<PAGE>

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

                                  FORM 10-QSB
                         QUARTERLY REPORT PURSUANT TO
          SECTION 13 OR I5(D) OF THE SECURITIES EXCHANGE ACT OF 1934

                 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
                             Commission File No.:

                                   001-15179

                               H-QUOTIENT, INC.
       (Exact name of small business issuer as specified in its charter)

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

                8150 Leesburg Pike, Suite 503, Vienna, VA 22182
      (Address and zip code of registrant's principal executive offices)

                                (703) 716-0100
             (Registrant's telephone number, including area code)


Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.

YES  X             NO __
    ---

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date: 20,909,567 of its $.0001 par
value common stock as of March 31, 2001.
<PAGE>

H-QUOTIENT INC.

FORM 10-QSB
FOR THE THREE MONTHS ENDED MARCH 31, 2001
INDEX



PART I:   FINANCIAL INFORMATION (unaudited)

<TABLE>
<CAPTION>
Item 1:                                                                       PAGE
<S>                                                                           <C>
Condensed Consolidated Balance Sheet as of March 31, 2001
and December 31, 2000                                                           2

Condensed Consolidated Statements of Operations for the
three month periods ended March 31, 2001 and
March 31, 2000                                                                  3

Condensed Consolidated Statements of Cash Flows for the
Three months ended March 31, 2001 and the three months
ended March 31, 2000                                                            4

Notes to Unaudited Condensed Consolidated Financial
Statements for the three months ended March 31, 2001                            5

Item 2:
Management's Discussion and Analysis of Financial Condition                    11
and Results of Operations

PART II:         OTHER INFORMATION

Item 1: Legal Proceedings                                                      14

Item 2: Changes in Securities and Use of Proceeds                              14

Item 5: Other Information                                                      15

Item 6: Exhibits and Reports on Form 8-K                                       15
</TABLE>
<PAGE>

                       H QUOTIENT, INC. AND SUBSIDIARIES

                     Condensed Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                         Assets
                                                                                        31-Mar-01                   31-Dec-00
                                                                                       ------------               ------------
                                                                                        (unaudited)                 (audited)
   <S>                                                                          <C>                       <C>
    Current assets:
     Cash                                                                       $           38,326        $            151,462
     Investment in equity securities                                                     2,433,222                   2,598,637
     Accounts receivable, less allowance for doubtful accounts of
      $18,790 at March 31, 2001 and December 31, 2000, respectively                        123,560                     164,912
     Due from affiliates                                                                    15,250                      24,236
     Costs and estimated earnings in excess of billings
      on uncompleted contracts                                                             761,612                     518,977
     Notes receivable                                                                    1,151,865                     747,000
     Prepaid expenses                                                                    1,778,527                   1,732,694
                                                                                ------------------        --------------------
       Total current assets                                                              6,302,362                   5,937,918

     Property and equipment, net                                                           180,782                     206,358
     Capitalized software, net                                                             286,450                     316,105
     Deposits                                                                               34,294                      14,294
                                                                                ------------------        --------------------
       Total assets                                                             $        6,803,888        $          6,474,675
                                                                                ==================        ====================

               Liabilities and Shareholders' Equity

    Current liabilities:
     Accounts payable                                                           $          410,881        $            356,445
     Accrued expenses                                                                      965,783                     898,153
     Due to affiliates                                                                       2,764                      50,077
     Short-term debt                                                                       650,630                     477,285
     Deferred revenues                                                                     476,332                     459,530
                                                                                ------------------        --------------------
        Total current liabilities                                                        2,506,390                   2,241,490
                                                                                ------------------        --------------------
    Commitments and contingencies

