient then
integrates this data with pertinent quality and risk management data, performs
sophisticated analysis of the data and provides reports thereon, in either paper
or electronic form.

         The software system is a bundled software system providing complete
quality and risk management for the extended care market. The System contains a
substantial portion of the functionality of the DataQual modules; Quality and
Risk Management, Utilization, Staff Credentialing and Infection Control, which
were combined into a single, full-function extended care facility quality and
risk management system. DataQuotient runs on an included Windows NT server, and
the entire system can be leased on a monthly basis or purchased by the extended
care facility and is priced to the market. The system is an integrated,
standards-based technology, highly adaptable to changing demands of the extended
care marketplace.

                                       7
<PAGE>


         Additionally, the DataQuotient system can take facilities' quality and
risk information that has been privacy formatted and send it, using I-Link
Enterprise, over an Internet based Virtual Private Network to our Central Data
Repository located at their affiliated healthcare group, to an extended care
association and/or to an insurance company for performance measurement and
statistical analysis purposes.

I-Link Enterprise

         The I-Link Enterprise system automates the collection of real time
hospital and extended care facilities clinical information, including DataQual
and DataQuotient quality and risk information, and sends it via an Internet
based Virtual Private Network to a Central Data Repository healthcare database.
This virtual network, which uses an expanded version of our I-Link interface
engine, changes manual service bureau healthcare systems, which only collect
hospital/extended care facility billing data, into on-line, source data
collection systems for groups of hospitals and extended care facilities,
hospital association members or insurance company client hospitals.

         In-patient and outpatient clinical and quality and risk data is
collected, corrected, encrypted and sent, using I-Link Enterprise, to a client
Central Data Repository. Access to the data is then provided to affiliated
hospital and extended care facilities to facilitate performance improvement and
measurement strategies. Prior information collection methods utilized billing
data, which are many months to years old. This timely, very accurate tactical
information, which has not yet been transmuted into billing data, then becomes
extremely useful strategic information available for use by all of the
affiliated hospitals and extended care facilities.

-I-Link Enterprise's- Central Data Repository

         I-Link Enterprise is used to first gather, cleanse and map data and
then populate remote Central Data Repositories with this hospital and extended
care facilities information via a private and secure Internet based Virtual
Private Network. The sophisticated, detailed and timely hospital/extended care
facility information is privacy formatted prior to sending to the Central Data
Repository. These repositories can be configured to contain information as
simple as liability risk incidents, up to one containing timely, complete
detailed hospital/extended care facility clinical, administrative and financial
information, including the DataQual and DataQuotient quality and risk data.
These I-Link Enterprise Central Data Repositories are used by hospital groups,
extended care groups, affiliated statewide hospital and extended care
organizations including hospital and extended care associations and insurance
carriers, for performance improvement measurement and statistical analysis
purposes.

Installation and Training

         Installation includes system design, file creation, system
implementation, training, consulting and system start-up. Our installation and
training procedures are designed to instruct the hospital and extended care
customer in data entry, report generation and retrieval. Our operations group
finalizes the testing and system acceptance by the customer. Customer training
is conducted at the customer site and includes up to a proportionate number of
initial product training days, depending on the system and modules purchased.

                                       8
<PAGE>


Support and Maintenance

         We provide software maintenance, system design, consulting,
installation, training and support for all of our software products. Support
teams, which include quality improvement nurses, registered nurses,
communications and software technicians and program developers, assist customers
throughout the course of their relationship with us. We also provide toll free
telephone and on-site support. Software maintenance is provided to all of our
customers. Along with telephone and on-site support, software enhancements are
included under license contracts. Customer support personnel are available to
answer questions and solve operational difficulties. The customer support group
works closely with the field support personnel to solve customer problems
on-site.

Sales and Marketing

         We generate sales opportunities through referrals, direct association
marketing, industry specific seminars, and trade conventions. Our sales staff
calls on potential customers to demonstrate the system and attempts to bring
software sales to closure.

         To date, we have focused our marketing efforts on hospital and extended
care associations in the United States, liability insurance companies and
selected referral opportunities. We intend to continue our current marketing
efforts, however, no assurance can be given that we will be able to generate
sufficient funds from our operations to enable us to undertake such activities
on an expanded basis.

         Management believes, based upon information received from JCAHO, that
healthcare provider's efforts for continuous quality improvement and total
quality management increasingly will not be limited to hospitals. Given this
market trend, management intends, given adequate financial resources, to market
the DataQual System to not only the hospital market segment but also to
ambulatory care centers, healthcare networks, in-home care agencies, independent
practice associations and clinics. We have in the past, sponsored an annual
national user conference, which includes seminars and training for DataQual
System users. Management believes it will continue sponsoring these conferences.

Customers

         We have installed the DataQual System in over 100 public and privately
owned hospitals and currently support approximately 40 hospitals that use our
systems. In addition, we have installed DataQual Systems in 29 states including
Puerto Rico. Our client base ranges in bed size from 30 to over 1,500 beds.

         We market our products and services to substantially all hospitals,
regardless of specialties, and all extended care facilities. We believe that the
DataQual and DataQuotient Systems, including the I-Link interface engine and the
I-Link Enterprise system, including the Central Data Repository, provides the
flexibility required for installation in most hospitals and extended care
facilities. We further believe that increasing portions of our sales of DataQual
are likely to be made in hospitals with 400 beds or less and to hospital
networks in both urban and rural areas. Our hospital customers include medical
teaching centers, government hospitals and large hospital groups. We also
believe, from our research, that the extended care marketplace is very
underserved in quality of care systems and will provide increasing portions of
our overall system sales.

                                       9
<PAGE>


Recent Large Contract Awards

         We have been awarded a number of contracts to automate the collection
of clinical healthcare information from hospitals throughout a state. The
largest contract is a statewide, five-year $3.0 million contract with the Ohio
Hospital Association ("OHA") to automate the collection, hospital clinical
information via an Internet based Virtual Private Network, to a statewide
Central Data Repository healthcare database. I-Link Enterprise, which uses this
virtual private network, changes a batch hospital service bureau system,
collecting billing data, into an on-line, data collection system for 189
statewide member hospitals, which are provided access to this data to facilitate
performance measurement strategies.

         This agreement followed two other contracts with OHA. One to conduct
the pilot phase of the 1999 Data Collection System, which was successfully
completed, and one to process their 1998 data, which was completed successfully.

         The second contract awarded is to automate the collection of hospital
risk incidents and to then implement a centralized risk management and quality
improvement system for the member hospitals of the Alabama Hospital Association
Trust (AHAT).

         This project creates an Internet based Virtual Private Network risk
management and quality improvement healthcare data collection system for 85
statewide hospitals. This will create the first statewide, Internet-based
healthcare risk and quality data collection and management system of its kind.
With this system, we are transforming a statewide manual, risk data submission
process into a fully automated one, extending on into a system utilizing
DataQual and DataQuotient to provide full quality improvement and measurement.

         By providing AHAT and its member hospitals and extended care facilities
with Internet access to a statewide, central source of timely risk event and
quality improvement information, we are producing a significant increase in the
hospitals and extended care facilities querying, tracking, reporting and
improvement capabilities. This combination of I-Link Enterprise and the DataQual
and DataQuotient System gives the AHAT members extensive tools to improve the
delivery of healthcare throughout the State of Alabama.

         We also have signed a comprehensive marketing agreement with a state
hospital association. The first of its kind is with the Center for Health
Affairs, Inc., a wholly owned subsidiary of the New Jersey Hospital Association.
("NJHA") Under the agreement, the Princeton-based Center for Health Affairs will
market DataQual, Quality and Risk Management Systems; along with the new I-Link
interface engine to the 84 acute care members of the NJHA.

         DataQual will be the tactical, quality improvement engine providing
NJHA's hospital members with staff credentialing, utilization review, risk
management and infection disease control functions, which are so integral to a
hospital's quality management activities. The joint marketing plan is to extend
the DataQual System into a statewide total quality improvement program for the
members of NJHA's Center for Health Affairs.

Competition

         The market for healthcare information systems is highly competitive. We
believe the principal competitive factors include the breadth and quality of
system and product offerings, access to proprietary data, the proprietary nature
of methodologies and technical resources, price and the effectiveness of
marketing and sales efforts.

                                       10
<PAGE>


         We compete with larger vendors such as McKesson HBOC, Inc., HCIA, Inc.
and Eclipsys, Inc., and with vendors whose sizes are similar to ours, such as
Medical Information Data Systems, Inc. ("MIDS"), Cantor and Associates and
LANDACORP. DataQual competitors include McKesson HBOC, Inc., offering a quality
and risk overview only competing system; and MIDS, Cantor and Associates and
LANDACORP offering similar systems, but non-modular systems. I-Link Enterprise
competitors include HCIA, Inc. offering batch data collection services to
hospital associations and state governments and; Eclipsys providing central data
repositories along with a DataQual competing product.

         Some of the our existing and potential competitors have significantly
greater research, development, financial, technical, marketing and personnel
resources and more extensive business experience than we do. As the market for
our products and services further develops, additional competitors may enter the
market and competition may intensify. There can be no assurance that we will be
able to maintain the quality of our software information products and services
relative to those of our competitors or continue to develop and market our
systems and services effectively or to compete successfully in new markets. We
are not aware of any recent announcements made on behalf of any of our
competitors or recent entrants into the healthcare information systems market,
which, in either case, would have a material adverse impact on our operating
results or financial position.

Software Research and Development

         We conduct research and development to enhance and expand our existing
product offerings. The open, modular design of the both the DataQual and
DataQuotient Systems allows us to develop additional features rapidly and to
modify the systems to accommodate customers in different environments. I-Link
Enterprise development utilizes similar modularity and object oriented
programming strategies.

         Our research and development expenditures for December 31, 1998 and
1999 were $69,308 and $352,311, respectively.

         Research and development priorities are derived from a combination of
strategic marketing requirements and customers' requests for additional
capabilities. New modules and enhancements are coordinated to optimize the
system as a whole and to ensure complete integration of the various
applications. We plan to continue development of the DataQual and DataQuotient
Systems with the I-Link interface engine and I-Link Enterprise, with the Central
Data Repository by continuing to expand the system's oversight and reporting
capabilities and information monitoring capabilities. This research and
development effort is focused on both existing products and new product
offerings. Although most of our products have been developed internally, we
believe that we can respond to changing market requirements more quickly by
acquiring complementary products or by licensing them for distribution either as
elements of our developed products or under private labels.

         The healthcare software industry is subject to rapid technological
advances and changes in client requirements. Our future success will depend to a
substantial degree upon our ability to enhance our current products and develop
and introduce new products that keep pace with technological developments,
respond to evolving client requirements, and continue to achieve market
acceptance. (See "Certain Factors That May Affect Future Results.... -
Dependence on Limited Number of Products--Need for New Technology" and "Risks of
Our Business - New and Uncertain Markets").

                                       11
<PAGE>


Intellectual Property

         We regard the technology incorporated in our products as proprietary.
However, like many other software companies, we do not hold any patents and rely
upon a combination of copyright, trademark and trade secret laws and contractual
restrictions to protect our rights in the software products. To date, our policy
has been to pursue copyright protection for the software and related
documentation. We have copyright and trademark registration in the United States
for "DataQual" and "I-Link". In addition, our key employees and independent
contractors and distributors are required to sign nondisclosure and secrecy
agreements. Despite our efforts to protect these proprietary rights,
unauthorized parties may attempt to copy aspects of our products or to obtain
and use information that we regard as proprietary. Policing unauthorized use of
our products is difficult, and we may not be able to determine whether or the
extent, if any to which piracy of our software products may exist.

         It may be possible for unauthorized third parties (including
competitors) to copy aspects of our products, whether or not in violation of our
rights. We believe that because of the complexity of the technical know-how
accumulated and possessed by us, our software management, key personnel, and the
rapid pace of technological change in the healthcare software industry, legal
protection is a less significant factor in our success than the knowledge,
ability and experience of our employees, the frequency of product enhancements
and the timeliness and quality of support services that we provide. DataQual,
DataQuotient, I-Link and I-Link Enterprise generally are sold pursuant to
software license agreements, which, in most cases, grant customers a
nonexclusive, nontransferable license to use our products at a specified site
and contains terms and conditions prohibiting the unauthorized reproduction or
transfer of our products.

Government Regulation

         Our products and services are not currently subject to government
regulation per se. However, the United States Food and Drug Administration
("FDA") has promulgated a draft policy for the regulation of certain computer
products as medical devices under the 1976 Medical Device Amendments to the
Federal Food, Drug and Cosmetic Act. To the extent that computer software is
considered a medical device under the policy, computer software manufacturers
could be required, depending on the product, to (i) register and list their
products with the FDA, (ii) notify the FDA of, and demonstrate to the FDA, the
product's substantial equivalence to other products on the market before
marketing such product, and/or (iii) obtain FDA approval of such product by
demonstrating safety and effectiveness before marketing the product. In
addition, such products would be subject to other statutory controls, including
those relating to good manufacturing practices and adverse experience reporting.
Although it is not possible to anticipate the final form of the FDA's policy
with regard to computer software, we expect that, whether or not the draft is
finalized, the FDA is likely to become increasingly active in the regulation of
computer software intended for use in clinical settings.

         The United States healthcare industry is subject to extensive
government regulation relating to such matters as facility expansion, capital
expenditures and reimbursement policies. There can be no assurance that
reimbursement for our systems and services will be or continue to be available
or that future reimbursement policies of Medicare, the Healthcare Maintenance
Organizations ("HMO") and other third party payers will not adversely affect our
ability to sell our systems and services on a profitable basis. The effect of
future legislation and government regulation upon prospective clients may, in
certain circumstances, have a material adverse effect upon our business.
Conversely, changes in the regulatory environment have increased, and may
continue to increase, the needs of healthcare organizations for cost-effective
information management, thereby increasing the demand for our products and
services. In addition, comprehensive federal healthcare reform legislation
could, depending on the form in which such legislation may in the future, be
enacted, have a substantial impact on our business. We cannot predict the
impact, if any, of future legislation and government regulation on our business.

                                       12
<PAGE>


Product Warranty

         We provide a limited warranty for a period of 90 days that our software
is free from defects in material and workmanship and operates substantially in
accordance with functional specifications. We are not responsible for any defect
caused by the user having made any changes or misused or damaged its programs or
for damages in excess of amounts paid by the user to us. To date we have not
experienced any financial loss due to our warranties and, to our knowledge,
there have been no warranty claims filed or threatened. See "Certain Factors
That May Affect Future Results... - Risk of Product Defects; Product Liability"

Compliance with Environmental Laws

         We have had no need to spend monies on compliance with local, state or
federal environmental laws.

