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

                                   Form 10-KSB

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
     1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934 FOR THE TRANSITION PERIOD FROM          TO
                                            --------    --------
                         Commission File Number 0-23952

                                   AVERT, INC.
                  --------------------------------------------
                 (Name of small business issuer in its charter)

         COLORADO                                       84-1028716
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

                   301 REMINGTON, FORT COLLINS, COLORADO 80524
                -------------------------------------------------
               (Address of principal executive offices) (Zip Code)

         Issuer's telephone number, including area code: (970) 484-7722


       SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: None
         SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:

                           COMMON STOCK, No Par Value
                                (Title of class)

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.

                                 Yes [X]  No [ ]

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation S-B contained 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 an
amendment to this Form KSB. [ ]

     The  issuer's   revenues  for  the  year  ended   December  31,  1999  were
$12,608,000.

     The aggregate  market value of the voting stock held by  non-affiliates  of
the issuer as of March 16, 2000 was $78,038,478.

     As of March 16, 2000 the issuer had outstanding  3,260,025 shares of Common
Stock, No par Value, its only class of Common Stock.

                       DOCUMENT INCORPORATED BY REFERENCE

     The following  document is  incorporated by reference into Part III of this
Annual Report on Form 10-KSB:  Definitive  Proxy Statement for the issuer's 2000
Annual Meeting of Shareholders.

     Transitional Small Business Disclosure Format (Check one):

                                 Yes [ ]  No [ X ]

<PAGE>

                                     Part I

     "The Company" or "Avert" is used in this report to refer to Avert, Inc. The
Company may from time to time make written or oral  forward-looking  statements,
including  statements contained in the Company's filings with the Securities and
Exchange   Commission  and  its  reports  to   shareholders.   Item  1  contains
forward-looking   statements  that  are  made  pursuant  to  the  "safe  harbor"
provisions  of the  Private  Securities  Litigation  Reform  Act of 1995.  These
statements include,  without  limitation,  statements relating to Avert's growth
and business  strategies,  regulatory  matters affecting Avert,  other plans and
objectives of Avert, management for future operations and activities,  expansion
and growth of Avert's  operations and other such matters.  The words "believes,"
"expects,"  "intends,"  "strategy,"  "considers"  or  "anticipates"  and similar
expressions identify forward-looking  statements. The Company does not undertake
to update, revise or correct any of the forward-looking information. Readers are
cautioned  that such  forward-looking  statements  should be read in conjunction
with the  Company's  disclosures  under the heading:  "Cautionary  Statement for
Purposes of the 'Safe Harbor'  Provisions of the Private  Securities  Litigation
Reform Act of 1995" beginning on page 11.

ITEM 1.  Description of Business.

General

     The Company was organized as a Colorado  corporation in June 1986 under the
name Hire Risk Services  Corporation.  In May 1987, the Company changed its name
to Avert, Inc. Avert began as an information service bureau engaged primarily in
the business of verifying job applicant  background  information  for employers.
Thought  the  Company's  general  business  strategy  has  remained   consistent
throughout the years, there has been a concentrated focused on making technology
its competitive advantage in the most recent years.

     Avert has developed into an Internet company providing information services
targeted  primarily at helping companies match employee  background  information
with  employer  job  requirements  through  the  verification  of job  applicant
background  information.  The employee  background  reports are obtained through
source document retrieval,  public record database searches,  Company databases,
and a national network of couriers (engaged on an independent  contractor basis)
developed and managed by the Company since its  incorporation in June, 1986. The
data  products  and  services  currently  provided  by the  Company  consist of:
criminal records, workers' compensation histories,  driving records,  employment
and personal  reference checks,  credit  histories,  social security number use,
name and address verification,  and education and credential verifications,  and
employment   application  forms.  The  Company  believes  that  the  demand  for
pre-employment  services is  increasing  as  employers  realize the  benefits of
assuring a better  quality  hire and  managing  bad hire risk.  The  Company has
approximately  11,100  customers  located  throughout  the  United  States.  The
Company's  business  strategy is to accelerate  market  presence  throughout the
United States.

Markets

     The Company markets its hiring support products and services throughout the
United States.  Although any company with  employees is a potential  customer of
Avert,  the Company  believes that  industries or businesses with one or more of
the following characteristics benefit most from background checking:

o    High risk of liability for negligent hiring lawsuits relating to the action
     or inaction of employees;

o    Physically demanding jobs;

o    Regulated industries such as health care, transportation, etc.

o    Industries  such as  information  technology  where  there are tight  labor
     markets  that are  forcing  companies  to hire from new or  non-traditional
     sources;

o    Industries   that  demand  a  high  degree  of  integration   and  employee
     information management;



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o    Employees with access to goods and cash of employers;

o    High employee turnover; and

o    Desire for better quality  employees,  not only with respect to competence,
     but also integrity.

o    Industries  in which one or more of these  characteristics  exist  include:
     construction;   retail;   manufacturing;   property  management,   medical,
     including nursing homes,  hospitals and in-home health care providers;  and
     city and county governments, including schools.

Products and Services

     General.  The  Company's  products and services are designed to support the
hiring  process by helping  verify job applicant  information  for employers and
consist of retrieval of public records,  internal database searches,  technology
aided searches through the use of the Company's  in-house  computer system,  and
both automated and manual retrieval of public records by Avert's network courier
system.  Avert customers may request and receive records through a private Avert
network, a secured,  membership-only Internet connection,  or by telephone, mail
and facsimile. Over 80% of Avert's business is conducted over the internet. This
network is available 24 hours per day, seven days a week.  Avert  customizes its
Internet service for larger customers on a both a for-fee and free service basis
(based on factors such as contract length, order volumes, scope of enhancement).
Avert does not sell or license software to its customers.

     The price to Avert's  customers of the reports prepared by the Company vary
in price from $0 to $50.50 per report  depending  upon the type and  location of
background check requested by the customer.  The reports may be viewed on screen
or printed in either Avert's or the customer's offices.  The reports remain in a
computer file in Avert's host computer system for two years and are available to
the customer at no additional  cost during that period.  New Avert customers are
required  to pay a set up fee to open an account  and to sign a Consumer  Report
User Agreement  ("User  Agreement").  If an existing  account is inactive for 12
consecutive months, the account may be put on inactive status.

     The Company's computer systems are Oracle based, with the databases running
on two Mid-range Digital Equipment  Corporation Alpha processors with dual CPUs,
1 Gigabyte  of RAM and 120  gigabytes  of  storage,  configured  to operate in a
scalable and fault tolerant environment.  The Oracle Application Server supports
our WEB interface and is hosted on dual XION processors for load balancing, data
management,  and rapid backup and  recovery.  Security is managed by  Checkpoint
Firewall One hosted on a Sun Workstation.  The company also runs a multiple RAID
array set to maintain customer data in a secure, recoverable environment.

     During 1996 the Company budgeted  approximately $1.5 million to develop new
software and upgrade its existing software, of which approximately  $450,000 was
expended  in  1996,   approximately   $1,181,000   was  expended  in  1997,  and
approximately $191,000 was expended in 1998. The upgrade was completed in April,
1998.  The total  cost of the  upgrade  was  approximately  $1.82  million,  and
exceeded the $1.5 million  budget by $322,000.  It is the Company's  belief that
the investments  made in the new computer  system,  implemented in April,  1998,
have  made it  possible  to extend  our  market by  leveraging  our  fundamental
competencies in process management,  technology, and order/delivery systems (see
examples  below).  There  continues  to be a  concentrated  focus on  processing
improvements  to enable more  profitable  growth.  The Company  believes the new
software and upgrade of its existing  software allows the Company to: (1) manage
its higher volume with a lower cost per transaction;  (2) introduce new products
and  services at a much  quicker  pace;  (3) directly  integrate  the  Company's
information  technology systems with strategic  partners,  suppliers,  and large
customers;  and (4)  maintain  the  Company's  competitive  position and provide
leading edge, but safe and proven, technology for its customers.

     The Company's  network  courier  system  consists  primarily of persons and
small companies variously located throughout the United States. The couriers are
engaged as  independent  contractors  by written  agreements  which provides for
payment  of a fee on a per  document,  per day or monthly  basis.  The number of
couriers  in each state  depends on the size of the state,  population  density,
number of counties within the state,  and the  organization of the court systems
within the state.  In first quarter of 1999, the Company  completed phase one of
an on-line vendor  management  system to aid in managing of its courier network.
This project has allowed Avert to more  accurately  track the performance of its
vendors while  improving  the  expediting  process,  resulting in a reduction of
production  cycle time by 20% for criminal  history products and 82% for workers
compensation reports. Additional improvements to the vendor payment process have
allowed  Avert to pay its  couriers  only for what was  returned in a timely and
accurate  manner by  implementing a procedure in which Avert provides a detailed
Summary  of  Charges  to each  vendor on a monthly  basis  instead of relying on
vendor invoices. Direct vendor costs in 1999, on criminal histories were reduced
by 8%, and workers compensation reports by 2.19%. During the vendor project, the
Company identified a primary vendor with whom it has developed a data interface.
This  increase in automation  has resulted in quicker court record  searches and


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decreased  internal  personnel costs. This vendor performs  approximately 35% of
county criminal  histories,  equating to approximately  15% of all court records
provided to its customers.  The Company  believes that if this vendor were lost,
until a replacement  vendor could be implemented,  the Company might  experience
minimal  delay in the  retrieval  of records and a minimal  increase in internal
personnel  costs. No assurance can be given that Avert will not be affected more
materially.

     Products and Services.  Avert currently  offers the following  products and
services:

          Criminal  Histories--Searches  selected  geographical  areas  for  the
presence  of  a  criminal  record.  This  background  information  is  available
statewide  from 35 states  including  District  of  Columbia  and from all 3,139
counties  in the  United  States  on a  county-by-county  basis or from  federal
district  courts.  The remaining 16 states do not have an  accessible  statewide
depository for this type of information.  This information is retrieved by Avert
through its network courier system, computer access directly into the states and
certain counties or, in some instances,  by facsimile,  mail, and telephone.  In
January 2000, Avert added Felony Plus+ to this product line. FelonyPlus+ reports
provide any and all felony and misdemeanor  information on felony crimes as well
as any  misdemeanor  information  that might be available at the same court.  In
February,  2000,  Wants and Warrants was added to the criminal  history  product
line. This product provides information on extraditable warrants on a nationwide
basis and advises  where the  applicant is wanted.  It is the only Avert product
that is nationwide in its scope.

          Workers'  Compensation  Histories--Used to confirm on-the-job injuries
in compliance  with the Americans  with  Disabilities  Act of 1990  (referred to
herein  as  the  "ADA").   Avert  has  been  collecting  and  storing   workers'
compensation  data since the  Company's  inception.  The Company  currently  has
approximately  3.7 million workers'  compensation  records in its database,  and
believes that it was the first  information  service bureau to compile this type
of data on a nationwide  basis and offer this  background  service to employers.
Avert can currently  provide workers'  compensation  information from 38 states,
District of  Columbia,  and Puerto  Rico,  through the use of its  database  and
couriers.  Such  information  from the remaining  twelve states is not currently
available  because of state law  prohibiting  the  release  of the  information,
refusal by the states to release the  information  or  inadequate  state  record
retrieval systems.

          Credential Reference Check/Education Reference Check--Confirms date of
attendance,   degrees  earned,  or  association  credentials.   This  background
information  is  obtained  by Avert  personnel  directly  from  the  educational
institutions or associations through the use of the telephone, fax or mail.

          Employment  Reference  Check/Personal   Reference   Check--Provides  a
standard  reference check  confirming  dates of employment,  salary,  duties and
title  information,  with the ability to add custom  questions  in order to meet
specific  customer needs.  The product gives employers a wide range of reference
choices.  This  background  information  is also obtained by Avert  personnel by
telephone, fax or mail directly from previous employers or personal references.

          First  Check--Confirms  that the  applicant  is  using a valid  social
security number.

          Motor  Vehicle  Driving   Reports--Confirms   driving  records.   This
background information is retrieved by Avert through a nonaffiliated third party
and is available from 47 states, all Canadian  provinces,  and Puerto Rico. This
same  information  could be obtained  directly by the Company from the source or
from other  nonaffiliated  third  parties.  These reports and the credit reports
discussed below are the only two products for which Avert serves as a broker. In
October  1999,  Avert  began  offering  MVR  Express.  This  product  is focused
specifically  on  reducing  the time it takes for  employers  to  gather  hiring
information.  Currently, Avert offers express access to 28 states, with plans to
add more as they become available.  Results are usually available on-line in the
customer's email inbox in one to two hours.