    Shareholders' accumulated deficit:
     Preferred stock, 10,000,000 shares                                                          -                           -
       authorized; 100 shares issued and outstanding                                             -                           -
     Common stock, $.0001 par value, 90,000,000 shares
       authorized; 20,909,567 and 19,810,544 shares issued and
       outstanding at March 31, 2000 ((unaudited), and
       December 31, 2000, respectively)                                                      2,092                       1,982
     Additional paid-in capital                                                         13,840,467                  13,652,448
     Accumulated deficit                                                                (9,545,062)                 (9,421,245)
                                                                                ------------------        --------------------
       Total shareholders' equity                                                        4,297,497                   4,233,185
                                                                                ------------------        --------------------
       Total liabilities and shareholders' equity                               $        6,803,888        $          6,474,675
                                                                                ==================        ====================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       2
<PAGE>

                       H QUOTIENT, INC. AND SUBSIDIARIES


                Condensed Consolidated Statements of Operations

                  Three months ended March 31, 2001 and 2000

<TABLE>
<CAPTION>
                                                                                     31-Mar-01                    31-Mar-00
                                                                                ------------------           ------------------
                                                                                    (unaudited)                  (unaudited)
<S>                                                                             <C>                          <C>
Revenues:

     Software sales                                                             $           24,688           $          311,987
     Maintenance and service income                                                        273,861                      131,366
                                                                                ------------------           ------------------
          Total revenues                                                                   273,861                      443,353


Operating expenses:
     Cost of sales and services                                                            148,771                      262,042
     Selling and marketing                                                                  12,687                       93,964
     General and administrative                                                            105,822                      238,341
                                                                                ------------------           ------------------
          Total operating expenses                                                         267,280                      594,348
                                                                                ------------------           ------------------
Operating income (loss)                                                                      6,581                     (150,994)

Other income (expense):
     Interest expense                                                                       (3,868)                      (4,780)
     Unrealized loss on securities                                                        (164,035)
     Realized gain on sale of securities                                                    37,505                      268,976
     Interest income                                                                             -                       27,917
                                                                                ------------------           ------------------
        Total other expense                                                               (130,398)                     292,113
                                                                                ------------------           ------------------
Income (loss) before provision for income taxes and
     extraordinary item                                                                   (123,817)                     141,119

Provision for income taxes                                                                       -                            -
                                                                                ------------------           ------------------
Income (loss) before extraordinary item                                                   (123,817)                     141,119

Extraordinary item                                                                               -                      212,073
                                                                                ------------------           ------------------
     Net income (loss)                                                          $         (123,817)          $          353,190
                                                                                ==================           ==================
Earnings (loss) Per Common Share:
    Before extraordinary item
       Basic                                                                    $            (0.01)          $             0.01
                                                                                ==================           ==================
       Diluted                                                                  $            (0.01)          $             0.01
                                                                                ==================           ==================
Extraordinary item
       Basic                                                                    $                -           $             0.02
                                                                                ==================           ==================
       Diluted                                                                  $                -           $             0.01
                                                                                ==================           ==================

After extraordinary item
       Basic                                                                    $            (0.01)          $             0.03
                                                                                ==================           ==================
       Diluted                                                                  $            (0.01)          $             0.02
                                                                                ==================           ==================

Weighted average common shares
       Basic                                                                            20,491,843                   12,700,137
                                                                                ------------------           ------------------
       Diluted                                                                          22,093,797                   15,613,157
                                                                                ==================           ==================
</TABLE>


         See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                       H QUOTIENT, INC. AND SUBSIDIARIES


                Condensed Consolidated Statements of Cash Flows

  Three months ended March 31, 2001 and the three months ended March 31, 2000

<TABLE>
<CAPTION>
                                                                                    31-Mar-01                    31-Mar-00
                                                                               ---------------              ---------------
                                                                                   (unaudited)                  (unaudited)
<S>                                                                            <C>                          <C>
Cash flows from operating activities:
  Net income (loss)                                                            $      (123,817)             $       353,191
                                                                               ---------------              ---------------
           Net cash provided (used) in operating activities                             21,331                     (495,701)
                                                                               ---------------              ---------------
Cash flows from investing activities:
           Net cash provided (used) in investing activities                             79,134                      (69,688)
                                                                               ---------------              ---------------
Cash flows from financing activities:
           Net cash provided by financing activities                                  (213,601)                     567,844
                                                                               ---------------              ---------------
Net increase in cash                                                                  (113,136)                       2,455
Cash at beginning of period                                                            151,462                       15,729
                                                                               ---------------              ---------------
Cash at end of period                                                          $        38,326              $        18,184
                                                                               ===============              ===============
</TABLE>


         See accompanying notes to consolidated financial statements.