Number of Employees

         As of May 15, 2000, we have 26 full time employees:

               Department                                   Number of Employees
               ----------                                   -------------------
               Sales and Marketing                                  3
               Operations and Product Development                   18
               Administration                                       5

         We have recruited seasoned technical engineers with considerable
experience in the software industry. Alan W. Grofe', our President and Director
joined our Company in March of 1996. Prior to joining us he was President and
CEO of MarketLink, Inc. a direct marketing software company not affiliated with
our Company. Douglas A. Cohn, our Chairman and Chief Executive Officer joined
our Company in November 1999. He is also the President and Chief Executive
Officer of Internet Guide, Inc., a publishing firm. Michael J. Black, our former
Chief Executive now Officer and now Chief Financial Officer and Secretary is
presently serving in a consulting capacity. Mr. Black has been with our Company
since September 1994. We believe that our current staffing, cost structure, and
current operating plans will allow us an opportunity to compete effectively as a
supplier of information management software to the hospital, extended care
facilities and other healthcare markets.

Certain Factors That May Affect Future Results, Financial
Condition And The Market Price of Securities

COMPANY IN INITIAL STAGES             While we have been in existence for over
                                      five years, we only entered the production
                                      stage in 1999 for our principal products,
                                      DataQual and DataQuotient with the
                                      interface engine and I-Link Enterprise
                                      with its Central Data Reporting. To
                                      continue to grow and become profitable: we
                                      must promptly complete the upgrade
                                      installations of DataQual in the presently
                                      licensed locations while continually
                                      adding new licensees; through the
                                      assistance of our marketing partners, sell
                                      and install new DataQual Systems; sell and
                                      install new DataQuotient Systems, complete
                                      the installation of I-Link Enterprise for
                                      the Ohio Hospital Association and Alabama
                                      Hospital Association.

                                       13
<PAGE>


WE HAVE A LIMITED OPERATING HISTORY   We began operations in 1993. As a result,
UPON WHICH YOU MAY EVALUATE US        any evaluation of our prospects and us
                                      will be based on a limited operating
                                      history. In addition, our products have
                                      been recently developed and marketed and
                                      our business strategy has been revised.
                                      Consequently, our historical results of
                                      operations may not give you an accurate
                                      indication of our future results of
                                      operation or prospects.

WE HAVE AN ACCUMULATED DEFICIT        We have incurred substantial losses since
                                      inception. As of December 31, 1999, we had
                                      an accumulated deficit of approximately
                                      $10.6 million. We have experienced
                                      significant losses in connection with our
                                      development and marketing of our new
                                      products. See "Management's Discussion and
                                      Analysis of Financial Condition and
                                      Results of Operations - Liquidity and
                                      Capital Resources."

WE NEED TO GENERATE ENOUGH CASH       For the year ended December 31, 1998, we
FROM OPERATIONS TO FUND OUR GROWTH    incurred a net loss of $1,917,738. For the
PLANS                                 year ended December 31, 1999, we incurred
                                      a loss from operations of $230,019, but we
                                      made a profit of $1,040,025, after
                                      extraordinary income. To fund our
                                      operations, we require a continuation of
                                      the 1999 operating trend or additional
                                      financing or a substantial increase in the
                                      number of contract awards to generate
                                      additional operating revenue. There can be
                                      no assurance, however, that our liquidity
                                      goals will be reached in the immediate
                                      future, if ever.


OUR INABILITY TO MANAGE GROWTH        To manage our growth, we must implement
COULD HURT OUR BUSINESS               systems, and train and manage our
                                      employees. We may not be able to implement
                                      these action items in a timely manner or
                                      at all. Our inability to manage growth
                                      effectively could have a material adverse
                                      effect on our business, operating results
                                      and financial condition. There can be no
                                      assurance that we will achieve our planned
                                      expansion goals, acquire new contract
                                      awards, develop and market new products,
                                      manage our growth effectively, or operate
                                      and service our existing and new business
                                      profitably.

WE FACE SUBSTANTIAL COMPETITION       The  market for healthcare information
                                      systems is fragmented but highly
                                      competitive and such competition is
                                      expected to continue to increase. There
                                      are no substantial barriers to entry in
                                      this market and we believe that the
                                      Company's ability to compete depends upon
                                      many factors within and beyond its
                                      control. We believe the principal
                                      competitive factors include the breadth
                                      and quality of software systems and
                                      product offerings, access to proprietary
                                      data, the proprietary nature of our
                                      methodologies and technical resources,
                                      pricing and the effectiveness of marketing
                                      and sales efforts.

                                       14
<PAGE>
DEPENDENCE ON KEY PERSONNEL           As a small company, we are highly
                                      dependent on certain key employees, in
                                      particular on Douglas A. Cohn, its
                                      Chairman and Chief Executive Officer and
                                      Alan W. Grofe, its President and Chief
                                      Operating. The loss of either of them
                                      without qualified replacements would have
                                      a material adverse effect on our ability
                                      to conduct operations. We have not
                                      purchased "key man" insurance policies on
                                      either of them.

OUR SUCCESS IS DEPENDENT ON OUR KEY   We believe that our success will depend on
                                      continued employment of our PERSONNEL
                                      management team. If one or more members of
                                      our executive management team were unable
                                      or unwilling to continue in their present
                                      positions, our business, financial
                                      condition and operating results could me
                                      materially adversely affected if we could
                                      not find qualified replacements. Our
                                      success also depends on having trained
                                      technical engineers. We will need to
                                      continue to hire additional personnel as
                                      our business grows. Competition for
                                      qualified technicians personnel is strong
                                      everywhere. Our business, financial
                                      condition and operating results will be
                                      materially adversely affected if we cannot
                                      hire and retain suitable technical
                                      personnel.

HISTORY OF LOSSES AND NEGATIVE        We have had continuous losses from
WORKING CAPITAL                       operations and negative cash flow for our
                                      entire history, as shown below:

                                                         Years Ended
                                                  12-31-98        12-31-99
                                                 ------------    ----------
                  Loss from Operations:          $(1,701,561)    $(230,019)*

              *  Before extraordinary income

                  Gains derived from debt reduction and equity transactions have
resulted in a positive working capital position of approximately $1.0 million at
December 31, 1999.

PAST DUE PAYABLES, ACCRUED            At December 31, 1999 past due obligations
EXPENSES, CLAIMS AND JUDGMENTS        for which there are claims and judgments
                                      totaling approximately $766,000, which is
                                      a reduction of $906,000 from December 31,
                                      1998. Negotiations are on-going to resolve
                                      these matters, some of which are disputed.
                                      Critical services have not been suspended,
                                      nor has there been cancellation of orders
                                      due to delays in product delivery as a
                                      result. We intend to use cash generated
                                      from operations to pay our trade and
                                      creditors.

WE HAVE NOT PAID, AND WILL NOT PAY,   We have not paid cash dividends on our
CASH DIVIDENDS                        common stock and have no present intention
                                      of paying cash dividends in the
                                      foreseeable future. It is the present
                                      policy of the Board of Directors to retain
                                      all earnings to reinvest in the Company.
                                      See "Dividends."

PROVISIONS OF OUR ARTICLES OF         The Company is a Virginia corporation.
INCORPORATION, BYLAWS, AND VIRGINIA   Anti-takeover provisions of Virginia law
LAW COULD MAKE ACQUISITION            could make it more difficult for a third
OF US DIFFICULT                       party to acquire control of us, even if
                                      such change in control would be beneficial
                                      to shareholders. In addition, our articles
                                      of incorporation provide that our Board of
                                      Directors may issue preferred stock
                                      without shareholder approval. The issuance
                                      of preferred stock could make it more
                                      difficult for a third-party to acquire us,
                                      even if doing so would be beneficial for
                                      our shareholders.

                                       15
<PAGE>

RISKS OF OUR BUSINESS


DEPENDENCE ON LIMITED NUMBER OF       Our business is almost exclusively
PRODUCTS-- NEED FOR NEW TECHNOLOGY    dependent at this time on three products,
                                      the DataQual System, with its I-Link
                                      interface engine and I-Link Enterprise,
                                      with its Central Data Repository, and
                                      DataQuotient. Although we plan to
                                      diversify our product line for the
                                      healthcare industry by developing new
                                      software applications to market to
                                      existing and new customers, the bulk of
                                      our sales during the next few years will
                                      come from these three products. In
                                      evaluating the DataQual, I-Link Enterprise
                                      and DataQuotient systems, investors and
                                      shareholders should also be aware that we
                                      have a registered copyright on the
                                      DataQual System and a registered service
                                      market on I-Link.

                                      As advances occur generally in the fields
                                      of networking of computers and integration
                                      of database information, we will need to
                                      keep pace by continuing to enhance
                                      DataQual and its I-Link interface engine
                                      and I-Link Enterprise with its Central
                                      Data Repository to accommodate these
                                      developments. There can be no assurance
                                      that we will succeed in doing so.

NEW AND UNCERTAIN MARKETS             The markets for healthcare software and
                                      services are relatively new, and it is
                                      difficult to predict the rate at which
                                      these markets will grow or whether new or
                                      increased competition will result in
                                      market saturation. If demand for
                                      healthcare software products fails to
                                      grow, or grows more slowly than
                                      anticipated, or if the market becomes
                                      saturated with competitors, our operations
                                      will be materially and adversely affected.

INCREASING COMPETITION                There are limited barriers to entry in the
                                      healthcare software industry in which we
                                      operate. This market is extremely
                                      competitive and can be significantly
                                      influenced by the product developments and
                                      pricing decisions of its largest
                                      participants. We have at least three
                                      active competitors that are now selling
                                      patient information management systems
                                      similar to DataQual and competitors
                                      selling statewide patient hospital billing
                                      information systems and services similar
                                      to I-Link Enterprise. Others may appear in
                                      the future as the advantages of this kind
                                      of healthcare patient information database
                                      aggregation and integration and reporting
                                      system become apparent to hospitals and
                                      others in the healthcare management field.
                                      Many of our potential competitors are
                                      large software development and marketing
                                      companies who are fully capable of
                                      developing new software products that
                                      would offer substantial competition to
                                      DataQual, DataQuotient and I-Link
                                      Enterprise. There can, therefore, be no
                                      assurance that we will have the financial
                                      resources, technical expertise marketing
                                      and support capabilities to continue to
                                      compete successfully in this market.

                                       16
<PAGE>

GOVERNMENT REGULATION                 The confidentiality of patient records and
                                      the circumstances under which these
                                      records may be released are subject to
                                      substantial governmental regulation
                                      governing both the disclosure and use of
                                      this information. While we believe that
                                      the DataQual, DataQuotient and I-Link
                                      Enterprise Systems comply with existing
                                      rules in substantially all jurisdictions,
                                      additional, more restrictive rules
                                      governing the dissemination of medical
                                      record information may require substantial
                                      changes in the Systems in the future and
                                      result in substantial costs to us. In
                                      addition, the U.S. Food and Drug
                                      Administration (the "FDA") have
                                      promulgated a draft policy for the
                                      regulation of certain computer products as
                                      medical devices. It is not possible at
                                      this time to anticipate the final form of
                                      the FDA's policy with regard to computer
                                      software, but we expect that, whether or
                                      not this draft policy is finalized, the
                                      FDA is likely to become increasingly
                                      active in regulating software intended for
                                      use in the healthcare industry. Our
                                      products could become subject to extensive
                                      regulation by the FDA.

RISK OF PRODUCT DEFECTS; PRODUCT      Software products as complex as those
LIABILITY                             offered by us might contain undetected
                                      errors or failures when first introduced
                                      or when new versions are released.
                                      Although we have not experienced material
                                      adverse effects resulting from any errors
                                      to date, there can be no assurance that,
                                      despite testing by us and by current and
                                      potential customers, errors will not be
                                      found in new versions of our products
                                      after commencement of shipments, resulting
                                      in loss of or delay in market acceptance,
                                      which could have a material adverse effect
                                      upon our business, operating results and
                                      financial condition. Although we do not
                                      maintain an "errors and omissions"
                                      insurance policy, our license agreements
                                      with our customers typically contain
                                      limited warranty provisions designed to
                                      limit our exposure to potential product
                                      liability claims. While we have not
                                      experienced product liability claims to
                                      date, the license and maintenance of our
                                      software products may entail the risk of
                                      successful claims. A successful product
                                      liability claim brought against the
                                      Company could have a material adverse
                                      effect on our business, operating results
                                      and financial condition.

POTENTIAL FLUCTUATIONS IN PERIODIC    Our revenues may be subject to significant
RESULTS                               variation from period to period due to the
                                      discretionary nature of healthcare
                                      software purchases and will be difficult
                                      to predict. Further, although our product
                                      line includes products with sales prices
                                      from $15,000 to over $200,000, the
                                      majority of our revenue is expected to be
                                      derived from products with sales prices
                                      from $15,000 to $120,000. Product revenues
                                      are difficult to forecast because the
                                      market for business healthcare software
                                      products is evolving, and our sales cycle
                                      may vary substantially with each customer.
                                      See "Management's Discussion and Analysis
                                      or Plan of Operations"

                                       17
<PAGE>

MAINTAINING A MARKET FOR THE          The Shares of the common stock have been
SECURITIES MAY NOT BE POSSIBLE IN     traded on the OTC Bulletin Board and there
THE FUTURE                            has been no other public market for our
                                      common stock or purchase warrants. We
                                      cannot predict the extent to which
                                      investor interest in the Company will lead
                                      to the further development or maintenance
                                      of the trading market or how liquid that
                                      trading market will remain.

EXTERNAL FACTORS COULD AFFECT OUR     Fluctuations in the trading price of our
COMMON STOCK TRADING PRICE            common stock and purchase warrants may
                                      result from a number of factors, some of
                                      which are beyond our control, including:

                                      o general economic and stock market
                                        conditions;
                                      o actual or anticipated fluctuations in
                                        our operating results;
                                      o changes in expectations as to our future
                                        financial performance or changes in
                                        financial estimates by securities
                                        analysts;
                                      o earnings and other announcements by, and
                                        changes in market valuations of other
                                        comparable companies and
                                      o trading of our common stock and purchase
                                        warrants.