          Credit  Link--Confirms  certain credit  information.  This  background
information  is a  special  form  of  a  common  "credit  report"  designed  for
employment  purposes  only. The report  complies with current  provisions of the
Fair Credit  Reporting Act, as amended  ("FCRA").  See  "Government  Regulation"
below in this Item 1.  Avert  serves as a broker  for this  information  for all
three of the major  credit  bureaus  (Equifax,  Experian,  and  TransUnion)  and
retrieves the information from these credit bureaus through  software  purchased
by Avert  from a  nonaffiliated  third  party.  Avert  customers  may  order any
combination  of the three credit  bureaus.  Avert offers an Instant Credit Link,
which  is a  Credit  Link  described  above,  available  instantly,  and is only
available through TransUnion.

          Name  Link--Reports  use of a social security number.  This product or
service identifies names and addresses associated with a social security number.
This information is obtained from TransUnion and Experian credit bureaus.

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<PAGE>


          Employment  Application   Forms--These   employment  forms  have  been
developed  by Avert and, in Avert's  judgment,  if used  properly by  employers,
comply with current provisions of the ADA and Title VII requirements.  The forms
contain a universal  release form for those states which require an  applicant's
signature  and include the required IRS Form W-4 and the  Department  of Justice
Employment Eligibility Verification (I-9). The forms also include an affirmative
action  questionnaire  and a  conditional  job offer  form.  All forms have been
updated  to  ensure  compliance  with the  revised  Fair  Credit  Reporting  Act
requirements.  The application portion of the form sets forth the questions in a
manner which, together with company policy, will permit an employer to conduct a
background search.

          Instant Address  Link--Through its links with TransUnion credit bureau
the Company  offers an address  locator  service  that  identifies  any reported
addresses (up to 20) for an applicant,  based on social  security  number usage.
Customers can match the findings of the report with information  provided by the
applicant.  Additionally,  Instant Address Link "builds" a ready to go order for
criminal  records  searches that match the addresses  identified.  Customers can
order the criminal records on-line with only a click of the mouse.

          Adverse  Action--As  a result of changes to the FCRA in 1997 and 1998,
employers are required to notify  applicants of any information  obtained from a
consumer  reporting agency that may adversely  affect the applicants  employment
potential with the employer.  Further, the applicant must be informed of his/her
rights and be provided a copy of the  findings.  Avert will provide this Adverse
Action service on a fee per applicant basis.

          AvertSelect--In  1998 the Company  contracted with  Interactive  Voice
Technology  for the purpose of  providing  screening  services  that do not fall
under the FCRA regulations.  AvertSelect is an automated applicant  registration
and interview system to pre-screen potential applicants. AvertSelect was piloted
by a current  customer  for  acceptance  in 1998 and  announced as a new product
offering.

     Avert will  confirm  the  validity  of the social  security  number of each
subject of a background  check,  if the  customer  provides the Company with the
number. If the social security number is valid,  Avert will provide the customer
with the state name and year of issuance. This service is currently rendered for
no  additional  cost to the customer in  conjunction  with another Avert product
purchased by the customer and regardless of the type of search.

     In  addition to the  foregoing  products  and  services,  Avert  offers the
following Membership Programs:

     o    Avert  Advantage  Online  Program:  In January 1999, the Company began
          offering  customers the Avert  Advantage  Online program  service.  As
          members  of  this  program,  customers  can  utilize  employment  risk
          management  services  developed  for many of the largest  employers in
          American  business.  These tools in the hiring process are intended to
          reduce  risk and  improve  probability  of  hiring  safe,  honest  and
          competent  employees.  For $20 a month, members may receive consulting
          assistance to help make informed  employment  decisions,  access to an
          online Human Resources chat room, and policies and procedures reviewed
          by experienced  employment law attorneys,  unlimited free First Checks
          (TM) to pre-screen illegal  applicants,  and unlimited free use of the
          Instant   Address  Link  (TM)  to  identify  all  recorded  places  of
          residence. In addition,  Avert Advantage Online customers also receive
          a 15% discount on all Avert  products.  The Company has  approximately
          730 customer members in this program.

     o    Avert  Advantage  Program:  The Company also still offers a lower cost
          Avert  Advantage  customer  membership  service to its customers  that
          allows them to qualify  for  special  discounts  and  services..  This
          service  provides  access to a library  of Human  Resources  documents
          including hiring processes and forms, access to Avert's  Knowledgelink
          Help Desk for  consulting  assistance and unlimited free First Checks.
          Additionally,  this service  provides instant access to hiring process
          information.  Advantage customers also receive a discount based on the
          number of months  they have been a customer.  A $10.00  monthly fee is
          collected  for  most  Advantage  members.  The  Company  has  obtained
          approximately 2,550 of such customers.

     o    ADP  Subscription  Model:  Avert  began its  rollout of  products  and
          services  during  the  third  quarter  of  1999  with  Automatic  Data
          Processing (see "Business Strategy-Distribution  Partnerships below in
          this Item 1).  The focus of this  partnership  agreement  is for ADP's
          Emerging Business Services division and its Major Accounts division to
          actively market two new product packages to their customers  utilizing
          a monthly subscription-pricing scheme. Members of the ADP subscription
          model pay a flat  monthly  subscription  rate based on their number of
          employees,  turnover  rates and  product  package.  This format uses a
          combination  of  cross-referenced  and cascading  on-line  services to
          provide  ADP's  customers  with a  cost-effective  way to help  screen
          employees  and reduce their hiring risk.  As of year-end  1999,  there

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          were  approximately  1,400 customers  obtained through the EBS channel
          (companies  with  less  than 100  employees)  and the  MAJORS  channel
          (companies with 100 to 999 employees0  accounted for approximately 200
          Avert customers.

Business Strategy

     Avert's primary  objective is to position the Company as one of the highest
quality,  most  innovative  hiring  support  companies in the United States and,
ultimately,  to expand that service and reputation into the international market
and the broader markets of internet  staffing and recruiting,  insurance,  Human
Resources, benefits administration, drug testing and skills testing. The Company
believes its general  business focus is to mold technology,  service,  products,
and  profitability  into a top web-based  business that  leverages the Company's
processing  abilities  with its ability to provide  new ways to present  Avert's
products through the rapidly expanding  Internet economy.

The basic elements of Avert's strategies are as follows:

o    Accelerated Market Presence.  Avert intends to continue the acceleration of
     its market presence  throughout the United States by aggressively  pursuing
     new products, extending partner channels and further expanding and refining
     our traditional  sales and marketing  techniques used over the past several
     years,  including:  (1) face-to-face  selling with  prospective  customers,
     primarily  larger  companies;   (2)  in-house   telemarketing  to  existing
     customers  and to  prospective  customers  who have  shown an  interest  in
     purchasing Avert's products and services;  (3) marketing  partnerships with
     providers of human  resource  software and service  products;  (4) Internet
     marketing   programs   through  links  to  the  company's  Web  Site;   (5)
     participation  in  trade  shows  and  seminars;  (6)  advertising  in trade
     publications;  (7) public  relations;  and (8) independent  resellers.  See
     "Marketing and Sales" below in this Item 1.

o    Development of New Revenue.  As a general matter,  many of Avert's products
     and services have been developed and added to the Company's product line as
     a result of requests or suggestions from existing or prospective customers.
     For this reason,  the Company will  continue to listen to its  customers or
     prospective  customers for new product and service ideas. In addition,  the
     Company intends to develop new or additional revenue from: (1) re-packaging
     and  customizing  of its existing  products,  such as packaged  pricing for
     products and services; (2) development of new products; and (3) enhancement
     of existing products and (4) improving customer value through new features,
     functions and improved delivery times. Furthermore,  the Company is seeking
     strategic  relationships  with  companies  having a large  customer base of
     their own, which can re-market  Avert's  products and services as an add-on
     or  integration  with  their  own  products.  Avert  also  seeks  strategic
     relationships with companies in other industries. See "Marketing and Sales"
     below in this Item 1.

o    Long-term  Customer  Relationships.  The Company is  committed to providing
     quality  products and services to its customers.  Management  believes that
     the  Company's  emphasis  on  building  long-term  relationships  with  its
     customers  has played a  significant  role in Avert's  success.  Management
     further  believes  that  these  relationships  are  important  not  only to
     generate  additional sales from existing  customers,  but also for customer
     referrals. A large percentage of the Company's sales have been generated by
     referrals  from  customers.  The  Company  intends to (1) run a campaign of
     tips, value added hiring ideas and new product updates that will be sent to
     customers  9 to 10 times per year,  (2)  continue  to  monitor  its  larger
     customers and provide  customer service through its large account team, (3)
     establish  implementation teams for larger, new customers, and (4) create a
     more  strategic and  integrated  partnership  relationship  with our larger
     customers by building  customized  interfaces  and services that  integrate
     Avert staffing support directly into the customer's hiring process.

o    Quality Customer Service and Support.  In order to offer customers  quality
     service and support,  Avert has  developed  and will  continue to enhance a
     client service and support program which includes:  (1) the availability of
     a customer service representative twelve hours a day Monday through Friday;
     (2) specific large customer  support team, (3) in-house  training and phone
     monitoring of all customer service  representatives on Avert products;  (4)
     quality  control  checks for Avert  products;  and (4)  minimum  acceptable
     performance  guidelines  for  employees.  In addition,  Avert  realizes the
     importance  of long-term  employees to the success of its  operations  and,
     therefore,  strives to provide a positive  work  environment  and  benefits
     package for employees.

o    Technological. In 1999, Avert was recognized as one of the top 50 web-based
     businesses by CIO Magazine.  Avert will continue to champion new technology
     that can  enhance  the  quality  of  service,  and ease of use,  for  Avert
     customers.  In  addition,  Avert  intends  to use the  Internet  to improve
     relationships among its vendors,  customers,  and partners.  Efforts in the

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     technological  arena have allowed  Avert to  aggressively  pursue  suitable
     marketing  partnerships and  streamlining our internal  processes to become
     more efficient.

o    Ultimate  International  Market  Development.   Currently,   revenues  from
     international  sales are not significant.  Although the Company's  ultimate
     goal is to  expand  internationally,  Avert  will  not do so  until  it has
     significantly  increased  its sales and  marketing  presence  in the United
     States.  International  possibilities  include  Canada,  since  Canada most
     closely  resembles the United  States  market,  sales to foreign  companies
     hiring Americans and the European market.

o    Research and  Development.  Avert has created a new market and  partnership
     development  initiative  for the 2000  fiscal  year that will  focus on the
     research and development of e-business solutions. This initiative will look
     for new  sales and  marketing  channels,  new  products,  and new  business
     development  opportunities  that have  been  enabled  by the  growth of the
     internet community.

o    Distribution Partnerships. Aggressive partnership initiatives were realized
     as the Company signed  partnerships  or joint  marketing  agreements with a
     diverse  group of companies who are  providers of human  resource  software
     and/or services.  Avert recognizes that today's employers value the idea of
     a one-stop  resource  to which  they can look to  fulfill  many of their HR
     needs.  The Company  wholly  embraces  partners who are leaders in applying
     Internet  technologies to human resource and risk management  applications.
     In general,  partners  introduce Avert to their customer base and encourage
     the use of Avert  products  and  services  through an easy to use  Internet
     connection. Avert and partners share revenues (in varying percentages) from
     the partner customer base. Examples of new partnerships during 1999 follow:

     1)   Automatic Data Processing (New York Stock Exchange/AUD): In 1999 Avert
          announced two agreements  with Automatic Data Processing to enter into
          a joint  marketing  partnership.  The first  agreement calls for Avert
          services to be offered  electronically  to ADP  customers  through the
          Emerging  Business  Services  division,   ("EBS")  which  consists  of
          employers of 1 to 99 employees nationwide.  The second agreement calls
          for Avert  services to be offered  nationwide  to ADP customers in the
          Major Accounts division  ("MAJORS")  consisting of employers of 100 to
          999 employees. As of year-end 1999, the EBS portion of the partnership
          accounted for approximately 1,400 customers, and the MAJORS portion of
          the  partnership  accounted  for  approximately  200  customers.   See
          Management's  Discussion  and Analysis or Plan of Operations in Item 6
          below for discussion of associated revenues for this partnership.

     2)   CareerMag.com:  A  partnership  was  announced  with  one of the  most
          comprehensive  employment  and career  resources  on the Web,  and its
          sister  company,  HRLIBRARY.COM,  the  newest  membership  site for HR
          research   information,   products   and   services.   In  June   1999
          CareerMag.com  began  offering  their  clients  access  to  a  simple,
          effective   background   checking   process   through   AVERTadvantage
          Online(TM) . The  partnership  meets the demand to provide access to a
          complete  online HR resource that caters to employers'  needs from the
          beginning of the recruiting process to the completion of the applicant
          hire. In addition, the Company considers the partnership an experiment
          in internet lead generation.