                                       4
<PAGE>

H-QUOTIENT, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Three Months Ended March 31, 2001


                    Organization - H-Quotient, Inc., 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
                    H-Quotient, Inc. in which all the issued and outstanding
                    shares of common stock of IHS were exchanged for an equal
                    number of shares of our $.0001 par value common stock.. We
                    develop, market, install and maintain integrated hardware
                    and software systems to private and public healthcare
                    facilities throughout the United States.

                    Basis of Interim Presentation - The consolidated financial
                    statements of the Company include the accounts of its wholly
                    owned subsidiaries, IHS of Virginia, Inc. (sold December 28,
                    2000). Dataqual Group, Inc and Quotient Capital Corporation.
                    All significant intercompany balances and transactions have
                    been eliminated in consolidation.

                    Use of Estimates - The preparation of consolidated financial
                    statements in conformity with general accepted accounting
                    principles 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 - We sell software systems under
                    noncancelable 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.

                                       5
<PAGE>

                    We offer 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 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, We consider all highly liquid debt
                    instruments purchased with a maturity of three months or
                    less at the time of purchase to be cash equivalents.

                    Throughout the year cash and cash equivalents exceeded
                    federally insured limits. We do not believe that this
                    results in any significant credit risk.

                    Fair Value of Financial Instruments - We consider 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 March 31, 2001 and December 31,
                    2000.

                    Property and Equipment - Property and equipment are stated
                    at cost. Depreciation of property and equipment is
                    determined using the straight-line method over an estimated
                    useful life of three years.

                    Capitalized Software Costs - We capitalize 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 consist of the
                    following:

                                                    3/31/01      12/31/00
                                                 --------------------------

                    Capitalized software         $   474,474   $   474,474
                    Accumulated amortization        (188,024)     (158,369)
                    -------------------------------------------------------

                    Net                          $   286,450   $   316,105
                    =======================================================

                    Amortization expense for the three months ended March 31,
                    2001 and the year ended December 31, 2000 totaled $29,655
                    and $108,709, respectively.


                                       6
<PAGE>

                    The carrying amount of acquired technology and software
                    development is periodically reviewed 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.

                    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. 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. We evaluate
                    the likelihood of realization of deferred tax assets and
                    provides an allowance where, in management's opinion, it is
                    more likely than not that the asset will not be realized.

                    Net Income (Loss) - 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.

                    Investment in Equity Securities - Our investments in equity
                    securities consists of marketable securities that the
                    Company has classified as trading securities and common
                    stock in a closely held Company that is a shareholder of H
                    Quotient, Inc., and is reported at cost.

                    The trading securities consist of 14,237,750 shares of
                    Veridien Corporation as of December 31, 2000, and 14,960,100
                    as of March 31, 2001, that had a fair value of $909,219 and
                    $629,934, respectively. The unrealized loss on this
                    investment as of December 31, 2000 and March 31, 2001 was
                    $356,781 and $164,035, respectively.

                    The investment in the stock of the shareholder of H
                    Quotient, Inc., consists of 310,516 and 430,626 shares of
                    common stock of Internet Guide, Inc., ("Internet Guide") as
                    of March 31, 2001 and December 31, 2000, respectively. These
                    shares are carried at cost of $1,804,288, as of March 31,
                    2001 and December 31, 2000. In December 2000, we acquired
                    79,890 shares of Internet Guide stock in an exchange of a
                    marketable security that was valued at $305,216, the fair
                    value of the stock exchanged on the date of the exchange. We
                    sold 138,500 shares of Internet Guide in September 2000 for
                    $1,800,000, consisting of $732,000 of notes receivable from
                    unrelated parties and $1,068,000 of commercial trade
                    credits. A gain of $899,750 was recognized on the sale. In
                    addition, in September 2000, we exchanged 61,500 shares of
                    Internet Guide stock at $6.50 per share, an aggregate of
                    $800,000, for 8,000,000 shares of the common stock of
                    Veridien Corporation. No gain or loss was recognized on the
                    exchange.