OUR STOCK PRICE MAY BE EXTREMELY      In addition, the stock market in general
VOLATILE AND SHAREHOLDERS MAY NOT     has experienced extreme volatility that
BE ABLE TO RESELL THEIR SHARES OR     often has been unrelated to the operating
WARRANTS AT A PROFITABLE PRICE        performance of particular companies. These
                                      broad market and industry fluctuations may
                                      adversely affect the trading price of our
                                      common stock and purchase warrants,
                                      regardless of our actual operating
                                      performance.

EXERCISE OF COMMON STOCK PURCHASE     At December 31, 1999, there were
WARRANTS MAY HAVE A DILUTIVE EFFECT   14,130,770 common stock purchase warrants
ON OUR SHAREHOLDERS                   outstanding. These warrants will be
                                      exercisable from a one to five year period
                                      at exercise prices ranging from $.75 to
                                      $7.00 per share from a period beginning
                                      May 1995 to December 2004. Certain of
                                      these warrants may have dilutive effects
                                      because holders of the Warrants would be
                                      given the opportunity to profit from a
                                      possible rise in the market price of the
                                      underlying securities with a resulting
                                      dilution in the interests of our other
                                      security holders and future investors.

                                      We have also agreed, at the request of the
                                      holders of the Warrants, under certain
                                      circumstances, that we will register under
                                      federal and state securities laws the
                                      Warrants or the securities underlying the
                                      Warrants. Exercise of these registration
                                      rights may involve substantial expense to
                                      us. Exercise of these registration rights
                                      may adversely affect the price of the
                                      common stock.

                                       18

<PAGE>


ITEM 2. Description of Properties

         At present, we lease a 3,682 square feet of office space, located at
12030 Sunrise Valley Drive, Suite 205, Reston, Virginia 20191. We currently have
a two-year sub-lease, which ends on May 21, 2001. The rent is $8,898 a month.
These premises should suffice for our administrative offices for the foreseeable
future.

ITEM 3.  Legal Proceedings

         On January 10, 1997, the Internal Revenue Service ("IRS") filed in the
Circuit Court for the County of Fairfax, Virginia a Notice of Federal Tax Lien
in the amount of $386,234.73 against us for employment withholding tax
liabilities of Integrated Systems Technology, Inc. ("IST"), formerly a wholly
owned subsidiary of ours acquired in 1995. It is the opinion of counsel, that
there is no "alter ego" liability on the part of us and that the lien filed
against us is wrongful and should be released. We have made efforts to get the
lien released but the IRS has refused. In the meantime, the IRS since the filing
of the Notice has not made any effort to enforce it against us. In the event the
lien is not released, we may have to bring a suit against the IRS in the Federal
courts for wrongful levy.

         Other suits arising in the ordinary course of business are pending
against us. We believe the ultimate outcome of these actions will not result in
a material adverse effect on our consolidated financial position, results of
operations or cash flows.

ITEM 4.  Submission of Matter to a Vote of Security Holders

         NONE



                                       19
<PAGE>


                                     PART II

ITEM 5.  Market for Common Equity and Related Stockholder Matters

(a)      Our Common Stock is traded on the NASDAQ Bulletin Board.
(b)      Our Common Stock was listed on the NASDAQ Bulletin Board on
         approximately April 16 of 1996.
(c)      Our Common Stock is approved for trading on the NASDAQ Over the Counter
         Bulletin Board, trading under the stock symbol "HQNT". The chart below
         breaks down the high bid and the low bid prices for each of the last 9
         quarters (as reported by NASDAQ Trading & Market Services) which
         quotations reflect inter-dealer prices, without retail mark-up,
         mark-down or commission, and may not reflect actual transactions.

         During 1998, 1999 and the first quarter of 2000, our high and low
prices were as follows:

                                          HIGH                       LOW
                                          ----                       ---
1998
----
1st Quarter                               1.40                       1.25
2nd Quarter                               1.40                        .59
3rd Quarter                               2.00                        .94
4th Quarter                               2.75                        .60

1999
----
1st Quarter                               1.06                        .50
2nd Quarter                               3.93                        .44
3rd Quarter                               1.43                        .56
4th Quarter                               2.06                        .50

2000
----
1st Quarter                               7.06                       1.46

         On May 23, 2000, the closing prices of our Common Stock were $2.968 bid
and $3.125 asked, as quoted on the NASDAQ OTC Bulletin Board.

         The Articles of Incorporation authorize the issuance of 100,000,000
shares consisting of 90,000,000 shares of Common stock and 10,000,000 shares of
Series Preferred Stock. The Common Stock has a par value of $0.0001 per share
and the series Preferred Stock shall have such par value, as the Board of
Directors shall determine. No Preferred Stock shares have been issued.

         At the time of the merger, effective June 14, 1999, the certificate of
incorporation of the predecessor corporation, Integrated Healthcare Systems,
Inc., formed in March of 1993 authorized the issuance of 50,000,000 shares of
common stock having a par value of $0.0001 per share.

         There are approximately 297 holders of record of our Common Stock as of
March 31, 2000, which figure does not take into consideration those shareholders
whose shares are held in the name of broker-dealers.

                                       20
<PAGE>

Common Stock Issued in 1999

         Pursuant to a private placement of Common Stock under Regulation, Rule
504 of the Securities Act of 1933, we issued 1,877,937 shares of common stock
under Regulation D, Rule 504, at an aggregate price of $.51 per share in
exchange for $564,833 in cash and $100,000 in debt conversion and $323,706 in
other expenses. A price adjustment reduced the issuance price of $446,389 shares
from $0.60 per share to $0.50 per share and resulted in a pro-rata issuance of
an additional 59,278 shares. These shares were issued from January 1999 through
November 1999.

         Pursuant to the exercise of Common Stock Purchase Warrants issued in a
private placement and pursuant to a Regulation D, Rule 506 of the Securities Act
of 1933, we issued 460,000 shares of our common stock to holders of the warrants
upon exercise of 460,000 warrants at an issuance price of $.25 per share. These
warrants had previously been purchased at a price of $1.00 per warrant, for an
aggregate price of $1.25 per share, and pursuant to an agreement to reduce the
exercise price of the warrants from $.75 to $.25 per share for a period of 60
days. In conjunction with these transactions, we also issued 100,000 shares of
our common stock to the placement agent at $.50 per share, net of commissions
for $25,000 in cash.

         In June 1999 we issued 99,000 shares of our common stock to holders of
warrants at an exercise price of $0.50 per share in exchange for debt repayment
and 30,000 shares of our common stock to a holder of warrants at an exercise
price of $0.75 per share in exchange for $22,500 in cash.

         In August 1999 we issued 500,000 shares of our common stock that are
subject to the restrictions of Rule 144, of the Securities Act of 1933, at $2.00
per share in exchange for 153,245 shares of Internet Guide, Inc. ("IGI"), common
stock, which was issued under a Regulation A offering. In September 1999 we used
28,893 of the IGI shares we received in the exchange to retire $244,096 in notes
payable, accrued expenses and accounts payable. As part of the exchange
agreement with IGI, we issued 250,000 warrants to purchase 250,000 shares of our
common stock at an exercise price of $2.00 per share and 250,000 warrants to
purchase 250,000 shares of our common stock at an exercise price of $1.00 per
share.

         From September through October 1999 we issued a total of 161,560 shares
of our common stock, which are subject to the restrictions of Rule 144 of the
Securities Act of 1933 in exchange for an aggregate of $249,259 less $100,816 in
debt forgiveness as follows: 16,667 shares at $.84 per share; 41,500 shares at
$.94 per share; and 36,205 shares at $.78 per share and 67,188 shares at $1.00.

        From August through December 1999 we issued 552,909 shares of common
stock which are subject to restrictions under Rule 144 of the Securities Act of
1933 in exchange for an aggregate of $279,788 in cash, $50,000 in notes and
$35,000 in prepaid expenses as follows: 122,000 shares at $.50 per share;
390,909 shares @ $.69 per share and 40,000 shares at $.88 per share;

        From November through December 1999 we issued 28,864 shares of common
stock subject to restrictions under Rule 144 of the Securities Act of 1933 in
exchange for an aggregate of $28,293 in cash under terms of a special employee
stock purchase program under which employees could purchase stock at the closing
price at the end of each pay period from November 15 through December 31, 1999
with the Company matching the shares on a one for one basis. In the program, the
following shares were issued: 10,762 shares at $.78 per share, 11,732 shares at
$.81 per share, 4,020 at $1.41 per share and 2,350 at $2.00 per share. 28,864
shares were issued by the Company to employees under the matching term of this
program.

        In December 1999, we issued 185,000 shares of common stock, which are
subject to restrictions under Rule 144 of the Securities Act of 1933 at $1.75
per share.

                                       21
<PAGE>


         In December 1999, we issued 2,999,750 shares of common stock upon the
exercise of warrants as follows: 2,999,750 shares of common stock were issued to
Internet Guide, Inc., an affiliate of the Chairman of the Board of Directors,
upon the exercise of a warrant held by the affiliate at an exercise price of
$1.00 per share in exchange for 461,500 shares of Internet Guide, Inc., common
stock, and 300,000 shares of common stock were issued to the holder of a warrant
at an exercise price of $.50 per share in exchange for $150,000 in marketable
securities

Warrants Issued in 1999

         In April 1999, we issued 399,000 warrants to purchase 399,000 shares of
our common stock at an exercise price of $.50 per share for financial services
rendered. Of these warrants 99,000 were exercised in June 1999 and 300,000 were
exercised in December 1999.

         In September 1999, we issued 250,000 warrants to purchase 250,000
shares of our common stock at an exercise price of $.75 per share to a Director
in lieu of compensation for serving as director for calendar year 1998. We also
issued 1,000,000 warrants to purchase 1,000,000 shares of our common stock at an
exercise price of $.75 per share to officers for a period of five years. These
warrants were issued in lieu of the implementation of an executive management
stock option program.

         In October 1999, we issued 200,000 warrants at an exercise price of
$1.00 per share for a three-year period to key outside professionals in exchange
for services rendered.

         In November 1999, we issued 3,000,000 warrants to Internet Guide, Inc.,
an affiliate of our Chairman and Chief Executive Officer at an exercise price of
$1.00 per share for a period of one year. These warrants were exercised by
exchanging 461,500 shares of Internet Guide, Inc., common stock as
consideration.

         In December 1999, we issued 356,147 warrants at an exercise price of
$1.00 per share for a period of three years to an affiliate of our Chairman and
Chief Executive Officer as consideration for services rendered in our debt
reduction program.

        In December 1999, the Company issued 300,000 warrants at an exercise
price of $1.00 per share for a period of three years to key employees. The
warrants are issued in lieu of the Company implementing a formal stock option
program.

        In December 1999, the Company issued 750,000 warrants to the Chairman of
the Board at an exercise price of $1.00 per share.

         At December 31, 1999, warrants to purchase 14,130,770 shares of common
stock exercisable at varying dates through September 2004 at prices from $.75 to
$7.00 per share were outstanding. Of the 14,130,770, warrants, 7,526,284
warrants were issued by the Company to the holders of IHS common stock as of
June 14, 1999. Each warrant allows the holder to purchase one share of the
Company's common stock at $5.00 for a period of five years, expiring in June
2004.

Subsequent Events

         On February 2, 2000 we announced our application for listing on the
American Stock Exchange. There can be no assurance, that approval will be
received or, if received, that the Company will meet the requirements for
continued listing.

                                       22
<PAGE>


         On February 29, 2000, we announced an exchange of common stock for
approximately 5,000,000 Class A Redeemable Warrants issued to stock holders of
record on June 14, 1999, at a conversion rate of one share of common stock for
every seven warrants with accredited investors. In conjunction with this
exchange program, we announced a Call of the remaining Class A Warrants pursuant
to the call provisions of the Warrant with October 3, 2000, as the redemption
date.

         On April 5, 2000, we announced an agreement in principle with MD
Home.com, a provider of information to the healthcare community to exchange
500,000 shares of our restricted common stock at $10.00 per share for 2,500,000
convertible preferred shares at $2.00 per share and 350,000 common stock
purchase warrants at $3.00 per share of MD Home.com for 3 years.

         On April 20, 2000, we announced an agreement in principle to purchase
all of the outstanding common stock of Information Resource Products, Inc. and
IRP Systems, Inc. for $3,900,000 plus $1,000,000 which shall be used to purchase
H Quotient, Inc, common stock on the open market, plus 25,000 restricted shares
of H Quotient, Inc. common stock and 250,000 two year warrants exercisable at
$10.00 per share, both of which will be allocated to the seller's employees.

Dividend

         Although we posted net operating profits for the 4th quarter of 1999,
we have not had net annual profits on operations and therefore are currently
proscribed under the Virginia Code from declaring dividends. We have not paid
any cash dividends on our Common Stock. Our Board of Directors has no present
intention of declaring any cash dividends, as we expect to re-invest all profits
in the business for additional working capital for continuity and growth. Our
Board of Directors considering the conditions then existing, including our
earnings, financial condition, capital requirements, and other factors will
determine the declaration and payment of dividends in the future.

ITEM 6.  Management's Discussion and Analysis or Plan of Operations

         The following "Discussion and Analysis" provides information which
management believes is relevant to an assessment and understanding of the of the
Company's consolidated results of operation and financial condition for the
years ended December 31, 1999 and 1998. The discussion should be read in
connection with the audited consolidated financial statements of the Company and
accompanying notes.

Material Changes in Results of Operations Overview

         HoQuotient, Inc. is a Virginia corporation, incorporated on May 20,
1999, and is the successor by merger to Integrated Healthcare Systems, Inc.
("IHS") which was a Delaware corporation organized in 1993 under the name of
Travel Technologies International, Inc. Our business, which we acquired from IHS
through the merger, is the designing, development, selling and maintenance of
computer software systems for the management of patient care in hospitals and
extended care facilities.

         Our business and assets were owned and operated by IHS until June 14,
1999 the effective date of a downstream merger between the companies. The
7,526,284 shares of outstanding common stock (par value $.0001) of Integrated
Healthcare Systems, Inc. was exchanged for 7,526,284 shares of H Quotient, Inc.
common stock, (par value $.0001).

                                       23
<PAGE>


Year Ended December 31, 1999 Compared With the Year Ended December 31, 1998

         Revenues for the year ended December 31, 1999 increased to $1,537,535
from $239,139 for the year ended December 31, 1998. The increase of $1,298,396,
resulted primarily from revenue generated under new contracts signed in the
first quarter for I-Link Enterprise software systems and related services and
installations of our new version of the Dataqual software system. These
increases were partially offset by a decrease in service income for our DOS
based Dataqual products under support contracts.