     3)   LeadersOnline(TM) (trademark of Heidrick and Struggles): A partnership
          was  formed  in April  1999  with an online  recruiting  service  from
          Heidrick and Struggles,  the leading worldwide IT executive recruiting
          firm.  The  Company   considers  this   relationship  an  experimental
          partnership  in  offering  internet-based  screening  services  to the
          high-end  executive  recruiting  industry.  Avert  is  linked  through
          LeadersOnline(TM) recruiting  service, a  subsidiary  of Heidrick  and
          Struggles. The  LeadersOnline(TM) recruiting  process  locates  strong
          candidates  and reduces the risk of hiring  unqualified  candidates by
          providing background verifications.  Avert usually provides background
          checking information within 48 hours via a secure online connection.

     4)   At Your  Business.com.  AYB  represents  a  Internet  Business  Portal
          relationship  that offers array of small business products - including
          Avert's  employment and staffing  services,  to small and medium sized
          customers.  To date, this relationship has allowed Avert to expand its
          Internet presence and its Internet lead sources.

o    Acquisitions  of Other  Companies  and/or  Product  Lines.  The Company may
     consider the  acquisition of other  companies,  assets and/or product lines
     that  either  complement  or  expand  Avert's  existing  business.   Target
     companies are regional or state background  checking companies or companies
     with complementary products such as drug testing,  skills testing or safety
     and security  products.  The Company may use cash or stock or a combination
     of stock and cash to effect any such acquisitions. The Company has had, and
     may  continue  to  have,   discussions  from  time-to-time  with  potential
     acquisition  candidates,  but  no  acquisition  has  been  made  nor is any

                                       7
<PAGE>

     currently considered  probable.  No assurance can be given that the Company
     will be successful in these efforts, if pursued.

Marketing and Sales

     The Company's  marketing  program consists of direct marketing  activities,
advertising, exhibitions at trade shows, the Internet utilizing banner pages and
other techniques, public relations activities and in-house telemarketing. All of
the leads generated by these  marketing  activities are referred to new customer
tele-sales  representatives for follow-up and, if applicable,  for obtaining the
documentation  (including  executed User Agreements) needed to open new customer
accounts.

     Avert employs direct marketing for lead generation, marketing communication
and market development.  There are 14 employees at the Company's headquarters in
Fort Collins, Colorado, who are involved in marketing activities.  Additionally,
the Company has established an association  channel to develop and convert leads
to sales and to implement territory development programs.

     Various forms of direct  marketing  techniques such as fax, direct mail and
target  advertising are used to generate leads.  Qualified leads are distributed
to the Company's in-house  telemarketing staff. The Company's marketing programs
for territory  development  include,  advertising,  co-branding  with  franchise
customers, exhibitions at trade shows and public relations.

     In 1999 the  Company  continued  its  focus  on  sales  to large  corporate
($100,000 annual revenue  potential)  accounts that match the Company's  profile
for a "targeted"  customer.  A "targeted"  customer is served  through  Internet
workflow  management  of its  internal  hiring  process.  Avert has several such
customers  that use AvertNet  (Avert's  on-line  system) to this  advantage  and
believes that there is a rapidly  growing  number of large  customers  that meet
this  requirement.  There is a specific  personnel  resource  dedicated to these
corporate  accounts,  along with an  implementation  team when  applicable.  The
indirect  sales channel  includes  resellers who value-add to and  private-label
Avert products. Currently there are approximately 700 resellers.

Customers

     The Company has  approximately  11,800  customers  located  throughout  the
United  States.  During  1999,  sales were made in 50 states,  the  District  of
Columbia,  Puerto Rico, Virgin Islands,  and Canada.  Approximately 61% of total
sales were made in 10 states (Colorado,  Texas,  California,  Illinois,  Oregon,
Missouri,  Florida,  Minnesota,  New York and  Tennessee),  with Colorado  sales
representing  approximately  18.6% of total sales, and Texas sales  representing
approximately  9.8% of  total  sales.  The  Company's  business  strategy  is to
accelerate  market  presence  throughout the United  States.  The single largest
customer of Avert accounted for approximately  10.1% of total Avert sales during
1999. If this customer were lost, Avert's revenues would be materially affected.

     Historically,  the Company experiences a seasonal slow down in its business
in the  fourth  quarter  due to  decreased  hiring  by  retailers,  starting  in
mid-November  and  continuing  through the  holiday  season,  and by  industries
affected by inclement weather.

Government Regulation

     The Company is a  "consumer  reporting  agency"  within the meaning of that
term as used in, and therefore is subject to, the  provisions of the FCRA and is
regulated  by the Federal  Trade  Commission  ("FTC")  under the  Federal  Trade
Commission  Act. Under the provisions of the FCRA, a consumer  reporting  agency
may  furnish a  "consumer  report" to a customer  (other  than a consumer  or in
response  to a court  order),  only if such  agency has reason to believe  that,
among  other  matters,  the  customer  intends  to  use  the  information  for a


                                       8
<PAGE>


permissible purpose, including in connection with a credit transaction involving
the  consumer  on whom the  information  is to be  furnished  or the  review  or
collection  of an  account  of the  consumer  or the  customer  otherwise  has a
legitimate need for the  information in connection  with a business  transaction
concerning the consumer.  The background  checking reports of Avert are consumer
reports  for  purposes  of the FCRA.  In  addition,  certain of Averts  consumer
reports are  "investigative  consumer  reports"  within the meaning of that term
under the FCRA.  The FCRA also  prohibits  disclosure  of  obsolete  information
concerning a consumer. Obsolete information generally means information which is
more than seven years old. The Consumer Reporting  Employment  Clarification Act
of 1998 ("CRECA") amended the FCRA, among other things, to extend the definition
of obsolete  information for criminal  convictions.  Criminal convictions may be
reported for an indefinite number of years.

     The FCRA  requires  a  consumer  reporting  agency to  maintain  reasonable
procedures  designed  to ensure  that the  proscriptions  on the use of obsolete
information are not violated,  and that the information  contained in a consumer
credit report is used for a proper purpose.  In addition,  a consumer  reporting
agency must  follow  reasonable  procedures  to assure  maximum  accuracy of the
information   concerning  the  consumer  about  whom  the  report  relates.  See
subcaption "Legal Considerations" below in this Item 1. The FCRA also requires a
consumer  reporting  agency,  upon  request  from a consumer,  to  disclose  all
information  about that consumer in a consumer report,  together with the source
and the recipients of the information.  In some cases,  this information must be
delivered  to the consumer at no cost,  and, in others,  the agency may charge a
reasonable fee. Avert historically has not charged such a fee.

     The Consumer Credit Reporting Reform Act ("CCRRA") of 1996 amended the FCRA
and added new requirements on consumer  reporting  agencies  providing  consumer
reports for employment  purposes,  and persons who regularly furnish information
to the consumer reporting agency. The requirements include:  providing customers
with  a  notification  of  their  responsibilities  under  the  FCRA;  obtaining
certifications  from customers that they are performing certain specific actions
as required by the FCRA, providing the subject of the report with a free copy of
the report if adverse action is taken by an employer based on information in the
consumer report, and providing a copy of a Summary of Your Rights under the Fair
Credit  Reporting  Act with each  consumer  report.  The CCRRA also  prohibits a
person from  procuring  a consumer  report,  or causing a consumer  report to be
procured,  on a  consumer  for  employment  purposes  unless:  (a) a  clear  and
conspicuous  written  disclosure has been made to the consumer before the report
is procured or caused to be procured,  in a document that consists solely of the
disclosure,  that a consumer report may be obtained for employment purposes; and
(b) the consumer has authorized in writing the procurement of the report by that
person.

     The CCRRA also placed new requirements on the resale of consumer reports. A
consumer  reporting  agency  providing  consumer  reports to a reseller must now
obtain the  identity  of the end user of the  information  for each  report.  In
addition,  the  consumer  reporting  agency  must  receive  certifications  from
resellers that their  customers are performing the same specific  actions as are
required of the consumer  reporting  agency's direct customers,  and ensure that
reports are being resold only for permissible  purposes.  This applies mostly to
the persons who procure the report for resale.

     The FCRA provides that an investigative consumer report may not be prepared
on any consumer unless (1) such consumer  receives notice thereof in writing not
later than  three  days after the date on which the report was first  requested,
which must include a statement, among others, that the consumer has the right to
request  complete  disclosure  of the  nature  and  scope  of the  investigation
requested.  The CRECA also provides that  consumers who apply for  employment by
mail,  telephone,  computer or other  similar  means,  must be provided by oral,
written or electronic  means,  notice that a consumer report may be obtained for
employment  purposes and provided  with a copy of a Summary of Your Rights Under
the Fair Credit Reporting Act.

     The FCRA further provides that if the consumer  requests  disclosure of the
information,  the consumer reporting agency must make such disclosure in writing
not later than five days after the date on which the request for  disclosure was
received.  A consumer  reporting agency may not be held liable for any violation
of the FCRA provisions relating to investigative consumer reports if that agency
shows by  preponderance  of the evidence that at the time of the violation  such
agency  maintained   reasonable  procedures  to  assure  compliance  with  those
provisions.   Of   the   Company's   current   products,    education/credential
confirmations  and personal and employment  reference  checks are  investigative
consumer reports for purposes of the FCRA.

     The  FCRA  provides  for  civil  liability  sanctions  against  a  consumer
reporting agency by a consumer for willful or negligent  noncompliance  with the
FCRA and criminal sanctions against officers and directors thereof who knowingly
and willfully  disclose  information  in a report to a person not  authorized to
receive the information.

     The ADA makes it unlawful to discriminate in employment against a qualified
individual  with a  disability.  The ADA does not directly  apply to  businesses

                                       9
<PAGE>


conducted by consumer reporting companies such as the Company. It does, however,
apply to employers  with 15 or more  employees and prohibits such employers from
making inquiries of a prospective  employee as to medical and injury  inquiries,
job-related  or not,  until after a  conditional  job offer has been made.  This
means,  among other matters,  that inquiries by an employer as to prior workers'
compensation  claims and injuries  cannot be made until after a conditional  job
offer has been made.

     State laws also impact the Company's business. There are a number of states
which have laws  similar to the FCRA,  and some states  which have human  rights
laws more strict than the ADA. In addition,  to the Company's knowledge at least
ten states require  companies  engaged in the type of business  conducted by the
Company to be licensed in order to conduct  business  within those  states.  See
discussion below. A large number of states also regulate the type of information
which can be made  available  to the  public  and/or  impose  conditions  to the
release of the  information.  For example,  some state laws  prohibit  access to
certain  types  of  information,  such as  workers'  compensation  histories  or
criminal  histories,  while others restrict access without a signed release from
the subject of the report. In addition,  many privacy and consumer advocates and
federal regulators have become  increasingly  concerned with the use of personal
information,  particularly  credit  reports.  Attempts  have  been made and will
continue to be made by these groups to adopt new or additional federal and state
legislation  to regulate the use of personal  information.  Federal and/or state
laws relating to consumer  reporting  agencies and/or access and use of personal
information, in particular, and privacy and civil rights, in general, amended or
enacted in the future could materially adversely impact Avert's operations.

     To the  Company's  knowledge,  at least 10 states of the 50 states in which
the  Company  sold its  products  and  services  during  1999  require  consumer
reporting agencies, such as the Company, to obtain a license to conduct business
within those states.  The Company has obtained the necessary licenses in five of
those states,  and is in the process of obtaining licenses in the remaining five
states. In addition, Avert presently is reviewing the laws of three other states
to determine if licensing is required.  The Company also  contacts each state on
an annual basis to determine if licensing is required.  Though  requirements can
change,  the  Company  believes  that  the  remaining  37  states  do not have a
licensing  requirement  for the Company.  Although the Company  believes that it
will be able to obtain  licenses in other states if necessary,  the inability to
do so could have an adverse impact on the Company's operations.  Operation of an
unlicensed  business is a  misdemeanor  under the laws of many states  generally
punishable  by fines  and/or  imprisonment  and could be grounds for denial of a
license, if required.

Legal Considerations

     Under general legal concepts and, in some instances,  by specific state and
federal  statute,  the Company  could be held liable to customers  and/or to the
subjects of background  checking  reports prepared by the Company for inaccurate
information  or misuse of the  information.  The FCRA contains  civil  liability
provisions for willful and negligent  noncompliance  with its requirements.  The
FCRA  further  provides  in effect  that,  except for  liability  for willful or
negligent  noncompliance  with the FCRA and  false  information  furnished  with
malice or willful  intent to injure a  consumer,  neither a  consumer  reporting
agency,  any user of information  nor any person who furnishes  information to a
consumer  reporting  agency  will be  liable  to the  consumer  for  defamation,
invasion  of  privacy  or  negligence  based on  information  disclosed  to such
consumer under the provisions of the FCRA.