                                       7
<PAGE>

                    Notes Receivable - Notes receivable at March 31, 2001,
                    consist of notes from employees for a cash advances of
                    $15,250 and a group of notes from Canadian individuals that
                    totaled $732,000 that were due at various dates in 2000 and
                    2001 and a balance on a note of $419,135 that was issued for
                    the exercise of 834,434 warrants at $.63 per share. On May
                    4, 2001, the $732,000 of notes were exchanged for $382,000
                    of commercial trade credits and a $350,000 note payable to
                    the other party to the exchange transaction.

                    Prepaid Expenses - Prepaid expenses at March 31, 2001 and
                    December 31, 2000 include $1,068,000 of Asset Recovery
                    Credits from SGD International Corp. and $622,500 of Cash
                    Collateral Credits issued by SGD International Corp.
                    acquired from Veridan Corporation. The credits represent
                    amounts that we expect to use in the fulfillment of future
                    sales contracts.

                    Property and Equipment -

                    Property and equipment consists of the following:
                                                         3/31/01      12/31/00
                                                      --------------------------

                    Office and computer equipment     $   339,225   $   339,225
                    Furniture and fixtures                 57,804        57,804
                    ------------------------------------------------------------
                                                          397,029       397,029
                    Less: accumulated depreciation       (216,247)     (190,671)
                    ------------------------------------------------------------

                                                      $   180,780   $   206,358
                    ============================================================

                    Depreciation expense of property and equipment was $25,576
                    and $70,912 for the three months ended March 31, 2001 and
                    the year ended December 31, 2000, respectively.

                    Short-term Debt -

                    Short-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                 3/31/01          12/31/00
                                                                             ----------------------------------
                    <S>                                                      <C>               <C>
                    Unsecured note payable to 967474 Ontario, Inc. with
                       interest at 12%, due March 28, 2001                   $       350,000   $       350,000

                    Unsecured note payable to a bank with interest at
                       prime plus 1%.                                                     -                  -

                    Legal settlement with a law firm with interest at 9%.
                       The Company is in default of the terms of
                       settlement of this obligation.                                 62,475            62,475

                    Unsecured non-interest bearing demand note payable to
                       an individual.                                                     -                  -

                    Unsecured promissory notes payable with interest at
                       15%.  These notes are in default                               64,810            64,810
                    -------------------------------------------------------------------------------------------

                                                                             $       477,285   $       477,285
                    ===========================================================================================
</TABLE>

                                       8

<PAGE>

                    Uncompleted Contracts -

<TABLE>
                    <S>                                                      <C>               <C>
                    Costs incurred on uncompleted contracts                  $       831,482   $       725,164
                    Gross profit recognized to date on uncompleted
                       contracts                                                     856,968           720,657
                    Less:  Billings to date                                         (926,838)         (926,838)
                    ------------------------------------------------------------------------------------------

                    Net                                                      $       761,612   $       518,977
                    ===========================================================================================
</TABLE>

                    Included in the accompanying consolidated balance sheets
                    under the following captions:

<TABLE>
                    <S>                                                      <C>               <C>
                    Costs and estimated earnings in excess of billings on
                       uncompleted contracts                                 $       761,612   $       518,977
                    Billings in excess of cost and estimated earnings on
                       uncompleted contracts                                              -
                    ------------------------------------------------------------------------------------------

                                                                             $       761,612   $       518,977
                    ==========================================================================================
</TABLE>

                    Lease Commitments - We entered into a nineteen month lease
                    agreement for office space beginning December 1, 2000. The
                    lease requires monthly payments of $4,294 plus a pro rata
                    share of taxes and operating costs. Future minimum lease
                    payments as of March 31, 2001 under this lease are as
                    follows:

                    Year ending
                    December 31
                    -----------------------------------------------------

                          2001                           $        38,649
                          2002                                    25,766
                    -----------------------------------------------------

                    Total                                $        64,415
                    =====================================================

                    Rent expense under all operating leases was $12,882 and
                    $105,386 for the three months ended March 31, 2001 and the
                    year ended December 31, 2000, respectively.