         The cost of sales and services for the year ended December 31, 1999
increased to $543,130 from $307,537 for the year ended December 31, 1998. The
increase of $235,593 resulted primarily from an increase in the technical and
support staff associated with implementing new contracts, which was partially
offset by capitalized research and development costs.

         Selling and marketing expenses for the year ended December 31, 1999
increased to $259,044 from $244,182 for the year ended December 31, 1998. This
increase of $14,862 resulted primarily from expanding the marketing staff to
promote and sell the new Dataqual software system.

         General and administrative expenses for the year ended December 31,
1999 decreased to $965,380 from $1,388,981 for the year ended December 31, 1998.
The decrease of $423,601 resulted primarily from a decrease in expense from
contingent liabilities and investment banking fees which were partially offset
by increased legal and accounting fees associated with filing of a registration
statement.

         Interest expense for the year ended December 31, 1999 was $107,838, as
compared to $157,970 for the year ended December 31, 1998. The decrease of
$50,132 in interest expense resulted primarily from reductions in notes payable
in our debt settlement efforts in 1999 in which $1,062,000 of our outstanding
notes payable were paid.

         Interest income for the year ended December 31, 1999 was $5,695, as
compared to $-0- for the year ended December 31, 1998.

         Other expense (income) for the year ended December 31, 1999 showed an
increase in other income of $96,663, net, as compared to and expense of $58,207
for the year ended December 31, 1998. The income increase resulted from a
realized gain on sales of securities of $93,903, a gain on the sale of a fixed
asset of $1,550 and miscellaneous income of $34,961, which was derived from a
credits received on expense adjustments with creditors. This income was
partially offset by an increase in our reserve for bad debt expense of $8,790
and an unrealized loss on securities of $33,751.

         Extraordinary item, net for the year ended December 31, 1999 was
$1,275,323 as compared to $-0- for the year ended December 31, 1998. The
increase resulted from the net gain derived from the settlement of $2,049,111 of
debt with various creditors and note holders in which $392,500 in cash, $187,805
in marketable securities and 161,560 shares of our common stock were exchanged.
See "Changes in Securities and Use of Proceeds".

         Net Income (loss) for the year ended December 31, 1999 and the year
ended December 31, 1998 were $1,040,025 and $(1,917,738), respectively.
Liquidity and Capital Resources

         We have funded our operations and working capital needs through a
series of private equity and debt offerings, the exercise of investor warrants,
and payments received under new contracts.

         Working capital at December 31, 1999 was $1,050,283 as compared to
deficit of $(4,318,026) at December 31, 1998, an improvement of $5,368,309.

                                       24
<PAGE>


         Cash and cash equivalents at December 31, 1999 were $15,729, an
increase of $13,953 from December 31, 1998. During the year ended December 31,
1999, we used $348,005 net cash in our operating activities as compared to using
$369,531 for the year ended December 31, 1998. This net change in the use of
cash in operations of $21,526 was the result of an increase in operating revenue
and accounts receivable and a decrease in operating expenses, accounts payable
and accrued expenses. We increased accounts receivable by $601,392, while we
decreased our accounts payable by $234,501 and accrued expenses by $137,226.
These operating improvements primarily the result of new contracts signed, sales
from the release of the new Dataqual software system and our efforts to settle
outstanding debt.

         During the year ended December 31, 1999, we used $415,163 for investing
activities as compared to $86,641 for the year ended December 31, 1998. The
increased use of cash of $328,522 for investing activities resulted from an
increase in the acquisition of computer equipment and an increase in intangible
assets resulting from capitalizing certain research and development costs
associated with bringing the new Dataqual software system and I-Link Enterprise
system to market.

         During the year ended December 31, 1999, we generated net cash of
$777,121 from financing activities as compared to $459,776 for the year ended
December 31, 1998. The increase of $317,345 resulted from funds raised in
private placements of common stock and the exercise of investor warrants.

Plan of Operation and Financial Condition

         Our sales of Dataqual and related service contracts are billed net due
upon receipt. Payment terms on I-Link Enterprise contracts are defined in the
contract and will vary. It is our practice to require a substantial payment upon
signing of any long term contract.

         We had, at December 31, 1999, working capital of $1,050,283. We believe
that cash generated from operations will not be totally sufficient to fund our
current requirements. We anticipate that it will be likely that we will continue
to raise additional funds through additional equity offerings and exercise of
outstanding warrants. It is possible that we may have to curtail our current
operations and delay and/or cancel our business plans, however, management
believes that our current operational plans for the next twelve months will not
be curtailed or delayed because of the lack of sufficient financing. If
additional financing is required, there can be no assurances that we will be
able to obtain such additional financing, on terms acceptable to us and at the
times required by us, or at all.

         We have frequently not been able to make timely payments to our trade
and other creditors. As of December 31, 1999, we had past due obligations for
which there were claims and judgments of approximately $766,000. This is a
reduction of $906,000 from December 31, 1998. Deferred payment terms have been
negotiated with many of our vendors and critical services have not been
suspended, nor has there been cancellation of orders due to delays in product
delivery as a result. We intend to use the cash generated from operations,
marketable securities we own and our own common stock to complete paying the
past due amounts. We may have an opportunity to discount or reduce some of the
trade and other creditor's debts and further increase income from debt
forgiveness.

         We lease office space on a two-year sublease basis and could be
required to move and/or add more space after this two-year period. The major
capital expenditures we may incur are for computers and related local area
network hardware and software and travel for sales representatives and key
support and installation personnel. Our recent upgrade of the DataQual software
is being initially marketed to our existing hospital customers. We also intend
to invest approximately $500,000 in personnel and equipment to expand and
enhance sales, software development and customer support, as well as associated
office support staff.

                                       25
<PAGE>


         We believe that our current staffing, including our expansion plans,
cost structure, and current operating plans will allow us an opportunity to
compete effectively as a supplier of information management software to the
hospital market and possibly attain profitability in future periods.

Net Operating Loss

         For federal income tax purposes, we have net operating loss
carryforwards of approximately $8,000,000 as of December 31, 1998 and $7,800,000
as of December 31, 1999. These carryforwards expire between the years 2009 and
2018, respectively. We also have a capital loss carryforward of approximately
$1,468,720 which expires in 2001. The use of our net operating loss
carryforwards to offset taxable income, if achieved, may be subject to specified
annual limitations.

YEAR 2000

         Based on the review of its systems to date, management believes that
the Year 2000 problem will not pose significant operational problems and that
the total costs associated with the Year 2000 issues will not have a material
effect on the consolidated results of the Company. To date, the Company has
determined that it will require nominal personal computer program upgrades to
accommodate Year 2000 issues.

         These estimates and conclusions contain forward looking statements and
are based on management's best estimates of future events. Risks of completing
the Year 2000 plan include the availability of alternative software, the
Company's ability to discover and correct potential Year 2000 problems which
might have a serious impact on operations, failure of vendors to complete their
expected Year 2000 compliance, and liquidity issues surrounding securities
investments.

ITEM 7.  Financial Statements

         The financial statements of the Company appear at the end of this
report beginning with the Index to Financial Statements on Page F-1.

ITEM 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure.

                                    PART III

ITEM 9.  Directors, Executive Officers Promoters and Control Persons; Compliance
         with Section 16(a) of the Exchange Act


                                       26
<PAGE>

Directors & Officers

         The Following table set forth the names, ages and positions with the
Company of each of the directors and officers of the Company.

<TABLE>
<CAPTION>

         Name                       Age              Positions                          Since
         ----                       ---              ---------                          -----
<S>                                 <C>             <C>                                <C>
         Douglas A. Cohn            54               Chairman, Director and              1999
                                                     Chief Executive Officer

         Alan Grofe'                55               President, Chief Operating
                                                     Officer and Director                1996

         Michael J. Black           47               Secretary, Chief Financial
                                                     Officer and Director                1994
</TABLE>

         All executive officers are elected by the Board of Directors and hold
office until the next Annual Meeting of Shareholders and until their successors
are elected and qualify.

         The following is information on the business experience of each
director and officer.

Douglas A. Cohn

         Douglas A. Cohn has been Chairman of the Board and Chief Executive
Officer of this Company since October, 1999. He is also Founder of Internet
Guide, Inc., and it's Chairman of the Board of Directors, President, Chief
Executive Officer and Publisher. Mr. Cohn is Jack Anderson's writing partner in
the nationally syndicated column Jack Anderson & Douglas Cohn's Washington
Merry-Go-Round. He is the president of American Publisher Corporation, which
publishes five nationally-distributed publications and syndicates writers and
cartoonists to newspapers. He has been in the publishing business since 1985 and
publishing five publications beginning in 1989. He is the author of Jackson's
Valley Campaign with Maps from West Point Atlas of American Wars. Mr. Cohn, a
1968 graduate of the U.S. Military Academy at West Point, NY., volunteered for
service in Vietnam, where he was wounded. Retired from the service as a result
of those wounds, he was awarded the Silver Star (twice), the Purple Heart and
other medals. He is a syndicated writer and speech writer and has appeared
numerous times on national television and radio shows.

Alan W. Grofe'

         Alan W. Grofe' has been President of the Company since May 15, 1996 and
Executive Vice President, Secretary and a director of the Company since April
1996,. From March 1993 to March 1997, Mr. Grofe' was President and Chief
Executive Officer of MarketLink, Inc., a direct marketing software company not
affiliated with the Company. From 1991 to 1993, Mr. Grofe' served as President
of CCS, Inc., a direct marketing service bureau and from 1989 to 1991, as Vice
President and Chief Operating Officer of Warren & Lewis, a venture capital firm.
Prior to that time, he managed the Federal Computer Conferences; a series of
computer industry trade shows, for Information Development Corporation from 1988
to 1989. And from 1980 to 1987, he was account manager and later Director of
Federal Systems Operations for Motorola Computer Systems, for whom he worked in
both the healthcare industry and in computer sales to the government.

                                       27
<PAGE>

Michael J. Black

         Michael J. Black has been employed as a key executive of the Company
since September 1994. He has been Chairman since May 15, 1996. From 1991 to
September 1994, Mr. Black was a consultant for Asset Growth Partners, Inc., an
investment banking firm, working on mergers and acquisitions, equity and debt
financing and strategic planning, primarily for technology companies. From 1989
to 1991 he served as vice president of finance for NMI Network Systems, Inc./The
Account Data Group before that as president and founder of The Account Data
Group. Both of these companies were involved in various aspects of computer
systems integration.

Section 16(a) Filing Compliance

         Section 16(a) of the Securities Exchange Act of 1934 requires officers
and directors of the Company and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of ownership
and changes in their ownership on Form 3, 4, and 5 with the Securities and
Exchange Commission, and forward copies of such filings to the Company. The
Company believes none of its directors, officers and beneficial owners of more
than ten percent of the equity securities of the Company have filed any of the
required reports since the Company became a reporting company in 1998.

ITEM 10.  Executive Compensation.

         The following table sets forth information concerning the compensation
paid during the Company's fiscal years ended December 31, 1999, 1998, and 1997
to the Company's Chief Executive Officer and all other executive officers whose
base salaries during the year were in excess of $100,000 (collectively, "Named
Executive Officers").
                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                   Annual Compensation                      Long-Term Compensation
                                                   -------------------                      ----------------------
                                                                                            Shares
                                                                                            Underlying
Name and Principal Position                 Year                    Salary ($)              Warrants (#)
---------------------------                 ----                    ----------              ------------
<S>                                         <C>                      <C>                    <C>
Douglas A. Cohn........................     12/31/99                   -0-                     750,000
      Chairman & CEO
Alan W. Grofe...........................    12/31/99                 110,068                   750,000
      President, Chief Operating            12/31/98                 145,000                   250,000
              Officer                       12/31/97                  81,250                     -0-

Michael J. Black ........................   12/31/99                 111,440                   750,000
            Chief Financial Officer,        12/31/98                 145,000                   250,000
    Treasurer, and Corporate Secretary      12/31/97                  75,000                     -0-
</TABLE>

     The following table contains information concerning common stock purchase
warrants granted to the Named Executive Officers during the fiscal year ended
December 31, 1999. No stock options were granted during the period.


                       Warrant Grants in Last Fiscal Year
<TABLE>
<CAPTION>
                                                              Number of              Percentage
                                                              Securities             of Total
                                                              Underlying             Warrants          Exercise     Expiration
                                                              Warrants               Granted (1)       Price (2)       Date
                                                              ---------              -----------       ---------    ----------
<S>                                                           <C>                        <C>             <C>         <C>
Douglas A. Cohn................................................750,000                   27%             $1.00       11/30/02
Alan W. Grofe..................................................750,000                   27%             $ .75        9/18/04
Michael J. Black...............................................750,000                   27%             $ .75        9/18/04
</TABLE>

(1)  Based on an aggregate of 2,750,000 warrants granted to employees and
     non-employee independent contractors in the fiscal year ended December 31,
     1999, including warrants granted to the Named Executive Officers.

(2)  The exercise price of each grant is equal to or greater than the fair
     market value of the Company's Common Stock on the date of the grant.

                                       28
<PAGE>

              The following table sets forth certain information concerning
exercisable and unexercisable warrants held as of December 31, 1999 by each of
the Named Executive Officers:

              Aggregate Warrants Exercises in Last Fiscal Year and
                         Fiscal Year-end Warrant Values
<TABLE>
<CAPTION>
                                                                     Number of
                                                                Unexercised Warrants                 In-the-Money Warrants (1)
                                                             ----------------------------           --------------------------
                                                             Exercisable    Unexercisable           Exercisable   Unexrcisable
                                                             -----------    -------------           -----------   ------------
<S>                                                            <C>               <C>                  <C>               <C>
Douglas A. Cohn...................................             750,000          -0-                   $656,250         -0-
Alan W. Grofe.....................................             750,000          -0-                   $843,750         -0-
Michael J. Black..................................             750,000          -0-                   $843,750         -0-
</TABLE>


(1) Based on the difference between the closing price on December 31, 1999
    ($1.875) and the exercise price of the outstanding warrants.