     The Company has developed and  implemented  internal  policies  designed to
help ensure that background information retrieved by it concerning a consumer is
accurate and that it otherwise  complies  with the  provisions  of the FCRA.  In
addition,  each customer of Avert is required to sign a User Agreement,  wherein
such customer agrees,  among other matters,  to accept  responsibility for using
information provided by Avert in accordance with the provisions of the FCRA, the
ADA, and all other applicable  federal and state laws and regulations  including
federal  and  state  equal  opportunity  laws and  regulations.  Avert  also has
internal  checks in place  regarding  access and  release  of such  information.
Additionally,  Avert requires that all employees  sign a written  acknowledgment
covering the proper procedures for handling confidential information.

     Avert  maintains  errors and  omissions  insurance  covering  claims by its
customers or by the subjects of its reports for alleged  inaccurate or misuse of
information.  The  insurance  provides  coverage of up to  $1,000,000  per claim
($2,000,000 aggregate) and has a deductible of $10,000 per occurrence.  To date,
Avert has been  named as a  co-defendant  or  defendant  in only  four  lawsuits
alleging violations of the FCRA, three of which the courts have dismissed. Avert
currently  is a  defendant  in a case filed on or about April 29,  1999,  in the
Superior Court of the State of California, in and for the County of Santa Clara,
styled Obadiah Lewis v. Avert, Inc. and Does 1 to 30. See "Legal Proceedings" in
Item 3 below.



                                       10
<PAGE>


Competition

     The background  checking industry is highly  fragmented.  The Company faces
both direct and indirect competition for its products and services. In addition,
many companies perform employee background checking in-house.

     Direct  Competition.  There are a large number of companies  engaged in the
sale of one or more of the background checking products sold by the Company, and
the Company  believes that this number will  increase.  A significant  number of
these  competitors are small  companies  operating on a local or regional basis;
while some are large  companies  operating on a national scale. To the Company's
knowledge,  the  background-checking  portion  of the  businesses  of its larger
direct  competitors  is currently a small portion of their  overall  operations.
Unlike many of its direct  competitors,  the Company serves as a broker for only
two of its products,  credit link reports and motor vehicle driving reports, and
obtains the data for the remainder of its products from the source.  The Company
believes  that  this  helps  to give it a  competitive  advantage  as to  price,
quality,  and delivery time. The Company also believes that it has a competitive
advantage over many of its  competitors  because of the wide variety of products
that it can offer to  customers,  and because of it's newly  developed  internet
electronic commerce capabilities.  Many of the Company's  competitors,  however,
have substantially  greater financial and personnel  resources than the Company.
In addition,  it is possible  that one or more of the  Company's  larger  direct
competitors could expand their background checking product line in the future.

     Indirect Competition.  The Company faces indirect competition from a number
of companies  engaged in, among  others,  drug,  aptitude and attitude  testing,
handwriting analysis and on-the-job trial employment  (employee leasing).  These
procedures,  though often used with  background  checking,  compete with Avert's
products and services. Most of these competitors operate on a national scale and
have substantially  greater financial and personnel  resources than the Company.
In addition,  it is possible that one or more of these  competitors could expand
their product lines in the future to include  background  checking  products and
services.

Employees

     As of March 16,  2000,  the Company  employed a total of 86  employees,  of
which 73 are full-time  employees and 13 are  part-time  employees.  Of these 86
employees,  12 full-time  employees and two part-time  employees are involved in
sales and marketing,  seven full-time employees and four part-time employees are
involved  in finance  and  administration,  seven  full-time  employees  and two
part-time  employees  are involved in  programming/information  systems,  and 29
full-time  employees and five  part-time  employees are involved in  information
retrieval/order   processing,  17  full-time  employees  are  involved  in  data
processing/customer  service,  and one full time  person is involved in research
and development.  None of the Company's employees is represented by labor unions
or is  subject  to  collective  bargaining  arrangements.  Avert  considers  its
relations with its employees to be good.

ITEM 2.   Description of Property.

     The Company owns and is sole occupant of an approximate  14,600 square foot
office  building,  located in downtown  Fort  Collins,  Colorado.  The building,
located on a 29,400  square-foot  parcel of land, was constructed by the Company
in March,  1996 at a total  cost of  approximately  $1.2  million.  The land and
construction  costs were paid entirely from  internal  funds of the Company.  No
portion of the proceeds of the Company's  initial  public  offering was used for
these purposes.

ITEM 3.   Legal Proceedings.

     Avert currently is a defendant in a case in the Superior Court of the State
of  California,  in and for the County of Santa  Clara,  originally  filed on or
about April 29, 1999 styled  Obdiah  Lewis v. Avert,  Inc. and Does 1 to 30. The
complaint seeks monetary damages and alleges that Avert negligently obtained and
released to third  parties  false  information  about the  plaintiff's  criminal
history.  Specifically, the complaint alleges that Avert advised the present and




                                       11
<PAGE>


a potential  employer that the plaintiff had pled guilty to robbery and received
a jail term of 176 days.  The  complaint  further  alleges  that because of this
information the plaintiff was terminated from a job and prevented from obtaining
new employment.  The complaint  asserts that the information  Avert reported was
libelous and done with a conscious  disregard of the plaintiff's  rights.  Avert
has paid the $10,000 deductible on its errors and omissions insurance policy for
this case.  Avert has denied  liability  and intends to  vigorously  defend this
claim.

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

     None.
                           -------------------------

             CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
       PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

     Avert is including the following  cautionary statement to take advantage of
the "safe harbor" provisions of the Private Securities  Litigation Reform Act of
1995 for any  forward-looking  statement  made by, or on behalf of,  Avert.  The
factors  identified in this cautionary  statement are important factors (but not
necessarily  all of the important  factors)  that could cause actual  results to
differ materially from those expressed in any forward-looking statement made by,
or on behalf of,  Avert.  Where any such  forward-looking  statement  includes a
statement of the assumptions or bases underlying such forward-looking statement,
Avert  cautions  that,  while  it  believes  such  assumptions  or  bases  to be
reasonable  and makes them in good faith,  assumed  facts or bases almost always
vary from actual results, and the differences between assumed facts or bases and
actual results can be material, depending upon the circumstances.  Where, in any
forward-looking statement, Avert, or its management, expresses an expectation or
belief as to the future results, such expectation or belief is expressed in good
faith and  believed to have a  reasonable  basis,  but there can be no assurance
that the  statement  of  expectation  or belief  will  result or be  achieved or
accomplished. Taking into account the foregoing, the following are identified as
important risk factors that could cause actual results to differ materially from
those expressed in any  forward-looking  statement made by, or on behalf of, the
Avert:

     Avert's  Business  Strategy  to Acquire  Other  Companies,  Assets,  and/or
Product Lines Could Divert Management Time and Avert's  Financial  Resources and
Adversely Impact Avert's Growth Rate. Though the Company's business strategy has
been  described (See  "Business  Strategy" in Item 1 above),  Avert may consider
using the net proceeds of the initial public  offering,  and the exercise of the
Redeemable Warrants to acquire other companies, assets and/or product lines that
either  complement  or expand its  existing  business.  Implementation  of these
strategies  could involve a number of risks,  including  diversion of management
time and Avert's financial resources to increased  marketing efforts,  review of
acquisition  candidates and assimilation of the acquired  intangible assets. The
impact of these strategies on Avert's operations, both long-term and short-term,
remains unknown,  but because of the foregoing  factors,  among others,  Avert's
growth  rate  for at least  the  short  term  could be  adversely  impacted.  In
addition,  no portion of the net proceeds of the IPO has been  allocated for any
specific acquisition,  and, although Avert has identified and has held, and will
continue to hold,  discussions  from  time-to-time  with  potential  acquisition
candidates,  no  acquisition  has  been  made  and  none  nor is  any  currently
considered probable.  Accordingly,  no assurance can be given that Avert will be
successful in acquiring other companies, assets or product lines if pursued.

     Government  Regulation on the Use of Personal  Information  Could Adversely
Impact  Avert's  Financial  Condition  and  Operations.  Avert  is  a  "consumer
reporting  agency"  within  the  meaning  of the term as used in the  FCRA  and,
therefore,  must comply with the various consumer credit disclosure requirements
of the FCRA. Willful or negligent  noncompliance would result in civil liability
to the subjects of reports.  Also, the ADA contains  pre-employment  inquiry and
confidentiality   restrictions  designed  to  prevent   discrimination   against
individuals with  disabilities in the hiring process.  Although the ADA does not
directly regulate Avert's business, Avert's customers use of certain information
to them is regulated,  both in respect to the type of information and the timing
of its use. State laws also impact the Company's business. There are a number of
states  that have laws  similar  to the FCRA,  and some  states  that have human
rights  laws more strict than the ADA. In  addition,  to Avert's  knowledge,  at
least  ten  states  require  companies  engaged  in the type of  business  to be
licensed  in order to conduct  business  within  those  states.  See  "Licensing
Requirements," below in this section. A large number of states also regulate the
type of  information  which can be made  available to the public  and/or  impose
conditions  to the  release of the  information.  For  example,  some state laws
prohibit access to certain types of information,  such as workers'  compensation
histories or criminal  histories,  while others restrict access without a signed
release from the subject of the report.  In addition,  many privacy and consumer
advocates and federal regulators have become increasingly concerned with the use





                                       12
<PAGE>


of personal  information,  particularly credit reports.  Attempts have been made
and will continue to be made by these groups to adopt new or additional  federal
and state  legislation  to  regulate  the use of personal  information.  Federal
and/or  state  laws  relating  to access  and use of  personal  information,  in
particular,  and privacy and civil rights, in general, amended or enacted in the
future could materially adversely impact Avert's operations.

     Avert's  Inability to Obtain Any Necessary  Licenses From States Could Have
an Adverse  Impact on Avert's  Financial  Condition and  Operations.  To Avert's
knowledge, at least ten states of the 50 states in which Avert sold its products
and services during 1999 require consumer reporting agencies,  such as Avert, to
obtain a license to conduct business within those states. Avert has obtained the
necessary  licenses in five of those states,  and is in the process of obtaining
licenses in the remaining five states. In addition, Avert presently is reviewing
the laws of three other states to  determine  if  licensing  is required.  Avert
conducts periodic reviews of state licensing  requirements.  Though requirements
can change,  Avert believes that the remaining 37 states do not have a licensing
requirement for Avert. The inability to obtain any necessary licenses from other
states  could have an  adverse  impact on Avert's  operations.  Operation  of an
unlicensed  business is a  misdemeanor  under the laws of many states  generally
punishable  by fines  and/or  imprisonment  and could be grounds for denial of a
license, if required.

     Liability  for  Inaccurate  Information  or  Misuse  of  Information  Could
Adversely Impact Avert's Financial Condition and Operations. Under general legal
concepts and, in some instances,  by specific state and federal  statute,  Avert
could be held  liable to  customers  and/or to the  subjects  of Avert  prepared
background  checking  reports  for  inaccurate  information  or  misuse  of  the
information.  Avert  maintains  internal  policies  designed to help ensure that
background  information it retrieves is accurate and that it otherwise  complies
with the  provisions  of the FCRA.  In  addition,  Avert  maintains  errors  and
omissions  liability  insurance  to cover claims by customers or the subjects of
reports.  The  insurance  provides  for up to $1 million per claim  coverage ($2
million aggregate) and has a deductible of $10,000 per occurrence.  To date, the
Company has been named as a co-defendant in four lawsuits alleging violations of
the  FCRA.  Three of these  lawsuits  have  been  dismissed  by the  court.  The
remaining  lawsuit is pending See Item 3 above "Legal  Proceedings"  for current
legal activity.  No assurance can be given that claims made against Avert in the
future  can  be  successfully  defended.  Uninsured  losses  from  claims  could
adversely impact the operations and financial condition of Avert.

     The Loss of Avert's  President  Could Have a  Detrimental  Effect on Avert.
Avert's success continues to be dependent upon the efforts of its key personnel,
particularly  Dean A. Suposs,  its President.  The loss of Mr. Suposs'  services
could have a detrimental effect.

     Competition in the Industry Could Have a Material Adverse Impact on Avert's
Financial  Condition  and  Operations.  Avert  faces both  direct  and  indirect
competition  for  its  products  and  services.  Direct  competitors  are  other
background  checking companies.  Indirect  competitors are companies engaged in,
among others,  drug, aptitude and attitude testing,  handwriting  analysis,  and
on-the-job trial employment (employee leasing).  Avert believes that there are a
large number of direct  competitors.  A significant  number of these competitors
are small companies operating on a local or regional basis, while some are large
companies  operating on a national  scale.  Avert also believes that there are a
number of indirect competitors, with most of them operating on a national basis.
Many of Avert's competitors have financial and personnel resources substantially
greater than those of Avert. As more companies enter the market,  and if larger,
direct  competitors place more emphasis on the employment  background segment of
their operations and/or indirect  competitors expand their businesses to include
background  checking products and services,  the competition within the industry
could become more  intense.  Accordingly,  no assurance  can be given that Avert
will be able to continue to compete favorably in this industry.