                    Net Operating Loss Carryforward - At December 31, 2000, we
                    had approximately $6,700,000 in net operating loss
                    carryfowards which expire at varying dates between the years
                    2009 and 2020. The annual utilization of these carryfowards
                    are significantly limited under Section 382 of the Internal
                    Revenue Code as a result of ownership changes. 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.

                                       9

<PAGE>

                    Net Income (Loss) per Share - The following data shows the
                    amounts used in computing basic and diluted net income
                    (loss) per share for the three months ended March 31, 2001
                    and the year ended December 31, 2000:

<TABLE>
<CAPTION>
                                                                                 3/31/01           3/31/00
                                                                             ----------------- ----------------
                    <S>                                                      <C>               <C>

                    Net income to common shareholders                        $      (123,817)  $       353,191
                    -------------------------------------------------------------------------------------------
                    Weighted average number of outstanding common
                       shares-basic                                               20,491,843        12,700,137
                    Diluted effect of warrants to purchase common shares           1,601,954         2,913,020
                    -------------------------------------------------------------------------------------------
                    Diluted common shares outstanding                             22,093,797        15,613,157
                    -------------------------------------------------------------------------------------------

                    Basic
                    -------------------------------------------------------------------------------------------
                    Net income (loss)                                        $          (.01)  $           .03
                    -------------------------------------------------------------------------------------------

                    Diluted
                    -------------------------------------------------------------------------------------------
                    Net income (loss)                                        $          (.01)  $           .02
                    -------------------------------------------------------------------------------------------
</TABLE>


                    Supplemental Information to Condensed Consolidated Statement
                    of Cash Flows.

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

                    Three months ended March 31, 2001:

                    .    We received 1,500,000 shares of Veridien Corporation
                         common stock on a zero cost basis as a supplement to a
                         transaction in which we sold 183,800 shares of our
                         common stock in exchange for $39,000 in cash. Of these
                         shares, 777,400 shares were sold in market transactions
                         that are recorded as a realized gain on the sale of
                         securities and the 722,600 shares held at March 31,
                         2001 are valued at the closing price of Veridien
                         Corporation common stock at March 30, 2001 at $.0469
                         per share.

                    .    On February 8, 2001, warrant certificates for the
                         purchase of 834,434 shares of our common stock were
                         exercised at a price of $.63 per share in the
                         aggregated of $525,000. Payment was made by the
                         delivery to us of a promissory note in the amount of
                         $525,000 with an interest rate of 6% per annum. The
                         note, which matures on December 31, 2001, has been
                         partially paid in the amount of $105,135 by waiver of
                         payment for balances due the note issuer by us.

                                      10

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following discussion and analysis should be read in conjunction with the
unaudited financial statements and related notes for the three months ended
March 31, 2001 and with the Company's audited financial statements and
accompanying notes for the year ended December 31, 2000. This report contains
forward-looking statements, such as statements of the Company's plans,
objectives, expectations and intentions, within the meaning of the Securities
Exchange Act of 1934, as amended. Actual results could differ materially from
those anticipated in forward-looking statements and are made as of the date of
this report. The Company assumes no obligation to update them. The discussion
contained herein relates to the financial statements, which have been prepared
in accordance with GAAP.

Overview

H-Quotient, 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, 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.

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., were exchanged for 7,526,284 shares of H Quotient, Inc., common
stock, (par value $.0001).

On December 28, 2000, the Company sold IHS of Virginia, Inc., a wholly-owned
subsidiary to an affiliate of a former officer and director in exchange for the
assumption of $791,319 in liabilities for which the subsidiary was obligated and
the granting of a license to resell certain of the Company's software products.
The Company has recognized this transaction as revenue from sale of marketing
rights in 2000.