Employment  Agreements

         On January 1, 1998, the Company entered into an employment with Alan W.
Grofe' to serve as The President and Chief Operating Officer, and a Director of
the Company for a term commencing January 1, 1998 and ending December 31, 2000.
Mr. Grofe' has been director of the Company since April 16, 1996. The agreement
provides for a salary of $145,000 per annum and for stock options under the
Company Stock Option Plan or, if there is no such plan, he will be granted
warrants, exercisable immediately for 60 months, to purchase a minimum of
100,000 to a maximum of 250,000 shares of Common Stock at an exercise price of
not less than the most recently issued warrants. The agreement also contains
restrictive covenants restricting Mr. Grofe' for two years, after termination of
his employment from competing with the Company and soliciting Company employees
or customers.

         On January 1, 1998, the Company entered into an employment agreement
with Michael J. Black to serve as the Chairman of the Board and Chief Executive
Officer for a term commencing January 1, 1998 and ending December 31, 2000. Mr.
Black was Chairman of the Company from May 15, 1996 to November 16, 1999.
Pursuant to a letter agreement dated November 16, 1999, Mr. Black will no longer
serve as Chairman and Chief Executive Officer but will continue as the Chief
Financial Officer of the Company until June 1, 2000, to transition certain
duties, at a salary of $10,000 per month. Pursuant to the original agreement,
Mr. Black will be granted warrants, exercisable immediately for 60 months, to
purchase a minimum of 100,000 to a maximum of 250,000 shares of Common Stock at
an exercise price of not less than the most recently issued warrants. The
agreement also contains restrictive covenants restricting Mr. Black for two
years after termination of his employment from competing with the Company and
soliciting Company employees or customers.

         None of the other Company's executive officers have existing employment
agreements. Any previous employment agreements between the Company and its
executive officers have either lapsed or have been rescinded, and no new
agreements have been executed.

                                       29
<PAGE>


ITEM 11.  Security Ownership of Certain Beneficial Owners and Management

         The following table sets forth, as of March 31, 2000, certain
information with respect to the beneficial ownership of shares of Common Stock
of: (i) each person who is known to the Company to be the beneficial owner of
more than five percent of the Company's Common Stock, (ii) each Director of the
Company and Named Executive Officer, and (iii) all directors and executive
officers of the Company as a group. As of March 31, 2000, the Company had
13,170,680 shares of Common Stock outstanding

<TABLE>
<CAPTION>
                                                                              Beneficially                 Percent
         Name and Address of Beneficial Owner                                   Owned (1)                  of Class
         ------------------------------------                                   ---------                  --------
<S>                                                                             <C>                         <C>
         The Steven W. Bingaman 1996 Trust (2).................................. 3,431,514                   19.5%
                  551 Fifth Avenue, Suite 1625
                  New York, N.Y.  10176

         Internet Guide Inc. (3)................................................ 4,356,157                   24.7%
                  1365 Beverly Street
                  McLean, VA  22101

         Douglas A. Cohen (4)................................................... 1,050,682                   5.95%
         Alan W. Grofe (5)......................................................   874,668                   4.96%
         Michael J. Black (6)...................................................   998,105                   5.66%
         All Directors and Officers as a group.................................. 2,923,455                  16.57%

                  Total.........................................................10,711,126                   60.7%
</TABLE>
------------------------
(1)   Shares of the Company's Common Stock which any person or entity set forth
      in this table has a right to acquire, pursuant to the exercise of options
      or warrants, are deemed to be outstanding for the purpose of computing the
      percentage ownership of such person or entity, but are not deemed
      outstanding for the purpose of computing the percentage ownership of any
      other person or entity.

(2)   Number of shares Beneficially Owned includes 100,000 shares of common
      stock and 1,568,471 shares issuable upon exercise of various series
      warrants beneficially owned by Appleby Partners, Ltd. exercisable during
      various periods ending June 30, 2000 to June 15, 2004 at prices ranging
      from $1.00 each to $7.00 each. Appleby Partners, Ltd. has the sole power
      not only to vote and direct the disposition of the shares of common stock
      and warrants held by it but also has the sole power to vote and direct the
      disposition of 1,438,043 shares of common stock and the 325,000 warrants
      held by the Steven W. Bingaman 1996 Trust.

(3)   Number of shares Beneficially Owned includes: 356,397 shares issuable upon
      exercise of warrants exercisable until November 21, 2000 at a price of
      $1.00, 250,000 shares issuable upon exercise of warrants exercisable until
      August 31, 2002 at a price of $1.00 and 250,000 shares issuable upon
      exercise of warrants exercisable until August 31, 2002 at a price of $2.00
      all held by such entity. Does not include warrants to purchase 750,000
      shares of common stock owned by Douglas A. Cohn, the Chairman and Chief
      Executive Officer of the Company and of Internet Guide, Inc. in his
      individual capacity. Mr. Cohn disclaims beneficial ownership of the shares
      of the Company common stock and warrants held by Internet Guide, Inc.
      except to the extent of his pecuniary interest therein.

(4)   Number of shares Beneficially Owned includes 750,000 shares issuable upon
      exercise of warrants exercisable until November 30, 2002 at a price of
      $1.00 each held by Mr. Cohn. Does not include warrants to purchase 856,397
      shares of common stock owned by Internet Guide, Inc. and Mr. Cohn
      disclaims beneficial ownership thereof except to the extent of his
      pecuniary interest therein, if any.

(5)   Number of shares Beneficially Owned includes: 250,000 shares issuable upon
      exercise of warrants until May 31, 2003 at a price of $.75 each, 62,334
      shares issuable upon exercise of warrant until June 15, 2004 at a price of
      $5.00 each and 500,000 shares issuable upon exercise of warrants until
      September 18, 2004 at a price of $.75 each.

(6)   Number of shares Beneficially Owned includes: 250,000 shares issuable upon
      exercise of warrants exerciable until May 31, 2003 at a price of $.75
      each, 107,666 shares issuable upon exercise of warrants exercisable until
      June 15, 2004 at a price of $5.00 each and 500,000 shares issuable upon
      exercise of warrants exercisable until September 18, 2004 at a price of
      $.75 each.

                                       30
<PAGE>


ITEM 12.  Certain Relationships and Related Transactions

         Many of the transactions during the last two years between the Company
and any of its officers, directors, principal stockholders or their affiliates
are the issuance of common stock to certain of the Company's officers described
in the Registration Statement on Form 10-SB incorporated by reference at "Recent
Sales of Unregistered Securities", described at page 54, the issuance of
warrants to certain of the Company's officers, described in "Executive
Compensation" at page 45, the issuance of warrants to a certain director of the
Company described in "Executive Compensation" at page 45 thereof, the issuance
of warrants to Aesop Financial Corporation, described in "Description of the
Company's Securities" at page 46 thereof and the lease of computer equipment
from Aesop, described in "Description of Properties" at page 41 thereof. Aesop
Financial Corporation is a wholly owned subsidiary of Appleby Partners, Ltd.
which is a principal stockholder as set forth in "Principal Stockholders" at
page 42.

         More recent transactions are reported in this report under "Common
Stock Issued in 1999". In addition, the following transactions took place in
1999.

         In December 1999, the Company loaned an officer and director of the
Company $50,000 to purchase shares of common stock of the Company (at $0.6875
per share). Pursuant to an unsecured promissory note, the loan is due upon
demand, but no later than December 31, 2000 and accrues interest at a rate of
eight percent (8%) per annum.

         On December 31, 1999, the Company sold 150,000 shares of common stock
of Internet Guide, Inc. at $10.375 per share and 185,000 shares of common stock
of the Company at $1.75 per share plus debt of $70,833 paid on behalf of the
Company, in exchange for a promissory note totaling $1,950,833. The promissory
note was subsequently paid in three installments in March, April and May, 2000
with cash in the amount of $330,000 and stocks of publicly traded companies with
a fair value of $1,648,800, an amount equal to the balance due on the Note. The
promissory note was secured by underlying securities and collateralized by
additional securities held by a third-party Trust. The promissory note accrued
interest at an annual rate of seven percent (7%) calling for payments due in
January, February and March 2000.

         In 1995, the Company accrued salary to an officer of the Company in the
amount of $68,833. In 1998, an additional accrual of $31,167 relating to salary
was made for two officers of the Company. In January 1999, these obligations
were paid through the issuance of 200,000 shares of common stock in connection
with a Regulation D, Rule 504 offering.

ITEM 13.  Exhibits and Reports on Form 8-K

         a) The following financial statements are filed as part of this report:
            Financial Statements.
                1)  Balance Sheet as of December 31, 1999.
                2)  Statements of Operations for the period ended December 31,
                    1999 and 1998 and cumulative form March 3, 1993, (date of
                    inception) to December 31, 1999.
                3)  Statements of Cash Flows for the period ended December 31,
                    1999 and 1998 and cumulative form March 3, 1993 (date of
                    inception) to December 31, 1999.
                4)  Statements of Stockholders' Equity for the period from March
                    3, 1993 (date of inception) to December 31,1999.
                5)  Notes to Financial Statements.
                6)  Independent Accountant's Report.
         b) Reports on Form 8-K

         During the fiscal year ended December 31, 1999 the Company did not file
any Current Reports on Form 8-K.
         c) Exhibits:

                                       31
<PAGE>

                         CONSENT OF INDEPENDENT AUDITORS




Board of Directors and Stockholder
HoQuotient, Inc.



We consent to the incorporation of our financial statements dated May 11, 1999,
with respect to the consolidated financial statements and schedules of
HoQuotient, Inc. for the years ended December 31, 1999 and December 31, 1998 in
the Annual Report dated May 25, 2000 on Form 10-KSB for the registration of
HoQuotient, Inc under the Securities Exchange Act of 1934.





KAUFMAN DAVIS, PC
Bethesda, Maryland May 25, 2000


























                                      F-1
<PAGE>

                        HoQUOTIENT, INC. AND SUBSIDIARIES


                        Consolidated Financial Statements

                     Years ended December 31, 1999 and 1998


                                    Contents



<TABLE>
<CAPTION>
                                                                                Page Number
                                                                                -----------
<S>                                                                                <C>
Report of Independent Auditors......................................................1


Financial Statements:

   Consolidated Balance Sheets......................................................2

   Consolidated Statements of Operations............................................3

   Consolidated Statements of Shareholders' Equity (Accumulated Deficit)............4

   Consolidated Statements of Cash Flows............................................5

   Notes to Consolidated Financial Statements..................................6 - 20
</TABLE>



























                                      F-2
<PAGE>

                         Report of Independent Auditors



To the Board of Directors
HoQuotient, Inc.
Reston, Virginia


We have audited the accompanying consolidated balance sheets of HoQuotient, Inc.
and Subsidiaries (the "Company") as of December 31, 1999 and 1998, and the
related consolidated statements of operations, shareholders' equity (accumulated
deficit), and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 financial position of HoQuotient, Inc. and
Subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.





Kaufman Davis, PC
Certified Public Accountants                                      Bethesda, MD

May 11, 2000




























                                      F-3
<PAGE>

                        HoQUOTIENT, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheets

                           December 31, 1999 and 1998


<TABLE>
<CAPTION>
                                         Assets

                                                                                     1999                     1998
                                                                                 ------------             ------------
<S>                                                                              <C>                      <C>
Current assets:
   Cash                                                                          $     15,729             $      1,776
   Investment in equity securities                                                  2,915,322                     --
   Contracts receivable, less allowance for doubtful accounts
     of $18,790 and $10,000, in 1999 and 1998, respectively                           671,724                   70,332
   Due from officers                                                                     --                      9,985
   Costs and estimated earnings in excess of billings
      on uncompleted contracts                                                         36,145                     --
   Other current assets                                                                41,503                     --
                                                                                 ------------             ------------
     Total current assets                                                           3,680,423                   82,093
                                                                                 ------------             ------------
   Property and equipment, net                                                         77,031                   67,776
   Capitalized software, net                                                          371,959                   69,308
   Deposits                                                                            68,631                    6,860
                                                                                 ------------             ------------
     Total assets                                                                $  4,198,044             $    226,037
                                                                                 ============             ============
           Liabilities and Shareholders' Equity (Accumulated Deficit)
Current liabilities:
   Accounts payable                                                              $    464,547             $    923,306
   Accrued expenses                                                                 1,561,383                1,901,458
   Short-term debt                                                                    275,130                1,337,130
   Billings in excess of costs and estimated earnings on
     uncompleted contracts                                                            205,302                     --
   Deferred revenues                                                                  123,778                  238,225
                                                                                 ------------             ------------
        Total current liabilities                                                   2,630,140                4,400,119
                                                                                 ------------             ------------
Commitments and contingencies                                                            --                       --
Shareholders' accumulated deficit:
   Preferred stock, $.0001 par value, 10,000,000 shares
     authorized; 100 shares issued and outstanding                                       --                       --
   Common stock, $.0001 par value, 90,000,000 shares
     authorized (50,000,000 at December 31, 1998); 12,464,866
     and 5,110,705 shares issued and outstanding at
     December 31, 1999 and 1998, respectively                                           1,247                      511
   Additional paid-in capital                                                      12,191,130                7,489,905
   Accumulated deficit                                                            (10,624,473)             (11,664,498)
                                                                                 ------------             ------------
     Total shareholders' equity (accumulated deficit)                               1,567,904               (4,174,082)
                                                                                 ------------             ------------
     Total liabilities and shareholders' equity (accumulated deficit)            $  4,198,044             $    226,037
                                                                                 ============             ============

</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>

                       HoQUOTIENT, INC. AND SUBSIDIARIES

                     Consolidated Statements of Operations

                     Years ended December 31, 1999 and 1998

<TABLE>
<CAPTION>
                                                                             1999                      1998
                                                                         ------------             ------------
<S>                                                                      <C>                      <C>
Revenues:
     Software sales                                                      $  1,040,312             $       --
     Maintenance and service income                                           497,223                  239,139
                                                                         ------------             ------------
          Total revenues                                                    1,537,535                  239,139
                                                                         ------------             ------------
Operating expenses:
     Cost of sales and services                                               543,130                  307,537
     Selling and marketing                                                    259,044                  244,182
     General and administrative                                               965,380                1,388,981
                                                                         ------------             ------------
          Total operating expenses                                          1,767,554                1,940,700
                                                                         ------------             ------------
Operating loss                                                               (230,019)              (1,701,561)
Other income (expense) :
     Interest expense                                                        (107,636)                (157,970)
     Bad debt expense                                                            --                       --
     Unrealized loss on securities                                            (33,751)                    --
     Realized gain on sale of securities                                       93,903                     --
     Interest income                                                            5,695                     --
     Gain on disposals of equipment                                             1,550                     --
     Other income (expense)                                                    34,961                  (58,207)
                                                                         ------------             ------------
        Total other expense                                                    (5,278)                (216,177)
                                                                         ------------             ------------
Loss before provision for income taxes and extraordinary item                (235,297)              (1,917,738)
Provision for income taxes                                                       --                       --
                                                                         ------------             ------------
Loss before extraordinary item                                               (235,297)              (1,917,738)
Extraordinary item                                                          1,275,322                     --
                                                                         ------------             ------------
     Net income (loss)                                                   $  1,040,025             $ (1,917,738)
                                                                         ============             ============
Earnings per common share:
     Basic:
     Loss before extraordinary item                                      $      (0.03)            $      (0.39)
                                                                         ============             ============
     Net income (loss)                                                   $       0.13             $      (0.39)
                                                                         ============             ============
     Diluted:
     Loss before extraordinary item                                      $      (0.03)            $      (0.39)
                                                                         ============             ============
     Net income (loss)                                                   $       0.09             $      (0.39)
                                                                         ============             ============
Weighted average common shares:
     Basic                                                                  7,841,237                4,936,915
                                                                         ============             ============
     Diluted                                                               11,531,284                4,936,915
                                                                         ============             ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>