     Loss of Significant  Customer  Would  Adversely  Impact  Avert's  Financial
Condition  and  Operations.   During  1999,  a  single  customer  accounted  for
approximately  10.1% of Avert's  total  sales.  The loss of this  customer (or a
significant portion of this customer's business) would materially affect Avert's
revenues and could have a material adverse impact on Avert's financial condition
and operations.



                                       13
<PAGE>


                                     PART II

ITEM 5.   Market for Common Equity and Related Stockholder  Matters.

     The Company's  Common Stock is traded on the NASDAQ  National  Market under
the symbol AVRT and began trading on December 7, 1994. The following  table sets
forth  the high  and low  sales  prices  of the  Common  Stock  for the  periods
indicated as reported by the NASDAQ  National  Market.  The  quotations  reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.

                                                              High      Low
                                                              ----      ---
1998:
     First quarter .........................................  9-1/4     7-1/2
     Second quarter ........................................  8         5-1/2
     Third quarter .........................................  7-1/8     3-3/4
     Fourth quarter ........................................  6-1/4     3-1/2

1999:
     First quarter .........................................  5-1/8     3-1/4
     Second quarter ........................................  7-1/8     3-1/4
     Third quarter .........................................  8-1/4     6-3/32
     Fourth quarter ........................................  13-3/8    7-7/8


     There  were  approximately  170  holders  of  record  (approximately  1,750
beneficial holders) of the Company's Common Stock on March 21, 2000.

     On February 22, 2000,  Avert  declared a special cash dividend of $0.18 per
common share  payable on March 28, 2000 to  shareholders  of record on March 14,
2000.  The Company paid a $0.12 per common share cash dividend on March 24, 1999
and a $0.10 per common share cash dividend on March 23, 1998. Avert has not paid
any other cash dividends since the year ended December 31, 1993. Avert generally
intends  to retain its  earnings  to support  the  operations  and growth of its
businesses.  Any other future cash  dividends  would depend on future  earnings,
capital requirements, Avert's financial condition and other factors the Board of
Directors deems relevant.

     The  following   subparagraph  sets  forth  information  concerning  equity
securities sold during 1999 that were not registered under the Securities Act of
1933, as amended (the "Securities Act"):

     (a)  During  May  1999,  options  to  purchase  a total of 1,000  shares of
          Avert's Common Stock were automatically  granted under the Avert, Inc.
          Non Employee  Directors Stock Option Plan to Stephen D. Joyce,  one of
          Avert's directors.  The exercise price for the 1,000 shares underlying
          the  options  granted  to Mr.  Joyce is $6.25  per  share  for a total
          exercise  price under these options of  $6,250.00.  The options have a
          five-year term and vest one year after the dates of the grant.

          No  underwriter  was  involved  in  this  transaction,  and  no  sales
          commissions,  fees, or similar compensation were paid to any person in
          connection  with the grant of the  options.  Avert  believes  that the
          grant of the options and the continuing offer of the shares underlying
          the options was and is exempt from the  registration  requirements  of
          Section 5 of the Securities Act by virtue of Section 4(2) thereof,  as
          transactions not involving any public offering. More specifically, the
          optionee is a director  of Avert and is able to fend for himself  with
          access to information upon which an investment decision can be made.


                                       14
<PAGE>



     On June 29, 1994,  Avert  completed an initial public  offering  ("IPO") of
1,000,000  Units at an initial  public  offering  price of $5.25 per Unit (total
gross proceeds of  $5,250,000).  Each Unit consisted of one share of the Avert's
Common  Stock  and  one  Redeemable  Warrant.  The IPO was  made  pursuant  to a
Registration Statement on Form SB-2 (SEC File No. 33-76726-D) declared effective
by   the    Securities    and   Exchange    Commission   on   June   22,   1994.
Neidiger/Tucker/Bruner,  Inc., Denver, Colorado, served as Representative of the
Underwriters.

     Two Redeemable Warrants entitled the holder to purchase one share of Common
Stock at a price of $6.50  per  share.  The  expiration  date of the  Redeemable
Warrants was  initially  December 22, 1995,  but was extended to April 30, 1996,
and further  extended to April 30, 1997, at which date they expired.  A total of
176,250 Redeemable  Warrants were exercised  resulting in the issuance of 88,125
shares of Common  Stock and  receipt of gross  proceeds  totaling  approximately
$572,800.  The total  expenses  incurred by Avert for its account in  connection
with the issuance and  distribution of the Units sold in the IPO and pursuant to
the exercise of the Redeemable Warrants,  including  underwriting  discounts and
commissions,  expenses paid to or for the Underwriters and other expenses,  were
approximately $909,200 ($867,900 for the IPO and $41,300 for the exercise of the
Redeemable Warrants).  None of such expenses were paid directly or indirectly to
directors or officers of Avert or any of their associates, to persons owning 10%
or more of any class of security  of Avert or to  affiliates  of Avert.  The net
proceeds  from the IPO and the exercise of the  Redeemable  Warrants (a total of
$4,913,600  ($4,382,100  from  the IPO and  $531,500  from the  exercise  of the
Redeemable  Warrants))  are  currently  intended  to be  used to  acquire  other
companies,  assets and/or product lines that either complement or expand Avert's
existing business. None of the net proceeds has been expended to date.

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

     This Item 6 contains  forward-looking  statements that are made pursuant to
the "safe harbor" provisions of the Private Securities  Litigation Reform Act of
1995. These  statements  include,  without  limitation,  statements  relating to
growth in sales,  liquidity,  Avert  expectations  regarding  new  software  and
software  upgrades and related  funding,  impact of inflation on operations  and
other such matters. The words "expected,"  "believes,"  "expects" or "estimates"
and similar expressions identify  forward-looking  statements.  The Company does
not  undertake  to  update,   revise  or  correct  any  of  the  forward-looking
information.  Readers are cautioned that such forward-looking  statements should
be read in  conjunction  with  the  Company's  disclosures  under  the  heading:
"Cautionary  Statement  for  Purposes  of the 'Safe  Harbor'  Provisions  of the
Private Securities Litigation Reform Act of 1995" beginning on page 11.

Results of Operations

Comparison of years ended December 31, 1999 and December 31, 1998

     Net revenues  increased  from  $9,961,800 in 1998 to $12,608,400 in 1999 or
approximately 26.6%. This increase was primarily due to the following factors:

     1)   Continued overall growth of the customer base

     2)   Continued use by the customer base of criminal history records


                                       15
<PAGE>



     3)   Increased program membership by the customer base

     4)   Improved turnaround time for motor vehicle records

     5)   Increased subscription fees resulting from ADP partnership

     The  breakdown of net  revenues,  exclusive of product  discounts and other
miscellaneous income items, is as follows:

<TABLE>
<CAPTION>
                                              Year Ended              Year Ended
                                           December 31, 1999       December 31, 1998
                                           -----------------       -----------------
                                                         % of                     % of             Percent of
                                          Revenues     Revenues     Revenues    Revenues        Increase/(Decrease)
                                          --------     --------     --------    --------        ------------------
<S>                                     <C>             <C>      <C>              <C>               <C>
Products:
   Workers' compensation
         histories ..................   $   844,500     6.7%     $   940,200      9.4%              (10.2%)
   Criminal history reports .........   $ 7,072,600    56.1%     $ 5,569,900     55.9%               27.0%
   Reference Checking/credit
         reports ....................   $ 1,316,000    10.4%     $ 1,181,600     11.9%               11.4%
   Motor vehicle driving records ....   $ 1,433,100    11.4%     $   988,300      9.9%               45.0%
   Other products/services: .........   $ 1,548,500    12.3%     $   957,800      9.6%               61.7%
         Education/Credential
             verification
         Social security number
             check
         Name Link
         Employment application
             forms
         Service sales
Interest income .....................   $   335,300     2.7%     $   319,100      3.2%                5.1%

Net Revenues ........................   $12,608,400              $ 9,961,800                         26.6%
</TABLE>

     Management  considers  1999 a year in which  Avert  began to  leverage  its
fundamental competencies in process management,  technology,  and order/delivery
systems. There was concentrated focus on processing  improvements to enable more
profitable growth. It is the Company's belief that the investments made in a new
computer system, implemented in April, 1998, have made improved efficiencies and
financial condition  possible.  Discussion of the above items and other relevant
information regarding Avert's financial performance in 1999 follow:

     1)   Continued overall growth of the customer base

          There were a total of 5,585 new customers added in 1999 as compared to
          2,336 new  customers  added in 1998.  This  represents  an increase of
          approximately   139%.  The  ADP   partnership   was   responsible  for
          approximately  1,900 new  customers in 1999.  See  description  of ADP
          partnership in "Business Strategy/Distribution Partnership" above). In
          addition,  the number of  customers  actually  utilizing  the  service
          increased from approximately 7,900 in 1998 to approximately  11,800 in
          1999, or a 49.4%  increase.  The dollars  spent per customer  however,
          decreased  from  approximately  $1,213  in 1998  to  $1,036  in  1999,
          representing  a 14.6%  decrease.  Avert  believes  this  decrease is a
          result of the  historical  low  unemployment  rate,  allowing  for few
          applicants available per job opening for background verification.

     2)   Continued use by the customer base of criminal history records

          The number of criminal  history records actually  processed  increased
          from approximately 377,000 to 459,400, a 21.9% Increase when comparing
          1998 to 1999.  Criminal history revenues  increased  approximately 27%
          from 1998 to 1999.  They  accounted  for 56.1% of total net revenue in
          1999,  representing  approximately  $7,072,600 as compared to 55.9% of
          total net revenue in 1998,  representing approximately $5,569,900. The
          Company  believes there is a continuing trend  nationwide,  as well as
          increased  regulation for mandatory checking of criminal records.  The
          Company continues to focus on obtaining quick and accurate data.

     3)   Increased program membership by the customer base

          As discussed above, Avert has both Avert Advantage and Avert Advantage
          Online programs. (See "Products and  Services/Membership  Programs" in
          Item  above  for  description).   As  the  customer  base  grows,  the


                                       16
<PAGE>


          membership in these programs increase as well. Revenues resulting from
          both of the programs increased from approximately  $290,000 in 1998 to
          approximately $479,500 in 1999, or approximately a 65.3% increase.

     4)   Addition of large customers utilizing motor vehicle records

          Motorvehicle   records   increased   approximately   45%  from   1998,
          representing   approximately   $444,800  in   revenues  in  1998,   to
          approximately  $1,433,100 in revenues in 1999.  Internal  enhancements
          specific  to  this  product  line,   improving  turnaround  time  were
          implemented  in first quarter 1999,  positively  impacted the customer
          base in their quest for quicker hiring decisions.  Enhanced  automated
          features make this product attractive to several large customers which
          has  increased  the usage of this  product.  In addition,  the Company
          believes that MVR Express,  introduced in October 1999,  will continue
          to address the Company's goal to further  improve  turnaround time for
          this product.

     5)   Increased subscription fees resulting from ADP partnership

          The  partnership  with ADP previously  discussed was  responsible  for
          subscription revenues of approximately $150,700 for the EBS portion of
          the partnership,  and approximately  $56,500 for the MAJORS portion of
          the partnership.  The Company believes this partnership to be one that
          could create substantial revenues in the upcoming year as well.

     Net revenues  generated in the area of  reference  checking/credit  reports
increased from approximately  $1,181,600 in 1998 to approximately  $1,316,000 in
1999. These products  represented  approximately  11.9% of total net revenues in
1998,  as compared to  approximately  10.4% of total net  revenues in 1999.  The
reference checking area is becoming challenged due to the increased  requirement
by employers to have  applicant  releases prior to releasing  information  about
past  employment.  This step has added  increased  customer  involvement and can
sometimes negatively impact turnaround time.

     Net revenues from workers' compensation histories continue to decrease as a
percentage of total net revenues,  but remains the fourth largest  product line,
representing  approximately  6.7% of total net revenues in 1999,  as compared to
9.4% of total net revenues in 1998. Sales of workers' compensation histories are
expected to  continue to decline in total net  revenues  due to  regulation  and
necessity of releases from the respective applicant to process the product.

     Other  Products and Services  revenue  increased  approximately  61.7% when
comparing  1999 to 1998.  The  product  contributing  the most  revenue  in this
category was Name Link, a product  linking names,  addresses and social security
numbers,  representing  approximately  $210,900 in 1999  revenues as compared to
approximately  $192,700  in 1998  revenues.  Another  product in this  category,
Instant   Address  Link   increased  from   approximately   $3,900  in  1998  to
approximately $105,700 in 1999. Through its links with TransUnion credit bureau,
the Company offers an address locator service that identifies reported addresses
for an applicant, based on social security number usage. Customers can match the
findings of the report with information provided by the applicant. Additionally,
Instant Address Link "builds" a ready to go order for criminal  records searches
that match the addresses  identified.  Customers can order the criminal  records
on-line with just a click of the mouse.