Our principal products consist of DataQual(R), which includes I-Linksm and
I-Linksm Enterprise, which includes the 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(R) is being developed for the extended-care market. DataQual's
companion product, I-Link, an interface engine, is designed to interconnect and
extract data from any and all hospital information systems in the hospitals.
I-Link Enterprise is a system of servers installed on a hospital's local area
network (LAN), which acts as an intelligent node on a wide area network, to
extract, cleanse, group and map hospital wide data. This data is then
transmitted over an Intranet/Virtual Private Network to a Central Data
Repository. We believe there is a significant need in the healthcare industry
for products of this type, and we intend to exploit that need.

Our Business Strategy

We hope to capitalize on the ever-increasing demand in the healthcare industry
for improved patient information by becoming a leading provider of software
information products and services to the industry. We intend to concentrate at
this time on the acute care hospital market and the

                                      11

<PAGE>

extended-care market, which constitute over 60% of the existing market for
patient care information delivery software. Our strategy includes the following
key elements:

 . Continue sales and installation of I-Link Enterprise and the Central Data
Repository and enhancements of this product through additional research and
development. This product is marketed to hospital associations and insurance
companies. Priority is being given to the completion of the Ohio Hospital
Association (189 hospitals) contract as a stepping stone to securing similar
contracts with other hospital associations. The following testimonial is a
validation of this strategy:

"The concept around H-Quotient's data collection software systems is
groundbreaking, and we at the Ohio Hospital Association are excited about the
prospect of accessing and using data through H-Quotient's I-Link Enterprise and
virtual private network. H-Quotient's solutions facilitate HIPAA compliance, and
they are innovative enough to bridge the technology gaps that occur in some
hospitals. This customization is what will create connectivity between our
member hospitals and the VPN. I highly recommend discussing the possibilities
with H-Quotient." Ohio Hospital Association Vice President of Data Services,
David Engler, PhD.

 . Continue sales/leases and installation of DataQual with the I-Link interface
engine and provide enhancements of those products through additional research
and development. It is anticipated that DataQual sales/leases efforts will be
concentrated on hospitals belonging to hospital associations that are I-Link
Enterprise customers.

 . Complete development of DataQuotient, continue sales and commence
installations in extended-care facilities.

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

 . Expansion of our operations through strategic merger and acquisitions.

 . Continue portfolio investment activity through our subsidiary Quotient Capital
Corporation.


Results of Operations

Three Months ended March 31, 2001 Compared With Three Months ended March 31,
2000

Revenues for the three months ended March 31, 2001, decreased to $273,861 from
$443,353 for the three months ended March 31, 2000. The decrease of $169,492 is
primarily a result of completing software products under our contract with the
Ohio Hospital Association during 2000. The decrease was partially offset by an
increase in service revenue of $117,807.

The cost of sales and services for the three months ended March 31, 2001,
decreased to $148,771 from $262,042 for the three months ended March 31, 2000.
The decrease of $113,271 resulted primarily from an increase in productivity and
a corresponding decrease redundant technical staff.

Selling and marketing expenses for the three months ended March 31, 2001,
decreased to $12,687 from $93,964 for the three months ended March 31, 2000.
This decrease of $81,276 resulted from a decrease in salaried marketing
personnel, implementing an in-house marketing outreach program and the addition
of commission-only outside sales representatives.

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General and administrative expenses for the three months ended March 31, 2001,
decreased to $105,822 from $238,342 for the three months ended March 31, 2000.
The decrease of $132,520 resulted from a reduction in executive management
costs, other personnel costs and legal and accounting fees.

Interest expense, net, for the three months ended March 31, 2001, was $3,868, as
compared to $4,780 for the three months ended March 31, 2000. The decrease in
interest expense of $912 resulted from reductions in notes payable in our
on-going debt settlement efforts.

Extraordinary gains, net for the three months ended March 31, 2001 decreased to
$-0- as compared to $212,073 for the three months ended March 31, 2000. The
decrease resulted because gains derived from our debt reduction efforts were
settled in previous periods.

Net income (loss) for the three months ended March 31, 2001, and the three
months ended March 31, 2000, were $(123,817) and $353,190 respectively.