                       HoQUOTIENT, INC. AND SUBSIDIARIES

      Consolidated Statements of Shareholders' Equity (Accumulated Deficit)

                     Years ended December 31, 1999 and 1998

<TABLE>
<CAPTION>
                                                           Common Stock            Additional                           Total
                                                    --------------------------      paid in         Accumulated     shareholders'
                                                      Shares         Amount         capital           deficit      deficit) equity
                                                    ----------    ------------    ------------     ------------    ---------------
<S>                                                 <C>          <C>             <C>              <C>              <C>
December 31, 1997                                    4,812,779    $        483    $  6,833,994     $ (9,746,760)    $ (2,912,283)
Issuance of common stock and warrants:
    Issuance of warrants:
     Regulation D offering @ $1.00                        --              --           145,000             --            145,000
     Regulation D offering @ $1.00                        --              --            50,000             --             50,000
     Regulation D offering @ $0.10                        --              --            25,000             --             25,000
     Issuance of warrants @ $.55 and $.42                 --              --           233,350             --            233,350
    Common stock issuance - Rule 144                   297,926              28         202,561             --            202,589
Net loss for 1998                                         --              --              --         (1,917,738)      (1,917,738)
                                                    ----------    ------------    ------------     ------------     ------------
December 31, 1998                                    5,110,705    $        511    $  7,489,905     $(11,664,498)    $ (4,174,082)
Issuance of common stock:
    Regulation D offering @ $0.60 per share            446,389              45         267,788             --            267,833
    Regulation D offering @ $0.50 per share          1,431,411             143         720,557             --            720,700
    Pro-rata additional shares                          59,278               6            --               --                  6
    Warrants exercised (Regulation D offering)
         @ $0.25 per share                             460,000              46         114,954             --            115,000
         @ $0.25 per share                             100,000              10          24,990             --             25,000
         @ $0.50 per share                              99,000              10          49,490             --             49,500
         @ $0.75 per share                              30,000               3          22,497             --             22,500
    Stock issuance - Rule 144
         @ $1.00 per share                             500,000              50         499,950             --            500,000
         @ $0.50 per share                             122,000              12          60,988             --             61,000
         @ $0.69 per share                             390,909              39         268,749             --            268,788
         @ $0.88 per share                              40,000               4          34,996             --             35,000
         @ $0.84 per share                              16,667               2          14,062             --             14,064
         @ $0.94 per share                              41,500               4          38,903             --             38,907
         @ $0.78 per share                              36,205               4          28,280             --             28,284
         @ $1.00 per share                              67,188               7          67,181             --             67,188
         @ $0.78 per share                              10,762               1           8,407             --              8,408
         @ $0.81 per share                              11,732               1           9,532             --              9,533
         @ $1.41 per share                               4,020            --             5,653             --              5,653
         @ $2.00 per share                               2,350            --             4,700             --              4,700
    Warrants exercised (Regulation D offering)
         @ $1.00 per share                           2,999,750             300       2,999,450             --          2,999,750
         @ $0.50 per share                             300,000              30         149,970             --            150,000
    Stock issuance - Rule 144
         @ $1.75 per share                             185,000              19         323,731             --            323,750
    Less: shares sold in exchange for note
       receivable (See note14)                            --              --        (1,013,603)            --         (1,013,603)
Net income for 1999                                       --              --              --          1,040,025        1,040,025
                                                    ----------    ------------    ------------     ------------     ------------
December 31, 1999                                   12,464,866    $      1,247    $ 12,191,130     $(10,624,473)    $  1,567,904
                                                    ==========    ============    ============     ============     ============
</TABLE>
          See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>

                       HoQUOTIENT, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                     Years ended December 31, 1999 and 1998

<TABLE>
<CAPTION>
                                                                      1999                     1998
                                                                   -----------             -----------
<S>                                                                <C>                     <C>
Cash flows from operating activities:
     Net income (loss)                                             $ 1,040,025             $(1,917,738)
Adjustments to reconcile net income (loss) to net cash
    used in operating activities:
     Depreciation                                                       55,147                  39,761
     Amortization                                                       49,660                  19,113
     Gain on sale of equipment                                          (1,550)                   --
     Stock and warrants issued for current expenses                    272,494                 356,439
     Unrealized loss on securities                                      33,751                    --
     Realized gain on sale of securities                               (93,903)                   --
     Extraordinary gain                                             (1,275,322)                   --
Changes in operating assets and liabilities:
     (Increase)/decrease in:
     Contracts receivable                                             (601,392)                 70,738
     Due from affiliate                                                   --                    50,899
     Due from officers                                                   9,985                    (285)
     Costs and estimated earnings in excess of billings                (36,145)                   --
     Prepaid expenses and other current assets                          (6,503)                   --
     Deferred charges and other assets                                 (64,040)                   --
     Increase/(decrease) in:
     Accounts payable                                                 (234,501)                296,145
     Accrued expenses                                                  413,434                 550,660
     Billings in excess of costs and estimated earnings                205,302                    --
     Deferred revenues                                                (114,447)                164,737
                                                                   -----------             -----------
     Net cash used in operating activities                            (348,005)               (369,531)
                                                                   -----------             -----------
Cash flows from investing activities:
     Additions to property and equipment                               (64,402)                (17,333)
     Proceeds from sale of equipment                                     1,550                    --
     Capitalized software                                             (352,311)                (69,308)
                                                                   -----------             -----------
     Net cash used in investing activities                            (415,163)                (86,641)
                                                                   -----------             -----------
Cash flows from financing activities:
     Proceeds from sale of warrants                                       --                   220,000
     Proceeds from sale of common stock                              1,007,121                  79,500
     Proceeds from notes payable                                          --                   155,000
     Proceeds from related parties                                        --                   115,376
     Repayment of notes payable                                       (230,000)                (20,000)
     Repayment of related parties                                         --                   (90,100)
                                                                   -----------             -----------
     Net cash provided by financing activities                         777,121                 459,776
                                                                   -----------             -----------
Net increase in cash                                                    13,953                   3,604
Cash at beginning of year                                                1,776                  (1,828)
                                                                   -----------             -----------
Cash at end of year                                                $    15,729             $     1,776
                                                                   ===========             ===========
</TABLE>


          See accompanying notes to consolidated financial statements.

                                      F-7
<PAGE>

                        HoQUOTIENT, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

1.  Organization

HoQuotient, Inc. (the "Company"), was incorporated in the Commonwealth of
Virginia on May 12, 1999 as a wholly-owned subsidiary of Integrated Healthcare
Systems, Inc. ("IHS"). On June 14, 1999, IHS executed a downstream merger with
HoQuotient, Inc. in which all the issued and outstanding shares of common stock
of IHS were exchanged for an equal number of shares of the $.0001 par value
common stock of the Company. The Company develops, markets, installs and
maintains integrated hardware and software systems to private and public
healthcare facilities throughout the United States.

2.  Summary of Significant Accounting Policies

Basis of Presentation - The consolidated financial statements of the Company
include the accounts of its wholly owned subsidiaries, IHS of Virginia, Inc. and
Dataqual Group, Inc. All significant intercompany balances and transactions have
been eliminated in consolidation.

Use of Estimates - The preparation of consolidated financial statements in
conformity with Generally Accepted Accounting Principles (GAAP) requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the
associated amounts of revenues and expenses during the period reported. Actual
results could differ from the estimates.

Revenue Recognition - The Company's revenue recognition policies are in
compliance with the American Institute of Certified Public Accountants
Statements of Position 97-2, 98-4 and 98-9, Software Revenue Recognition. The
Company sells software systems under noncancellablle sales agreements. Revenue
from a software system sale is recognized when a sales agreement is in force,
the product has been delivered, the sales price is fixed and determinable, and
collectibility is reasonably assured. If a software system sale includes
multiple elements, the sale price is allocated to each element according to its
actual selling price.

Revenues from software system sales requiring significant modification or
customization are recognized using the percentage of completion method based on
the costs incurred relative to total estimated costs.

Contract costs include all direct material, labor costs, subcontract and those
indirect costs related to contract performance, such as equipment cost,
supplies, insurance, payroll taxes and other general costs. General,
administrative and overhead costs are charged to expense as incurred. Provision
for estimated losses on uncompleted contracts are made in the period in which
such losses are determined. Changes in job performance, job conditions,
estimated profitability, and final contract settlements may result in revisions
to costs and income, which are recognized in the period in which the revisions
are determined.

                                      F-8
<PAGE>

                        HoQUOTIENT, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

2.  Summary of Significant Accounting Policies (continued)

The Company offers non-specific upgrades to customers with annual support
agreements for a specific product when they are completed and available for
release. If an upgrade leads to a new product, the upgrade is considered a new
sale.

Revenues from consulting services are recognized as performed. Revenues derived
from maintenance contracts are initially deferred and subsequently recognized as
revenue ratably over the terms of the contracts, which are typically from one to
two years.

Deferred Revenue - Deferred revenue represents either billings related to, or
payments received from customers, for software system sales prior to customer
delivery and acceptance, and maintenance service fees billed in advance.

Cash Equivalents - For the purposes of the consolidated statements of cash
flows, the Company considers all highly liquid debt instruments purchased with a
maturity of three months or less at the time of purchase to be cash equivalents.

Fair Value of Financial Instruments - The Company considers the recorded value
of its financial assets and liabilities, consisting principally of contracts
receivable, investments in equity securities, accounts payable, accrued
expenses, and debt to approximate the fair value of the respective assets and
liabilities at December 31, 1999 and 1998.

Property and Equipment - Property and equipment are stated at cost. Depreciation
of property and equipment is determined using the straight-line method over the
estimated useful lives of the assets, as follows:

       Office and computer equipment........................2-5 years
       Furniture and fixtures...............................3-7 years

Capitalized Software Costs - The Company capitalizes software development costs
incurred subsequent to the internal release of the product for acceptance
testing. Upon the general release of the product to customers, development costs
for that product are amortized over periods not exceeding four years, based on
the economic life of the product. Capitalized software costs amounted to
$352,311 and $69,308 in 1999 and 1998, respectively. Related accumulated
amortization and amortization charges were $49,660 in 1999 and none in 1998. The
carrying amount of acquired technology and software development is periodically
reviewed by the Company for impairment. Impairment is recognized when the future
gross revenues from products, reduced by the estimated future costs of
completing and disposing of that product, including the costs of maintenance and
customer support required at the time of sale, is less than the carrying amount
of that product.

                                      F-9
<PAGE>

                        HoQUOTIENT, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998


2.  Summary of Significant Accounting Policies (continued)

Intangible Assets - Amortization of intangible assets is determined using the
straight-line method over the estimated useful lives of the assets, as follows:

        Financing costs......................................   5 years
        Maintenance contracts................................ 30 months
        Customer lists....................................... 30 months
        Copyrights........................................... 30 months

Annually, the Company makes an assessment of the remaining fair market value of
intangible assets. Declines in fair market value considered to be other than
temporary are expensed immediately.

Income Taxes - Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes. Deferred taxes are recognized for differences between the basis
of assets and liabilities for financial statement and income tax purposes. The
differences relate primarily to depreciable assets (use of different
depreciation methods and lives for financial statement and income tax purposes),
and officer's salary and legal contingencies accrued but not paid (deductible
for financial statement purposes but not for income tax purposes). Deferred tax
assets and liabilities represent the future tax return consequences of those
differences, which will either be deductible or taxable when the assets and
liabilities are recovered or settled. Deferred taxes are also recognized for
operating losses and tax credits that are available to offset future taxable
income.

Dividend Policy - The Company has not paid any dividends since its inception and
does not anticipate paying any dividends in the foreseeable future. The payment
of dividends, other than stock dividends, is restricted by covenants included in
the Company's convertible subordinated promissory notes. When such convertible
subordinated promissory notes are either paid or converted, the payment of
dividends is within the discretion of the Board of Directors of the Company.

Earnings Per Share - Basic earnings per share is computed by dividing net income
by the weighted average number of shares outstanding for the period. Diluted
earnings per share include the dilutive effect of warrants and contingent
shares.

3.  Investments in Equity Securities

The Company acquired 153,846 and 461,500 shares of common stock of Internet
Guide, Inc. (a development stage company) in August and December 1999,
respectively. These transactions are related party transactions as an officer
and director of the Company is also an officer, director and significant
shareholder of Internet Guide, Inc. Accordingly, equity securities for Internet
Guide, Inc. are stated at their carrying value.

                                      F-10
<PAGE>

                        HoQUOTIENT, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

3.  Investments in Equity Securities (continued)

In December 1999, the Company acquired 1.5 million shares of common stock in
Veridian Corporation in exchange for 300,000 shares of common stock of the
Company. Equity securities in Veridian Corporation are stated at fair value,
which is based upon market quotes.

The Company is actively selling these investments in equity securities to
accredited investors in order to raise funds for ongoing operations.