     Service  sales,  a subset of Other  Products  and  Services,  which are not
itemized in the chart above,  increased from  approximately  $559,900 in 1998 to
approximately $1,175,100 in 1999, representing an approximate 109.9% growth. The
program membership and subscription revenues, which are a part of this category,
already  discussed  previously  accounted  for the  majority  of revenue in this
category.  In addition,  start up fees paid when new customers  initially become
clients of Avert  accounted for  approximately  $290,400 in revenues in 1999, as
compared  to  approximately  $96,800  in  revenues  in  1998.  There is a direct
correlation  to the  increase in the number of new  customers to the increase in
start-up  fee  revenues.  Service  sales also  include  miscellaneous  research,
special service fees, and order entry fees charged to clients.

     All expense  categories  decreased as a percentage  of total net  revenues.
Avert's  1999 focus was to leverage  technology  for improved  efficiencies  and
financial  condition  made possible by the computer  conversion  implemented  in
1998.  There have been some minor  reclassifications  of  expenses  for  simpler
internal reporting. A breakdown of expenses is as follows:



                                       17
<PAGE>

<TABLE>
<CAPTION>
                                              Year Ended              Year Ended
                                           December 31, 1999       December 31, 1998
                                           -----------------       -----------------            Increase/(Decrease)
                                                         % of                     % of             % of Revenue
                                          Revenues     Revenues     Revenues    Revenues          1999 over 1998
                                          --------     --------     --------    --------        ------------------
<S>                                     <C>             <C>      <C>              <C>               <C>
Search and product ...................   $5,699,400     45.2%      $4,966,500     49.9%              (4.7)%
Marketing ............................    1,367,200     10.8%       1,492,700     15.0%              (4.2)%
General and administrative ...........    1,318,700     10.5%       1,144,900     11.5%              (1.0)%
Software development and
   maintenance .......................      527,700      4.2%         581,900      5.7%              (1.5)%
Depreciation and
   amortization ......................      623,700      4.9%         563,900      5.7%              (0.8)%
                                         ----------     ----       ----------     ----               ----
Expenses .............................   $9,536,700     75.6%      $8,749,900     87.8%             (12.2)%
</TABLE>

     The  decrease in 1999 over 1998 of search and product  fees as a percentage
of total net  revenues,  was  primarily  a result  of  decreased  personnel  and
temporary  costs due to the  technological  enhancements  made in the operations
area.  Specifically,  there were 24.77  full-time  equivalents in the operations
departments  in  1999,  as  compared  to  30.15  in  1998.  This  represents  an
approximate 17.8% decrease in personnel,  equating to approximately  $509,000 in
revenue  per   operations   full-time   equivalent   in  1999,  as  compared  to
approximately $330,400 in 1998.

     Marketing expenses,  as a percentage of total net revenues,  decreased from
approximately  15.0% in 1998 to  approximately  10.8% in 1999. This decrease was
primarily  attributable  to the  decrease  in lead  generation  costs  that were
approximately  $351,500 in 1998 and approximately  $117,300 in 1999. The Company
reduced expenditures in certain lead generation  activities such as yellow pages
advertising  and broadcast  fax as it  transitions  its marketing  activities to
web-based lead generation  programs and distribution  partnerships.  Examples of
web-based  lead  generation  activities  include web site links with other human
resource providers,  banner advertisements,  listings on Internet portals, email
messages sponsored by human resource  publications,  and additional  information
services  on our  own web  site.  There  was  also  decreased  personnel-related
expenses. The Company believes that there will be an increased marketing expense
in the way of revenue pass-through payments to distribution partnerships as more
of distribution partnerships are developed and implemented.

     The General and  Administrative  expense category  decreased  slightly when
expressed as a percentage of total net revenues from approximately 11.5% in 1998
to approximately 10.5% in 1999.

     There was a decrease  in  software  development  and  maintenance  expenses
expressed as a percentage of total net revenues from  approximately 5.7% in 1998
to  approximately  4.2% in 1999.  The primary reason for the decrease is reduced
fees of approximately  $100,000 associated with third-party  consultants in 1999
that were utilized in 1998. After implementation of the computer system in 1998,
consultants  were  used  to  troubleshoot  problems  and  other  minor  software
development.  See  "Liquidity  and capital  Resources"  below in this Item.  The
Company continues to focus on making  technology its strategic  advantage in its
relationships with customers, partners and suppliers.

     There  was a  decrease  in  depreciation  and  amortization  expenses  when
expressed as a percentage of total net revenues, from approximately 5.7% in 1998
to  approximately  4.9% in 1999. The decrease was due to the fact that there was
no substantial  software development project capitalized in 1999 as there was in
1998.

     Income before income taxes increased from approximately  $1,211,900 in 1998
to  approximately  $3,071,700 in 1999, or  approximately  153.5% and represented
approximately  12.2% of net revenues in 1998 compared to approximately  24.4% in
1999.

     The  combined  federal and state  income tax rate for 1999 and 1998 was 39%
and 38%,  respectively,  resulting  in net income of  approximately  $740,000 or
$0.22 per share,  on  3,440,000  (weighted  average  shares  plus  common  stock
equivalents) for 1998 as compared to  approximately  $1,898,300 in net income of
$0.57  per  share on  3,314,000  (weighted  average  shares  plus  common  stock
equivalents) for 1999.

     Comparison of years ended December 31, 1998 and December 31, 1997

     Net revenues  increased  from  $9,490,800  in 1997 to $9,961,800 in 1998 or
approximately  5.0%.  This increase was  primarily due to the continued  overall
growth  of the  customer  base  and its use of  criminal  history  records.  The





                                       18
<PAGE>


breakdown  of  net   revenues,   exclusive  of  product   discounts   and  other
miscellaneous income items, is as follows:

<TABLE>
<CAPTION>
                                                   Year Ended                Year Ended
                                                December 31, 1998         December 31, 1997
                                                -----------------         -----------------
                                                            % of                       % of              Percent of
                                               Revenues   Revenues       Revenues    Revenues        Increase/(Decrease)
                                               --------   --------       --------    --------        ------------------
<S>                                          <C>          <C>         <C>            <C>            <C>
Products:
   Workers' compensation
         histories .......................   $  940,200      9.4%      $1,114,200     11.7%          (15.6%)
   Criminal history reports ..............   $5,569,900     55.9%      $4,754,300     50.1%           17.2%
   Reference Checking/credit
         reports .........................   $1,181,600     11.9%      $1,223,800     12.9%           (3.4%)
   Motor vehicle driving records .........   $  988,300      9.9%      $1,000,000     10.5%           (1.2%)
   Other products/services: ..............   $  979,300      9.8%      $  986,900     10.4%            (        .8%)
         Education/Credential
             verification
         Social security number
             check
         Name Link
         Employment application
             forms
         Service sales
Interest income ..........................   $  319,100      3.2%      $  315,200      3.9%            1.2%

Net Revenues .............................   $9,961,800                $9,490,800       5.0%
</TABLE>

     Avert, Inc. experienced relatively flat growth during 1998 on most products
and services offered. Management considered 1998 a year of building, transition,
and change. It was a year that had negative  financial  impact,  but a year that
represented much technological improvement.  It is believed, that the activities
Avert  performed in 1998 were  necessary in order to leverage its technology for
improved  future  efficiencies  and financial  condition.  The  following  three
factors contributed to Avert's financial performance in 1998:

     1)   INCREASED CUSTOMER CREDITS: Avert records customer credits as a direct
          reduction  in  the  appropriate   sales  category,   rather  than  one
          separate"credits  given" line. During the implementation period of the
          new  computer  system and months that  followed,  Avert  enacted a "no
          questions asked" credit policy for any problems customers experienced,
          or perceived  they  experienced,  due to the  conversion.  This policy
          resulted in a significant amount of credits of approximately  $553,900
          or 5.6% of total net  revenues in 1998,  as compared to  approximately
          $248,900  or 2.6%  of  total  net  revenues  in  1997.  This  increase
          dramatically  impacted  average selling prices and revenues as a whole
          for the year.

     2)   VOLUME DISCOUNTS  RESULTING IN REDUCED MARGINS:  Avert provides volume
          discounts,  which  resulted in reduced  margins and revenues.  Avert's
          largest  customer,  accounting for approximately 9% of total revenues,
          grew  approximately  30%,  while the Company's  overall  business grew
          approximately  5%. Due to their  discounted  pricing,  this negatively
          affected Avert's overall revenue growth for 1998.

     3)   CRIMINAL HISTORY  PRICING:  Prior to the conversion to the new system,
          Avert provided combination felony/misdemeanor criminal records for one
          combined  price  (2-for-1).  Once  converted,  the  Company  split the
          products  and  attempted to charge for both parts  separately.  Due to
          backlash from large  customers for this decision,  Avert was forced to
          give  misdemeanors  free until new prices  could be  negotiated.  This
          greatly affected Criminal History revenues for 1998.



                                       19
<PAGE>


     In  total  dollars,  criminal  history  reports  contributed  the  most net
revenues,  representing  approximately  $5,569,900  in net revenues in 1998,  as
compared to $4,754,300  in net revenues in 1997.  The criminal  history  reports
product  line has  increased  to  represent  approximately  55.9%  of total  net
revenues in 1998,  as compared to  approximately  50.1% of total net revenues in
1997. The Company  believes there is a continuing trend  nationwide,  as well as
increased  regulation for mandatory  checking of criminal  records.  The Company
continues to focus on obtaining quick and accurate data, by increased leveraging
of internal improvements gained from the recent computer system implementation.

     Net revenues  generated in the area of  reference  checking/credit  reports
decreased  slightly  from  approximately  $1,223,800  in 1997  to  approximately
$1,181,600 in 1998. These products represented  approximately 11.9% of total net
revenues in 1998,  as compared to  approximately  12.9% of total net revenues in
1997.

     Net revenues from workers' compensation histories continue to decrease as a
percentage  of total net  revenues,  and has  slipped  to  represent  the fourth
largest product line, approximately 9.4% of total net revenues in 1998. Sales of
workers' compensation histories are expected to continue to decline in total net
revenues  due to  regulation  and  necessity  of  releases  from the  respective
applicant to process the product.

     Other  Products and Services  revenue  remained flat when comparing 1998 to
1997. The product  contributing the most revenue in this category was Name Link,
a product  linking names,  addresses and social security  numbers,  representing
$192,700 in 1998 as compared to $203,800 in 1997.  Service sales,  which are not
itemized  in the chart  above,  increased  from  $520,100 in 1997 to $559,900 in
1997,  representing  an  approximate  7.7% growth.  Service  sales include Avert
Advantage   membership,   start-up  fees,   extended   criminal   history  fees,
miscellaneous research fees, and order entry fees charged to clients.

     In  conjunction   with  the  computer   conversion  in  1998,  the  Company
implemented  a new General  Ledger  system,  which  provides  additional  detail
regarding indirect costs. Due to this implementation, the Company is better able
to identify indirect costs, and therefore the 1998 amounts were re-classified to
better categorize expenses.  This reclassification,  not available in 1997, does
in no way  affect the bottom  line  reported  results.  All  expense  categories
increased as a percentage of total net revenues except  Marketing.  As mentioned
above, Avert's 1998 focus was to complete the computer conversion project, which
resulted in additional indirect expenditures in order to meet that objective.  A
breakdown of expenses is as follows:

<TABLE>
<CAPTION>
                                           Year Ended                   Year Ended
                                        December 31, 1998            December 31, 1997
                                        -----------------            -----------------            Increase (Decrease)
                                                     % of                         % of               % of Revenue
                                       Expenses     Revenue         Expenses     Revenue            1998 over 1997
                                       --------     -------         --------     -------          ------------------

<S>                                   <C>             <C>          <C>             <C>                 <C>
Search and product .................  $4,644,100      46.6%        $4,182,100        44.1%               2.5 %
Marketing ..........................   1,492,700      15.0%         1,435,800        15.1%              (0.1)%
General and administrative .........   1,467,400      14.7%         1,246,300        13.1%               1.6%
Software development and
   maintenance .....................     581,900       5.8%           364,100          3.8%              2.0%
Depreciation and
         amortization ..............     564,000       5.7%           404,500          4.3%              1.4%
                                      ----------      ----         ----------         ----              ----
Expenses ...........................  $8,750,100      87.8%        $7,632,800         80.4%              7.4%
</TABLE>

     The  increase in 1998 over 1997 of search and product  fees as a percentage
of total net revenues,  was a result of increased  personnel and temporary costs
due  to  the  additional   training  and  overtime  required  for  the  computer
conversion.  In addition, there were additional direct costs associated with the
reference checking and name link product groups.