Liquidity and Capital Resources

Working capital at March 31, 2001, was $3,795,970 as compared to $3,696,428 at
December 31, 2000.

We have funded our operations and working capital needs through profits, private
equity placements, and the exercise of investor warrants. We believe, that with
cash generated from operations and portfolio security sales that we will meet
our current operational and business plans for the next 12 months.

Cash at March 31, 2001, was $38,326, an increase of $20,142 from March 31, 2000.
During the three months ended March 31, 2001, our operations provided $21,331
net cash as compared to using $495,701 for the three months ended March 31,
2000. This net change in the use of cash in operations of $517,032 was the
result of realizing gains from notes receivable payments, billing increases in
our long-term contact.

During the three months ended March 31, 2001, we generated $79,134 from
investing activities as compared to using $69,688 for the three months ended
March 31, 2000. The increase of $148,822 in cash provided from investing
activities resulted from a decrease in capital expenditures and net cash
generated from the sale of equity securities.

During the three months ended March 31, 2001, we used net cash of $213,601 in
financing activities as compared to generating $567,844 for the three months
ended March 31, 2000. The decrease of $781,445 resulted from redemptions of
stock of $375,871, and a reduction of $594,164 in capital raised though the
issuance of our common stock and proceeds from notes payable.

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 lease office space on a nineteen-month sublease basis and could be required
to move and/or add more space after this period. Capital expenditures we may
incur are for computers and related local area network hardware and software.

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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 market and continue to book
profits.


PART II:      OTHER INFORMATION

Item 1:   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"), a wholly owned subsidiary of ours
from September 1994 through December 1996. It is the opinion of our special
counsel, Carr Goodson Lee & Warner P.C., Washington D.C.; 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.

On May 17, 2001, a lawsuit was filed by the Steven W. Bingaman 1996 Trust (the
"Trust") alleging that restrictions be removed from certain stock certificates
owned by the Trust, and that certain shares be issued to the Trust. The
restrictions have been removed, and the claim for approximately 500,000 shares
of common stock from the July 31, 2000 and August 31, 2000 one-for-seven
distributions is being assessed by counsel. We do not believe there to be any
financial liability in the lawsuit.

A contract dispute of $350,000 with Marketing Enterprises, Inc., is set for
arbitration. We are vigorously defending the action.

Actions by Sallie E. Buck for $500,000 and the Department of Labor for $80,000
were dismissed by the courts.

Other suits arising in the ordinary course of business are pending against us,
including one ex-employee suit which our legal counsel regards as frivolous and
without merit. 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 2.  Changes in Securities and Use of Proceeds

In February 2001, warrant certificates for the purchase of 834,434 shares of our
common stock were exercised at a price of $.63 per share in the aggregate of
$525,000. Payment was made by delivery us of a promissory note in the amount of
$525,000 with an interest rate of 6% per annum. The note matures on December 31,
2001. We issued 183,800 shares of our common stock, which are restriction under
Rule 144 of the Securities Act of 1933, at $0.2122 per share in exchange for
$39,000 and 1,500,000 shares of Veridien Corporation common stock.

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On March 29, 2001, we filed Form S-8 in which 395,000 shares owned by a former
officer and director were registered under the Securities Act of 1933, and is
subject to a selling restriction for shares sold in the open market through
registered broker-dealers whereby no more than five percent of the previous
day's trading volume or 5,000 shares of the registered common stock may be sold
in open market transactions.


Item 5:  Other Information

On April 20, 2000, we 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 is designated to purchase shares of our
common stock in the open market, 25,000 shares of our common stock which is to
be allocated to the seller's employees and 250,000 common stock purchase
warrants that are exercisable for a period of two years at $10.00 per share. The
closing of this acquisition is pending as of the date of this report.


Item 6:  Exhibits and Reports on Form 8-K

None.



SIGNATURES

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


H-Quotient, Inc.

June 4, 2001                        By: /s/ Douglas A. Cohn
                                        Douglas A. Cohn
                                        Chairman, President and Chief Executive
                                        Officer

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