The following is information on investments in equity securities as of December
31, 1999:

<TABLE>
<CAPTION>
                                                               (A)   Carrying
                                 Shares of                             Value
                                  common            Price          ------------        Unrealized       Realized
         Company                stock held        per share    (B)  Fair Value            Loss            Gain
---------------------------    -------------     ------------      ------------        ----------       ---------
<S>                                 <C>          <C>                <C>                <C>              <C>
Internet Guide, Inc.                430,626      $  6.500      (A)  $  2,799,072              --        $  93,903
Veridian Corporation              1,550,000      $   .075      (B)  $    116,250      $  (33,751)              --
                                                                    ------------
                                                                    $  2,915,322
                                                                    ============
</TABLE>

4.  Property and Equipment

Property and equipment consists of the following:

                                            1999                  1998
                                         ----------             ---------

Office and computer equipment             $ 190,218             $ 129,657
Furniture and fixtures                        7,291                 5,000
                                          ---------             ---------
                                            197,509               134,657
Less: accumulated depreciation             (120,478)              (66,881)
                                          ---------             ---------
                                          $  77,031             $  67,776
                                          =========             =========


Depreciation expense of property and equipment was $55,147 and $39,761 for the
years ended December 31, 1999 and 1998, respectively.




                                      F-11
<PAGE>

                        HoQUOTIENT, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998


5.  Intangible Assets


Intangible assets consist of the following:

                                             1999                 1998
                                          ---------             ---------
Organization costs                        $   1,450             $   1,450
Finance costs                                60,000                60,000
Maintenance contracts                       254,052               254,052
Customer lists                              195,425               195,425
Copyright                                   390,850               390,850
Service mark                                 56,673                56,673
                                          ---------             ---------
                                            958,450               958,450
Less: accumulated amortization             (958,450)             (958,450)
                                          ---------             ---------
                                          $      --             $      --
                                          =========             =========

Amortization charges for intangible assets were $0 and $19,113 for the years
ended December 31, 1999 and 1998, respectively.

6.  Short-term Debt

Short-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                                 1999                1998
                                                                                              ---------            --------
<S>                                                                                            <C>                 <C>
Unsecured note payable to a bank with interest at prime plus 1%                                $ 70,000            $ 70,000

Demand note payable to a former employee with interest at 9% per annum.  This note,
which was paid in 1999, was previously in default                                                  --                17,950

Demand note payable to a former law firm of the Company with interest at 10% due
September 1997. This note, which was paid in 1999, was previously in default
                                                                                                   --                80,000

Legal settlement to a former law firm of the Company with interest at 9% due
throughout 1999 and 1998.  This note is in default                                              105,000             105,000

Demand note payable to a former shareholder of IST with interest at 8% per
annum
This note was paid in 1999                                                                         --               150,000

Non-interest bearing demand note payable to an affiliate.  This note was paid in
1999                                                                                               --                11,288

Unsecured non-interest bearing demand note payable to an individual                              35,320              35,320
</TABLE>

                                      F-12
<PAGE>

                        HoQUOTIENT, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

6.  Short-term Debt (continued)

<TABLE>
<CAPTION>
                                                                                               1999                 1998
                                                                                             ---------           ----------
<S>                                                                                          <C>                 <C>
Demand note payable to a secured lender with interest at 12%.  This note was paid in               --               115,376
1999

Non-interest bearing demand note payable.  This note was paid in 1999                              --                15,000

Note payable with interest at prime plus one due March 13, 1999.  Paid in full in
1999 with interest of $937 and a financing fee of $9,063                                           --                50,000

Unsecured promissory notes payable with interest at 15%                                          64,810             687,196
                                                                                             ----------          ----------
                                                                                             $  275,130          $1,337,130
                                                                                             ==========          ==========
</TABLE>

7.  Uncompleted Contracts

<TABLE>
<CAPTION>
                                                                               Year ended December 31,
                                                                                       1999
                                                                               -----------------------
<S>                                                                                 <C>
Costs incurred on uncompleted contracts                                             $   463,104

Gross profit recognized to date on uncompleted contracts                                440,532
                                                                                    -----------

Less:  Billings to date                                                               1,072,793
                                                                                    -----------
                                                                                    $  (169,157)
                                                                                    ===========

Included in accompanying consolidated balance sheets under the following
captions:

Costs and estimated earnings in excess of billings on
   uncompleted contracts                                                            $    36,145

Billings in excess of cost and estimated earnings on
   uncompleted contracts                                                               (205,302)
                                                                                    -----------
                                                                                    $  (169,157)
                                                                                    ===========
</TABLE>

There were no long-term contract activities for the year ended December 31,
1998.


                                      F-13
<PAGE>

                        HoQUOTIENT, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

8.  Commitments and Contingencies

Lease Commitments - Beginning May 21, 1999, the Company entered into a two year
lease agreement for office space. Future minimum lease payments as of December
31, 1999 under all operating leases with terms greater than one year are as
follows:

                          Year ending
                  -----------------------------

                       December 31, 2000          $ 106,776
                       December 31, 2001             44,490
                                                   --------
                                                  $ 151,266
                                                   ========

Rent expense was $81,146 and $42,728 for the year ended December 31, 1999 and
1998, respectively.

Employment Agreements - In January 1998, the Company entered into employment
agreements with both the Chief Executive Officer and President of the Company.
Both agreements provide each officer with annual compensation of $145,000 and
allow for the issuance of warrants to purchase common stock of the Company
ranging from a minimum of 100,000 to a maximum of 250,000 shares per year at an
exercise price not less than the most recently issued warrant by the Company.

In December 1999, the Company's Chief Executive Officer resigned, but continues
in the capacity as Chief Financial Officer through May 2000 at $10,000 per
month.

Litigation - On January 10, 1997 the Internal Revenue Service ("IRS") filed in
the Circuit Court for the County of Fairfax, Virginia a Notice of Federal Tax
Lien in the amount of $386,234 against the Company for employment withholding
tax liabilities of Integrated Systems Technology, Inc. ("IST"), formerly a
wholly owned subsidiary of the Company. It is the opinion of the Company's legal
counsel that there is no "alter ego" liability on the part of the Company and
that the lien filed against the Company is wrongful and should be released. The
Company continues their efforts to get the lien released. Since the filing of
the Notice the IRS has not made any effort to enforce it against the Company. In
the event the lien is not released, the Company may have to bring a suit against
the IRS in the federal courts for wrongful levy.

The Company is currently a defendant in other lawsuits. The total potential
liability to the Company including the matters as discussed above, is estimated
to be $766,000 and $1,672,000 which has been recorded in the accompanying 1999
and 1998 financial statements, respectively.


                                      F-14
<PAGE>

                        HoQUOTIENT, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

9.  Shareholders' Equity

From January through March 1998, the Company issued 145,000 warrants at an
exercise price of $0.75 per share in exchange for $1.00 per warrant to
subscribers of a Regulation D offering. These warrants are exercisable for a
period of five years.

In January 1998, the Company issued 325,000 warrants at an exercise price of
$0.75 per share to an investment bank in exchange for financial services valued
at $178,750. These warrants are exercisable for a period of five years.

In January 1998, the Company issued 130,000 warrants at an exercise price of
$0.75 per share for a period of five years to an investment bank as compensation
for financial services valued at $54,600.

In June 1998, the Company issued 250,000 warrants at an exercise price of $1.50
per share, 150,000 warrants at an exercise price of $2.00 per share and 100,000
warrants at an exercise price of $3.00 per share to officers of the Company for
a period of five years. These warrants were issued to the officers in lieu of
the Company implementing an executive management stock option program.

In August 1998, the Company issued 50,000 warrants at an exercise price of $0.75
per share in exchange for $1.00 per warrant to subscribers of a Regulation D
offering. These warrants are exercisable from August 1998 to September 2001.

In August 1998, the Company issued 297,926 shares of its common stock in
exchange for $79,500 in cash and $123,089 in current year expenses at a price of
$0.68 per share. The common shares are subject to the restrictions of Rule 144
of the Securities Act of 1933.

In November 1998, the Company issued 250,000 warrants at an exercise price of
$0.80 per share for a five year period in consideration of $25,000.

In December 1998, the Company issued 10,000 warrants at an exercise price of
$1.00 per share for a five year period as partial consideration for a short-term
loan.

From January through October 1999, the Company issued 1,877,800 shares of common
stock pursuant to a Regulation D offering at an effective price of $0.50 per
share in exchange for $564,833 in cash, $100,000 in debt conversion and $323,706
in other expenses. A price adjustment reduced the issuance price of 446,389
shares from $0.60 to $0.50 per share and resulted in a pro-rata issuance of an
additional 59,278 shares.

In April 1999, the Company issued 399,000 warrants at an exercise price of $0.50
per share for a five year period for financial services rendered.

                                      F-15
<PAGE>

                        HoQUOTIENT, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

9.  Shareholders' Equity (continued)

In May and June 1999, the Company issued 460,000 shares of common stock (to
holders of warrants issued under a Regulation D offering) upon exercise of
warrants at an exercise price of $0.25 per share. These warrants were originally
purchased at $1.00 per warrant, for an aggregate price of $1.25 per share. In
conjunction with the warrant exercise transactions, the Company issued 100,000
shares of common stock to the placement agent at $0.25 per share, net of
commissions of $25,000 in cash.

On June 4, 1999, the Company adopted a plan of merger under which each share of
outstanding common stock of Integrated Healthcare Systems, Inc. became
convertible into one fully paid and nonassessable share of HoQuotient, Inc.
common stock. Under the plan, the authorized capital stock of HoQuotient, Inc.
is 100,000,000 shares consisting of 90,000,000 shares of common stock, $0.0001
par value and 10,000,000 shares of preferred stock, of which 100 shares of
HoQuotient, Inc. were issued to Integrated Healthcare Systems, Inc. each such
share being entitled to one vote.

In June 1999, the Company issued 7,526,284 Class A redeemable warrants at an
exercise price of $5.00 per share for a period of four years. These warrants
were issued to all shareholders of record as of June 14, 1999 as part of the
merger of that date. (See Note 1).

In June 1999, the Company issued 99,000 shares of common stock to the holder of
a warrant at an exercise price of $0.50 per share in exchange for debt repayment
of $49,500. Additionally, 30,000 shares of common stock were issued to the
holder of a warrant at an exercise price of $0.75 per share in exchange for
$22,500 in cash.

In August 1999, the Company issued 500,000 shares of common stock at $1.00 per
share, which are subject to restrictions under Rule 144 of the Securities Act of
1933 in exchange for 153,245 shares of common stock of Internet Guide, Inc.,
valued at $500,000. Additionally, the Company issued 250,000 warrants at an
exercise price of $1.00 per share for a period of three years and 250,000
warrants at an exercise price of $2.00 per share for a period of three years.

From August through December 1999, the Company issued 552,909 shares of common
stock which are subject to restrictions under Rule 144 of the Securities Act of
1933 in exchange for an aggregate of $279,788 in cash, $50,000 in notes and
$35,000 in prepaid expenses as follows: 122,000 shares at $0.50 per share;
390,909 shares at $0.69 per share and 40,000 shares at $0.88 per share.

From September through October 1999, the Company issued a total of 161,560
shares of common stock, which are subject to restrictions under Rule 144 of the
Securities Act of 1933, in exchange for an aggregate of $249,259 less $100,816
in debt forgiveness as follows: 16,667 shares at $0.84 per share; 41,500 shares
at $0.94 per share; 36,205 shares at $0.78 per share and 67,188 shares at $1.00
per share.

                                      F-16
<PAGE>

                        HoQUOTIENT, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

9.  Shareholders' Equity (continued)

In September 1999, the Company issued 1,050,000 warrants at an exercise price of
$0.75 per share to officers and an outside director of the Company for a period
of five years. These warrants were issued to the officers in lieu of the Company
implementing an executive management stock option plan and to the outside
director for serving on the Board of Directors.

In October 1999, the Company issued 200,000 warrants at an exercise price of
$1.00 per share for a three year period to key outside non-employees in exchange
for services rendered.

From November through December 1999, the Company issued 28,864 shares of common
stock subject to restrictions pursuant to the stock purchase program. Under this
plan, employees can purchase common stock of the Company at the closing price at
the end of each pay period from November 15 through December 31, 1999, with the
Company matching the shares on a one for one basis. The following shares were
issued: 10,762 shares at $0.78 per share; 11,732 shares at $0.81 per share;
4,020 shares at $1.41 per share and 2,350 at $2.00 per share.

In November 1999, the Company issued 3,000,000 warrants to Internet Guide, Inc.,
an affiliate of the Chairman of the Board at an exercise price of $1.00 per
share for a period of one year.

In November 1999, the Company issued 356,147 warrants at an exercise price of
$1.00 per share for a period of three years to an affiliate of the Chairman of
the Board as consideration for services rendered.

In December 1999, the Company issued 2,999,750 shares of common stock (to
Internet Guide, Inc.) upon the exercise of warrants at an exercise price of
$1.00 per share. In exchange, the Company received 461,500 shares of Internet
Guide, Inc. common stock.

In December 1999, 300,000 shares of common stock were issued to the holder of a
warrant at an exercise price of $0.50 per share in exchange for $150,000 in
marketable securities.

In December 1999, the Company issued 185,000 shares of common stock which are
subject to restrictions under Rule 144 of the Securities Act of 1933 at $1.75
per share.

In December 1999, the Company issued 28,118 warrants to note-holders at an
exercise price of $1.06 per share for a period of three years in exchange for
debt forgiveness of $26,725 plus accrued interest.

In December 1999, the Company issued 300,000 warrants at an exercise price of
$1.00 per share for a period of three years to key employees. The warrants were
issued in lieu of the Company implementing a formal stock option program.


                                      F-17
<PAGE>

                        HoQUOTIENT, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

9.  Shareholders' Equity (continued)

In December 1999, the Company issued 750,000 warrants to the Chairman of the
Board at an exercise price of $1.00 per share. The warrants are exercisable by
the officer as follows: 250,000 are exercisable from December 1999 through
December 2002, 250,000 are exercisable from December 2000 through December 2003,
provided the officer is employed by the Company at December 31, 2000 and 250,000
warrants are exercisable after December 2001, provided the officer is employed
by the Company at December 31, 2001.