     Marketing expenses,  as a percentage of total net revenues,  decreased from
approximately  15.1%  in  1997 to  approximately  15.0%  in  1998.  There  was a
decreased in personnel related expenses,  but an increase in lead generation and
advertising  costs.  Avert has an on-going marketing campaign designed to target




                                       20
<PAGE>


lead generation, marketing communication and market development for both current
customers  and new  customers,  via  in-house  marketing  personnel  and partner
relationships.

     As predicted, there was an increase in software development and maintenance
expenses expressed as a percentage of total net revenues from approximately 3.8%
in 1997 to  approximately  5.8% in 1998.  The primary reason for the increase is
that personnel costs directly associated with the development and implementation
of the computer system were  capitalized  with the software  project in 1997 and
the first three months of 1998,  but all costs are being  expensed  since April,
1998. In addition,  after  implementation  of the computer  system,  payments of
approximately  $100,000 were made to third parties to troubleshoot  problems and
other  minor  software  development,  which were  expensed  in  operations.  See
"Liquidity and capital  Resources" below in this Item. The Company  continues to
focus on making  technology its strategic  advantage in its  relationships  with
customers, partners and suppliers.

     There was an  increase  in  depreciation  and  amortization  expenses  when
expressed as a percentage of total net revenues, from approximately 4.3% in 1997
to approximately 5.7% in 1998. The increase was due to the increased capitalized
costs  associated  with  the  software  development  project  which  were  fully
amortized prior to April,  1998.  Depreciation  expense will increase in 1999 as
1998 included only nine months of depreciation related to this project.

     Income before income taxes  decreased from $1,858,000 in 1997 to $1,211,700
or approximately  34.8% and represented  approximately  19.6% of net revenues in
1997 compared to approximately 12.2% in 1998.

     The  combined  federal and state  income tax rate for 1998 and 1997 was 39%
and 34%, respectively, resulting in net income of $1,218,000, or $.35 per share,
on 3,488,000  (weighted average shares plus common stock  equivalents) for 1997,
as compared to net income of $739,800 or $0.22 per share, on 3,440,000 (weighted
average shares plus common stock  equivalents)  for 1998.  This tax increase was
primarily  a result of state  (enterprise  zone) tax  credits  received in 1997,
which effectively reduced the prior year rate.

Liquidity and Capital Resources

     Avert's  financial  position  at  December  31,1999,  remained  strong with
working  capital  at  that  date  of   approximately   $8,495,000   compared  to
approximately  $7,349,000  at December 31, 1998.  Cash and cash  equivalents  at
December 31, 1998 were  approximately  $531,000 and  increased to  approximately
$1,569,000 at December 31, 1999. Net cash provided from  operations for the year
ended December 31, 1999, was approximately  $2,282,000,  and consisted primarily
of net income of  $1,898,000,  a $355,000  increase  in trading  investments,  a
$361,000  net  increase  in  accrued  expenses,  and a  depreciation  expense of
$624,000.  Net cash provided  from  operations  for the year ended  December 31,
1998, was  approximately  $1,420,000,  and consisted  primarily of net income of
$740,000, a $107,000 decrease in trading investments, a $120,000 net decrease in
prepaid  expenses,  and a  depreciation  expense of $564,000.  Avert had capital
expenditures of approximately  $287,000 for the year ended December 31, 1999, as
compared to  approximately  $305,000 for 1998.  During 1999,  Avert used cash in
financing activities to purchase $548,000 of its Common shares outstanding,  and
to pay a $419,000 dividend.  Avert has declared an approximate $586,800 dividend
in 2000.

Inflation

     The Company  believes that the results of its  operations are not dependent
upon or affected by inflation.

ITEM 7.   Financial Statements.

     Financial  Statements are filed as a part of this report at the end of Part
III hereof  beginning at page F-1, Index to Consolidated  Financial  Statements,
and are incorporated herein by this reference.

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

     None.


                                       21
<PAGE>

                                    PART III

     The  information  required by Part III is omitted from this report  because
the Company will file a definitive Proxy Statement for the Company's 2000 Annual
Meeting of Shareholders  (the "Proxy  Statement")  pursuant to Regulation 14A of
the Securities Exchange Act of 1934 not later than 120 days after the end of the
fiscal year covered by this Form  10-KSB.  Certain  information  included in the
aforementioned definitive Proxy Statement is incorporated herein by reference.

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

     The information  required by this Item is incorporated  herein by reference
to the Proxy Statement.

ITEM 10.  Executive Compensation.

     The information  required by this Item is incorporated  herein by reference
to the Proxy Statement.

ITEM 11.  Security Ownership of Certain Beneficial Owners and Management.

     The information  required by this Item is incorporated  herein by reference
to the Proxy Statement.

ITEM 12.  Certain Relationships and Related Transactions.

     The information  required by this Item is incorporated  herein by reference
to the Proxy Statement.

ITEM 13.  Exhibits and Reports on Form 8-K.

(a)      Exhibits.

         3.1   Articles of Incorporation, as amended, of the Registrant. (2)

         3.2   Bylaws, as amended, of the Registration. (2)

         3.3   Excerpt  from  Articles  of   Incorporation   of  the  Registrant
               Regarding Common Stock and Preferred Stock. (2)

         10.1  Form of Consumer Report User Agreement  between  Registration and
               customer of Registrant for changes in FCRA dated September, 1997.
               (8)

       10.1.1  Revised  form   of  Consumer  Report   User  Agreement-Employment
               between Registrant and customer of Registrant. (8)

       10.1.2  Revised form of Consumer Report User Agreement between Registrant
               and customer of  Registrant  for changes in  available  programs,
               billing  options,  etc.  for  customers  beginning  approximately
               September, 1999.

       10.1.3  Revised form of Consumer Report User Agreement between Registrant
               and customer of Registrant  for changes  necessary for use on the
               Avert web site.

       10.1.4  Revised  form   of  Consumer   Report  User   Agreement   between
               Registrant and ADP EBS customers  beginning  approximately  June,
               1999.

       10.1.5  Revised Form of Consumer Report User Agreement between Registrant
               and ADP MAJORS customers beginning approximately July, 1999.

       10.1.6  Consumer Report User Addendum between  Registrant and customer of
               Registrant for selection of payment methods.


                                       22
<PAGE>


       10.1.7  Revised form of Consumer Report User Addendum between  Registrant
               and customer of Registrant to be used for Staffing Related Firms.

       10.1.8  Revised form of Consumer Report User Addendum between  Registrant
               and customer of Registrant to be used for Security Related Firms.

       10.2    Revised  form of Consumer  Report User  Agreement-Non  Employment
               between Registrant and customer of Registrant.  (7)

       10.3    Employment  Agreement  dated as of January 1, 1994,  between  the
               Registrant and Dean A. Suposs. (2)

       10.3.1  Employment  Agreement Renewal dated January 5, 1999,  between the
               Registrant and Dean A. Suposs.

       10.4    Employer  Report  Subscriber  Agreement,  dated  March 29,  1991,
               between the Registrant and TRW, Inc. (1)

       10.4.1  Reseller Service Agreement, dated September 25, 1997, between the
               Registrant and TRW, Inc. (2)

       10.4.2  Experian   (formerly  TRW,  Inc.)   Reseller   Certification   of
               Compliance dated May 4, 1998. (8)

       10.5    Credit Bureau Service  Agreement,  dated March 30, 1992,  between
               the Registrant And TransUnion. (1)

       10.5.1  TransUnion Amendment to Service Agreement dated May 5, 1998. (8)

       10.5.2  TransUnion  Amendment  to Service  Agreement  dated  December 30,
               1999.

       10.6    Amended and Restated 1994 Stock Incentive Plan. (3)

       10.7    Non-Employee Directors' Stock Option Plan.  (2)

       10.8    Letter  Agreements,  Dated  March  24,  1995,  with Ace  Hardware
               Corporation and Loss Prevention Services relating to sales of the
               Registrant's Products. (4)

       10.9    Amended and  Restated  1994 Stock  Incentive  Plan and  Incentive
               Stock Option  Agreement  between Leonard Koch and the Registrant.
               (6)

       10.9.1  Amended and  Restated  1994 Stock  Incentive  Plan and  Incentive
               Stock Option Agreement  between Dean A. Suposs and the Registrant
               dated January 1, 2000.

       10.10   Amended and Restated 1994 Stock  Incentive Plan  Incentive  Stock
               Option Agreement,  dated June 10, 1996, between Jerry Thurber and
               the Registrant. (6)

       10.10.1 Amended and Restated 1994 Stock  Incentive Plan  Incentive  Stock
               Option Agreement dated December 16, 1999,  between Registrant and
               Jerry Thurber.

       10.11   Amended and Restated 1994 Stock  Incentive Plan  Incentive  Stock
               Option  Agreement,  dated July 1, 1996,  between Jamie Burgat and
               the Registrant. (6)

       10.12   Restrac/Avert  Avertnet Reseller  Agreement dated January 4, 1999
               between Registrant and Registrant. (8)


                                       23
<PAGE>


       10.13   Distribution   Partnership  Agreement  dated  December  13,  1998
               between Registrant and Heidrick and Struggles.

       10.14   Distribution   Partnership  Term  Sheet  between  Registrant  and
               Careermag.com dated June 8, 1999.

       10.15   Distribution and Marketing Rights  Agreement  between  Registrant
               and AtYourBusiness.com dated September 15, 1999.

       10.16   Agreement for Electronic  Payments  between  Registrant and First
               State Bank of Fort Collins dated June 7, 1999.

       10.17   Profit Sharing Plan for 1999

       23.1    Consent of Hein + Associates LLP

       27.1    Financial Data Schedule-1999

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

     (1)  Filed as an Exhibit to the initial  Registration  Statement  (File No.
          33-76726-D) filed with the Securities and Exchange Commission on March
          21, 1994.
     (2)  Filed as an Exhibit to Amendment No. 1 to the  Registration  Statement
          (File  No.   33-76726-D)   filed  with  the  Securities  and  Exchange
          Commission on April 26, 1994.
     (3)  Filed as an Exhibit to Amendment No. 2 to the  Registration  Statement
          (File  No.   33-76726-D)   filed  with  the  Securities  and  Exchange
          Commission on May 24, 1994.
     (4)  Filed  as  an  Exhibit  to  Post-Effective  Amendment  No.  1  to  the
          Registration Statement (File No. 33-76726-D) filed with the Securities
          and Exchange Commission on May 4, 1995.
     (5)  Filed as an Exhibit to Form  10-KSB  for the year ended  December  31,
          1995 filed with the  Securities  and Exchange  Commission  on March 9,
          1996.
     (6)  Filed  as  an  Exhibit  to  Post-Effective  Amendment  No.  2  to  the
          Registration Statement (File No. 33-76726-D) filed with the Securities
          and Exchange Commission on October 23, 1996.
     (7)  Filed as an Exhibit to Form  10-KSB  for the year ended  December  31,
          1997 filed with the  Securities  and Exchange  Commission on March 30,
          1998.
     (8)  Filed as an Exhibit to Form  10-KSB  for the year ended  December  31,
          1998 filed with the  Securities  and Exchange  Commission on March 23,
          1999.

(b)  Reports on Form 8-K.

     The  following  current  reports on Form 8-K were filed during the calendar
quarter ended December 31, 1999:

     1)   Form 8-K, dated October 5, 1999,  regarding  press release  announcing
          that  Avert Inc.  added  Express  Motor  Vehicle  Records to  expedite
          background checks.
     2)   Form 8-K, dated October 13, 1999,  regarding press release  announcing
          that Avert  Inc.  announced  record  financial  results  for the third
          quarter and nine-month period.
     3)   Form 8-K, dated November 30, 1999,  regarding press release announcing
          a partnership  between Avert and  AtYourBusiness.com  Partner to Offer
          Pre-employment Screening Solutions Online.


                                       24
<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.


                                    AVERT, INC.


Date:  March 27, 2000               By: /s/ Dean A. Suposs
                                        ----------------------------------------
                                        Dean A. Suposs
                                        President and Chairman of the Board


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following  persons on behalf of the Registrant and in the
capacities indicated as of March 30, 1999.

     Signature                                    Title
     ---------                                    -----

/s/ Dean A. Suposs                      Chairman of the Board; and President
--------------------------------------
    Dean A. Suposs
(Principal Executive Officer)

                                        Vice President of Operations; Treasurer;
  /s/ Jamie M. Burgat                   and Assistant Secretary
--------------------------------------
      Jamie M. Burgat
(Principal Financial and Accounting Officer)

/s/ D. Michael Vaughan                  Director
--------------------------------------
    D. Michael Vaughan

/s/ Stephen C. Fienhold                 Director
--------------------------------------
    Stephen C. Fienhold

/s/ Stephen D. Joyce                    Secretary; and Director
--------------------------------------
    Stephen D. Joyce


















                                       25
<PAGE>

                                   Avert, Inc.