A summary of warrant activity follows:

<TABLE>
<CAPTION>
                                                                                           Exercise         Number of
                                                              Exercise                      Price            Shares
                                                               Period                       Range           Reserved
------------------------------------------------ -----------------------------------    -------------    --------------
                                                      From               To
                                                      ----               --
<S>                                                <C>             <C>                  <C>                 <C>
December 31, 1997 - Warrants outstanding                                                                    2,599,971
   Issued during 1998                              January 1998    December 2004        $ .75 - 3.00        1,410,000
                                                                                                           ----------
December 31, 1998 - Warrants outstanding
   Issued during 1999                              April 1999      September 2004       $ .50 - 5.00       14,109,549
   Exercised during 1999                                                                $ .25 - 1.00       (3,988,750)
                                                                                                           ----------
December 31, 1999 - Warrants outstanding                                                                   14,130,770
                                                                                                           ==========
</TABLE>

10.  Stock-Based Compensation Plan

The Company instituted a non-qualified employee stock purchase program under
which all employees could purchase restricted common stock from the Company at a
purchase price equivalent to the closing price on the date of purchase. Under
this program, which was in effect from November 15, 1999 through December 31,
1999, the Company matched all stock purchases on a one for one basis. During
this period 28,864 shares were purchased at prices ranging from $0.78 per share
to $2.00 per share and 28,864 shares were issued under the matching terms.
Compensation expense totaling $28,293 was recorded in 1999 in connection with
this non-qualified employee stock purchase program.

Pursuant to SFAS No. 123 "Accounting for Stock-based Compensation", the Company
has elected to account for its stock purchase warrants and other equity
instruments under APB Opinion 25 "Accounting for Stock Issued to Employees" and
adopt the disclosure only provisions of SFAS No. 123. Under APB 25, no
compensation costs are recognized because the exercise price is equal to the
fair market price of the common stock on the date of grant. Under SFAS No 123,
stock purchase warrants are valued a grant date using the Black-Scholes
valuation model. Had compensation costs been determined as prescribed by SFAS
No. 123, the Company's net earnings and earnings per share would not have
changed, since the stock purchase warrants were considered to have little or no
value.

                                      F-18
<PAGE>

                        HoQUOTIENT, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

11.  Extraordinary Item

During 1999, the Company settled debt to creditors totaling approximately
$2,337,646. These debts were settled by issuing common stock of Company with a
fair value of $653,081, paying cash of $215,000 and selling equity securities of
Internet Guide, Inc. held by Company for $194,243. The settlement of this debt
resulted in an extraordinary gain of $1,275,322.

12.  Income Taxes

The effective income tax rate varied from the federal statutory tax rate as
follows:

                                                          1999        1998
                                                         -------     -------
     Statutory rate                                       34.0 %     (34.0)%
     State rate                                            5.0 %      (5.0)%
     Accruals not currently deductible                     5.7 %      (6.8)%
     Legal settlement expenses                           (13.6)%        -- %
     Capitalized software costs                          (11.3)%       1.4 %
     Officer's compensation                               (7.2)%        -- %
     Long-term capital loss carryover                     (3.5)%        -- %
     Other                                                (1.7)%       4.2 %
     Valuation allowance                                  (7.4)%      40.2 %
                                                         ------      ------
                                                           0.0 %       0.0 %
                                                         ------      ------

The deferred tax asset and the deferred tax liability is comprised of the
following:

<TABLE>
<CAPTION>
                                                                                  1999                1998
                                                                              ------------        -------------
<S>                                                                           <C>                 <C>
     Deferred tax asset:
         Expenses not currently deductible for tax purposes                   $    406,492        $     731,092
         Capital loss carryfoward                                                  572,801              609,423
         Net operating loss carryfoward                                          3,055,717            3,131,482
                                                                              ------------        -------------
                                                                                 4,035,010            4,471,997

     Valuation allowance                                                        (4,035,010)          (4,471,997)
                                                                              ------------        -------------
     Gross deferred tax assets                                                          --                   --
     Gross deferred tax liability                                                       --                   --
                                                                              ------------        -------------
     Net deferred tax asset (liability)                                                 --                   --
                                                                              ============        =============
</TABLE>

                                      F-19
<PAGE>

                        HoQUOTIENT, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

12.  Income Taxes (continued)

At December 31, 1999 and 1998, the Company has approximately $7,800,000 and
$8,000,000, respectively, in net operating loss carryfowards which expire at
varying dates between the years 2009 and 2018. The Company also has a capital
loss carryfoward of $1,468,720, which expires in 2001. The annual utilization of
these carryfowards are significantly limited under Section 382 of the Internal
Revenue Code as a result of ownership changes experienced by the Company. A
valuation allowance equal to the total deferred tax asset has been established
in each period due to the uncertainty regarding the realization of the net
deferred tax assets.

Approximately, $1,275,322 in net operating loss carryforwards were utilized to
offset federal and state income taxes estimated at $498,000 relating to the
extraordinary item.

13.  Earnings Per Share

The following data shows the amounts used in computing basic and diluted
earnings per share for the years ended December 31, 1999 and 1998.

<TABLE>
<CAPTION>
                                                                            1999                       1998
                                                                      -----------------           --------------
<S>                                                                   <C>                         <C>
Net income (loss) to common shareholders                              $       1,040,025           $   (1,684,388)
                                                                      =================            =============

Weighted average number of outstanding common shares-basic                    7,841,237                4,936,915
Diluted effect of warrants to purchase common Shares                          3,690,047                     --
                                                                      -----------------            -------------
Diluted common shares outstanding                                            11,531,284                4,936,915
                                                                      =================            =============

 Basic:
   Loss before extraordinary item                                     $           (0.03)           $       (0.39)
                                                                      =================            =============
   Net income (loss)                                                  $            0.13            $       (0.39)
                                                                      =================            =============
 Diluted:
   Loss before extraordinary item                                     $           (0.03)           $       (0.39)
                                                                      =================            =============
   Net income (loss)                                                  $            0.09            $       (0.39)
                                                                      =================            =============
</TABLE>

For 1998, warrants to purchase shares of common stock are not included in
computing diluted earnings per share because their effects are antidilutive.

14.  Related Party Transactions

In December 1999, the Company loaned an officer and director of the Company
$50,000 to purchase shares of common stock of the Company (at $0.6875 per
share). Pursuant to an unsecured promissory note, the loan is due upon demand,
but no later than December 31, 2000 and accrues interest at a rate of eight
percent (8%) per annum. This promissory note receivable has been reflected as a
reduction of additional paid in capital.

                                      F-20
<PAGE>

                        HoQUOTIENT, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

14.  Related Party Transactions

On December 31, 1999, the Company sold 150,000 shares of common stock of
Internet Guide, Inc. at $10.375 per share and 185,000 shares of common stock of
the Company at $1.75 per share plus had debt of $70,833 paid on behalf of the
Company, in exchange for a promissory note totaling $1,950,833. The promissory
note is secured by underlying securities and collateralized by additional
securities held by a third-party Trust. The promissory note accrues interest at
an annual rate of seven percent (7%) calling for payments due in January,
February and March 2000. The payment terms were renegotiated calling for two
equal payments on April 30th and May 31st, 2000. The promissory note was
subsequently paid in full on March 30, 2000 via cash of $330,000 and stocks in
publicly traded companies with a fair value of $1,648,800. The Company has
accounted for these transactions as if the Company exchanged common shares of
common stock of the Company for a promissory note receivable. As these
transactions are considered related party transactions, accordingly, any gain
resulting from this sale has been deferred and will be recognized in earnings in
the period paid, and the promissory note receivable has been offset against
paid-in-capital.

In 1995, the Company accrued salary to an officer of the Company in the amount
of $68,833. In 1998, an additional accrual of $31,167 relating to salary was
made for two officers of the Company. In January 1999, these obligations were
paid through the issuance of 200,000 shares of common stock in connection with a
Regulation D offering. (See Note 9. Shareholders' Equity).

15.  Supplemental Information to Consolidated Statements of Cash Flows

Supplemental disclosure of cash flows and noncash investing and financing
activities are as follows:

Year ended December 31, 1998:

     o    Exchange of debt, expenses, and cash advances totaling $202,588 into
          297,924 shares of common stock of the Company.

     o    455,000 warrants issued for financial services of $233,350.

     o    500,000 warrants issued to officers in lieu of the Company
          implementing an executive stock option program.

     o    10,000 warrants to a third party in connection with a short-term loan.





                                      F-21
<PAGE>

                        HoQUOTIENT, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                           December 31, 1999 and 1998

15.  Supplemental Information to Consolidated Statements of Cash Flows
     (continued)

Year ended December 31, 1999:

     o    The Company issued 3,799,750 shares of common stock in exchange for
          investments in equity securities of $3,009,897 (See Note 13).

     o    The Company issued 1,434,562 shares of common stock in satisfaction of
          certain debts totaling $462,449 and in payment of current expenses
          totaling $272,494.

     o    The Company issued 27,352 warrants to settle debts totaling $26,725
          with various creditors.

     o    A promissory note receivable of $1,950,883 was entered into for
          185,000 shares of common stock of the Company at $1.75 per share,
          150,000 shares of Internet Guide, Inc. common stock at $10.375 per
          share and a receivable of $70,883.

The Company paid interest of $10,000 (none in 1998) and no income taxes in 1999
or 1998.

16.  Significant Customers

During 1999, the Company derived a significant portion of its sales from one
customer. Sales from this customer totaled $1,171,135, representing 76% of total
sales for 1999. As of December 31, 1999, accounts receivable from this customer
totaled $549,479.

17.  Subsequent Events

On April 5, 2000, the Company announced an agreement in principle with
MDHome.com, a provider of information to the healthcare community to exchange
500,000 shares of the Company's restricted common stock for 2,500,000
convertible preferred shares and 350,000 common stock purchased warrants of
MDHome.com.

On April 20, 2000, the Company announced an agreement in principle to purchase
all of the outstanding stock of Information Resource Products, Inc. and IRP
Systems, Inc. for $3,900,000 plus $1,000,000, which shall be used to purchase
HoQuotient, Inc. stock on the open market, plus 25,000 restricted shares of
HoQuotient, Inc. stock which will be allocated to the seller's employees, as
will 250,000 two-year $10.00 warrants.













                                      F-22
<PAGE>

Exhibit
Number            Description
------            -----------

3.1               Copy of the Certificate of Incorporation of the predecessor
                  corporation under the name of Travel Technologies
                  International, Inc. (1)
3.2               Copy of Restated Certificate of Incorporation of the
                  predecessor corporation, which among other things changes
                  its name to Traverse Technologies, Inc. (1)
3.3               Copy of Amendment to the Restated Certificate of
                  Incorporation, changing the name of the predecessor
                  corporation to Integrated Healthcare Systems, Inc.  (1)
3.4               Copy of the Certificate of Renewal of Integrated Healthcare
                  Systems, Inc. as filed with the State of Delaware (2)
3.5               Copy of the By-Laws of the predecessor corporation (1)
3.6               Copy of the Certificate of Incorporation of IHS of
                  Virginia, Inc. a wholly owned subsidiary. (2)
3.7               Copy of the Certificate of Renewal of the IHS of Virginia,
                  Inc as filed with the State of Delaware (2)
3.8               Copy of the By-Laws of IHS of Virginia, Inc. (2)
3.9               Copy of the Articles of Incorporation our Company as filed
                  with the State of Virginia on May 20, 1999 (2)
3.10              Plan of Merger between IHS and the Company effective
                  June 14, 1999. (2)
3.11              Articles of Merger effective June 14, 1999 as filed with
                  the State of  Virginia (2)
3.12              Agreement of Merger as filed with State of Delaware (2)
3.13              Copy of the By-Laws of the Company (2)
23.2              Certified copy of the Certificate of Incorporation of The
                  DataQual Group, Inc. a wholly owned subsidiary 920
3.15              Copy of the By-Laws of the DataQual Group, Inc. (2)
4.1               Form of Certificate evidencing shares of Common Stock of
                  the Company. (2)
4.2               Warrant Certificate for 325,000 warrants issued to the
                  Steven W. Bingaman 1996 Trust. (2)
4.3               Warrant Certificate for 40,000 warrants issued to Asset
                  Growth Partners, Inc. (2)
4.4               Warrant Certificate for 50,000 warrants issued to Mark
                  Wachs (2)
4.5               Warrant Certificate for 1,190,000 warrants issued to Aesop
                  Financial Corporation together with Assignment thereof to
                  Appleby Partners, Ltd. (2)
4.6               Form of 1995 Redeemable Bridge Warrants (2)
4.7               Form of Warrant Certificates issued to Investors, Placement
                  Agents and Investment Banker in 1997 and 1998  (2)
4.8               Form of Warrant Certificates issued to management
                  executives, and consultants (2)
4.9               Form of Class A Redeemable Common Stock Purchase
                  Certificate (2)

                                       32
<PAGE>

4.10              Warrant Agreement between the Company and the Warrant Agent
                  covering the Class A Common Stock Warrants (2)
10.1              Form of Software License and Support Agreement (2)
10.2              Form of Licensed Software Agreement (2)
10.3              Form of Software Maintenance Agreement (2)
10.4              Form of DataQual(R) for Windows and I-Link(sm) Upgrade
                  Addendum (2)
10.5              (a) Form of Executive Employment Agreement (2)
                  (b) Forms of Employment for key Employees (2)
10.6              Sublease Agreement dated as of May 21, 1999 (2)
21.1              Subsidiaries of Registrant (2)
23.2              Consent of Kaufman Davis PC for Annual Statement, December 31,
                  1997 and 1998(2)
23.2              Consent of Kaufman Davis, PC for Annual Statement, December
                  31, 1999
27.1              Financial Data Schedule to Form 10-SB (2)
27.2              Financial Data Schedule for Annual Report Form 10-KSB for 1999

     (1) Incorporated by reference to the Company's Regulation Form 1-A Offering
         Statement of Integrated Healthcare Systems, Inc. (the predecessor
         corporation) filed on Form 1-A under the Securities Act of 1933 as
         emended (file No. 24-3450).

     (2) Incorporated by reference to the Company's Registration Statement on
         Form 10-SB (File No. 001-15179).

                                       33
<PAGE>


                                   SIGNATURES


         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, in Reston, Virginia on
May 25, 2000.

                                                 HoQUOTIENT, INC.



                                                 By: /s/  Douglas A. Cohn
                                                    ---------------------------
                                                     Chairman of the Board and
                                                     Chief Executive Officer

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, in Reston, Virginia on
May 25, 2000.

<TABLE>
<CAPTION>
               Signature                                   Title
               ---------                                   -----

<S>                                        <C>
By:          /s/  Douglas A. Cohn          Chairman of the Board and Chief Executive Officer
   -----------------------------------
               Douglas A. Cohn

By:          /s/  Alan W. Grofe            President, Chief Operating Officer, Treasurer
   -----------------------------------     and Director
               Alan W. Grofe

By:          /s/  Michael J. Black         Chief Financial Officer and Director
   -----------------------------------
               Michael J. Black

</TABLE>