                              Financial Statements
                                December 31, 1999


























































                                      F-1
<PAGE>



                          INDEPENDENT AUDITOR'S REPORT




Board of Directors
Avert, Inc.
Fort Collins, Colorado


We have audited the accompanying balance sheet of Avert, Inc. as of December 31,
1999, and the related statements of income,  shareholders' equity and cash flows
for the years ended December 31, 1999 and 1998.  These financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our 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 financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Avert, Inc. as of December 31,
1999,  and the results of its  operations and its cash flows for the years ended
December 31, 1999 and 1998, in conformity  with  generally  accepted  accounting
principles.



/s/ HEIN + ASSOCIATES LLP
HEIN + ASSOCIATES LLP


Denver, Colorado
January 28, 2000





                                      F-2
<PAGE>

<TABLE>
<CAPTION>



                                        AVERT, INC.

                                       BALANCE SHEET
                                     DECEMBER 31, 1999



                                     ASSETS

<S>                                                                                 <C>
CURRENT ASSETS:
Cash and cash equivalents .....................................................     $ 1,569,000
Marketable securities .........................................................       6,361,000
Accounts receivable, net of allowance of $103,000 .............................       1,602,000
Prepaid expenses and other ....................................................          99,000
                                                                                    -----------
Total current assets ..........................................................       9,631,000

PROPERTY AND EQUIPMENT, net ...................................................       2,797,000
                                                                                    -----------
TOTAL ASSETS ..................................................................     $12,428,000
                                                                                    ===========



                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable ..............................................................     $   500,000
Accrued expenses ..............................................................         486,000
Income taxes payable ..........................................................         150,000
                                                                                    -----------
Total current liabilities .....................................................       1,136,000

DEFERRED INCOME TAXES .........................................................         340,000

COMMITMENTS (NOTE 5)

SHAREHOLDERS' EQUITY:
Preferred stock, no par value, authorized 1,000,000 shares; none outstanding ..           --

Common stock, no par value, authorized 9,000,000 shares; 3,263,000 shares
issued and outstanding ........................................................       3,924,000
Retained earnings .............................................................       7,028,000
                                                                                    -----------
Total shareholders' equity ....................................................      10,952,000
                                                                                    -----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ....................................     $12,428,000
                                                                                    ===========
</TABLE>



              See accompanying notes to these financial statements.



                                      F-3
<PAGE>


<TABLE>
<CAPTION>
                                        AVERT, INC.

                                   STATEMENTS OF INCOME



                                                                  FOR THE YEARS ENDED
                                                                      DECEMBER 31,
                                                               -------------------------
                                                                  1999          1998
                                                                  ----          ----
<S>                                                          <C>            <C>
NET REVENUES:

     Search and product fees .............................   $ 12,215,000  $ 9,638,000

     Interest and other income ...........................        393,000      324,000
                                                              -----------  -----------
                                                               12,608,000    9,962,000
EXPENSES:

     Search and product costs ............................      5,699,000    4,966,000

     Marketing ...........................................      1,367,000    1,493,000

     General and administrative ..........................      1,319,000    1,145,000

     Software development and maintenance ................        528,000      582,000

     Depreciation ........................................        624,000      564,000
                                                             ------------  -----------
                                                                9,537,000    8,750,000
                                                             ------------  -----------
INCOME BEFORE INCOME TAXES ...............................      3,071,000    1,212,000

     Income tax expense ..................................     (1,173,000)    (472,000)
                                                             ------------  -----------
NET INCOME ...............................................   $  1,898,000  $   740,000
                                                             ============  ===========
NET INCOME PER COMMON SHARE:
     Basic ...............................................   $        .57  $       .22
                                                             ============  ===========
     Diluted .............................................   $        .55  $       .21
                                                             ============  ===========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

     Basic ...............................................      3,314,000    3,440,000
                                                             ============  ===========
     Diluted .............................................      3,422,000    3,504,000
                                                             ============  ===========
</TABLE>


              See accompanying notes to these financial statements.





                                      F-4
<PAGE>


<TABLE>
<CAPTION>
                                                             AVERT, INC.

                                                  STATEMENT OF SHAREHOLDERS' EQUITY
                                           FROM JANUARY 1, 1998 THROUGH DECEMBER 31, 1999


                                                                 COMMON STOCK                                             Total
                                                          ---------------------------               Retained           Shareholders'
                                                          Shares               Amount               Earnings             Equity
                                                          ------               ------               --------           -------------
<S>                                                   <C>                <C>                   <C>                   <C>
BALANCES, January 1, 1998 ..................            3,488,000             5,276,000             5,159,000            10,435,000

     Dividend paid .........................                 --                    --                (350,000)             (350,000)

     Shares repurchased ....................             (165,000)             (814,000)                 --                (814,000)

     Net income ............................                 --                    --                 740,000               740,000
                                                     ------------          ------------          ------------          ------------

BALANCES, December 31, 1998 ................            3,323,000          $  4,462,000          $  5,549,000          $ 10,011,000

     Dividend paid .........................                 --                    --                (419,000)             (419,000)

     Shares purchased ......................                2,000                10,000                  --                  10,000

     Shares repurchased ....................              (62,000)             (548,000)                 --                (548,000)

     Net income ............................                 --                    --               1,898,000             1,898,000
                                                     ------------          ------------          ------------          ------------

BALANCES, December 31, 1999 ................            3,263,000          $  3,924,000          $  7,028,000          $ 10,952,000
                                                     ============          ============          ============          ============
</TABLE>



              See accompanying notes to these financial statements.






                                      F-5
<PAGE>


<TABLE>
<CAPTION>
                                            AVERT, INC.

                                     STATEMENTS OF CASH FLOWS

                                                                                     FOR THE YEARS ENDED
                                                                                         DECEMBER 31,
                                                                                 ---------------------------
                                                                                 1999                   1998
                                                                                 ----                   ----

<S>                                                                          <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income ......................................................       $ 1,898,000            $   740,000
     Adjustments to reconcile net income to net
        cash provided by operating activities:
     Depreciation ....................................................           624,000                564,000
     Bad debt expense ................................................            53,000                 72,000
     Deferred income taxes ...........................................          (107,000)                (19,000)
     Loss (gain) on sale of asset ....................................             4,000                  2,000
     Changes in operating assets and liabilities:
         (Increase) decrease in:
               Trading investments, net ..............................          (355,000)                107,000
               Accounts receivable ...................................          (594,000)                  2,000
               Prepaid expenses and other current assets .............            44,000                120,000
          Increase (decrease) in:
               Accounts payable ......................................           204,000                (92,000)
               Accrued expenses ......................................           361,000                (76,000)
               Income taxes payable ..................................           150,000                   --
                                                                             -----------            -----------
     Net cash provided by operating activities .......................         2,282,000              1,420,000

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of property and equipment ..............................          (289,000               (338,000)
     Proceeds from sale of property and equipment ....................             2,000                 33,000
                                                                             -----------            -----------
          Net cash used in investing activities ......................          (287,000)              (305,000)

CASH FLOWS FROM FINANCING ACTIVITIES:
     Purchase of shares outstanding ..................................          (548,000)              (814,000)
     Proceeds from exercise of warrants and options ..................            10,000                   --
     Dividends declared ..............................................          (419,000)              (350,000)
                                                                             -----------            -----------
          Net cash used in financing activities ......................          (957,000)            (1,164,000)
                                                                             -----------            -----------
INCREASE IN CASH AND CASH EQUIVALENTS ................................         1,038,000                (49,000)

CASH AND CASH EQUIVALENTS, beginning of year .........................           531,000                580,000
                                                                             -----------            -----------
CASH AND CASH EQUIVALENTS, end of year ...............................       $ 1,569,000            $   531,000
                                                                             ===========            ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -
     Income taxes paid ...............................................       $   994,000            $   415,000
                                                                             ===========            ===========
</TABLE>

              See accompanying notes to these financial statements.



                                      F-6
<PAGE>


                                   AVERT, INC.

                          NOTES TO FINANCIAL STATEMENTS


I    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     Organization  and Nature of  Operations  - Avert,  Inc.  (the  Company) was
     incorporated  in  Colorado  in 1986 to  develop  the  use of  databases  to
     accumulate  and provide  information  for sale relating to an  individual's
     workers'  compensation  claims,  criminal history,  driving record,  credit
     rating,  education,  and previous  employment.  The Company  provides  this
     service to a diverse group of customers throughout the United States.

     Cash and Cash  Equivalents  - For purposes of the  statement of cash flows,
     all highly liquid debt instruments with original maturities of three months
     or less are considered to be cash equivalents.

     Marketable  Securities - Marketable securities consist of government backed
     debt  securities  which mature within one year or less.  The securities are
     classified  as  trading   securities  and  are  stated  at  market,   which
     approximates cost at December 31, 1999.

     Concentration of Credit Risk and Financial  Instruments - Concentrations of
     credit risk consist primarily of cash equivalents,  short-term  investments
     and accounts receivable with the Company's various customers. The Company's
     cash equivalents and short-term  investments  consist of money market funds
     and government backed debt securities issued by various  institutions.  The
     Company's  credit  policy is  designed to limit the  Company's  exposure to
     concentrations  of  credit  risk.   Accordingly,   the  Company's  accounts
     receivable include a variety of organizations throughout the United States.
     The Company  estimates  an allowance  for  uncollectible  amounts  based on
     revenues,  and when specific credit problems arise.  Management's estimates
     have been adequate during historical periods,  and management believes that
     all significant credit risks have been identified at December 31, 1999.

     Property  and  Equipment  -  Property  and  equipment  are  stated at cost.
     Depreciation  is  calculated  using  the  straight-line   method  over  the
     estimated useful lives of the assets, which is generally five years, except
     for the Company's building which is 30 years.

     The Company incurs costs for computer  software  development  for enhancing
     and maintaining its data base system and to provide  "on-line"  services to
     its  customers.  In 1996,  the Company  embarked on a major  upgrade to its
     database system to expand its service to its customers. In April 1998, this
     project was completed.  During 1999 and 1998, the Company capitalized major
     enhancements  costs of  approximately  $130,000  and  $191,000,  consisting
     principally of payments to third parties.  These capitalized software costs
     are being  amortized  over five  years and  commenced  as the  project  was
     completed. Maintenance and routine upgrades are expensed in operations.

     Impairment of  Long-Lived  Assets - The Company  periodically  assesses the
     recoverability  of the  carrying  amount of  long-lived  assets,  including
     intangible assets. A loss is recognized when expected future cash flows are
     less  than  the  carrying  amount  of the  asset.  The  impairment  loss is
     determined  as the  difference  by which the  carrying  amount of the asset
     exceeds its fair  value.  Assets to be disposed of are carried at the lower
     of their financial  statement  carrying amounts or fair value less costs to
     sell.

     Income Taxes - The Company  accounts  for income taxes under the  liability
     method,  which requires  recognition of deferred tax assets and liabilities
     for the expected future tax  consequences of events that have been included
     in the financial statements or tax returns. Under this method, deferred tax


                                      F-7
<PAGE>
                                   AVERT, INC.

                          NOTES TO FINANCIAL STATEMENTS


     assets and liabilities are determined  based on the difference  between the
     financial  statements and tax bases of assets and liabilities using enacted
     tax rates in effect for the year in which the  differences  are expected to
     reverse.

     Net Income Per Share - Basic earnings per share (EPS) excludes dilution for
     common  stock  equivalents  and is  computed  by  dividing  income  or loss
     available to common  shareholders  by the weighted  average  number  common
     shares  outstanding  for the period.  Diluted EPS  reflects  the  potential
     dilution that could occur if securities or other  contracts to issue common
     stock were  exercised  or  converted  into common stock and resulted in the
     issuance  of common  stock.  In 1999 and 1998,  diluted  common  and common
     equivalent shares outstanding includes 108,000 and 64,000 common equivalent
     shares, respectively,  consisting of stock options and warrants, determined
     using the treasury stock method.

     Comprehensive  Income  (Loss) -  Comprehensive  income  is  defined  as all
     changes in  stockholders'  equity,  exclusive of transactions  with owners,
     such as capital  investments.  Comprehensive  income includes net income or
     loss,  changes in certain assets and liabilities that are reported directly
     in  equity  such as  translation  adjustments  on  investments  in  foreign
     subsidiaries,  and  certain  changes in minimum  pension  liabilities.  The
     Company's  comprehensive income was equal to its net income for all periods
     presented in these financial statements.

     Stock-Based  Compensation  - As permitted  under the Statement of Financial
     Accounting  Standards No. 123 (SFAS No. 123),  Accounting  for  Stock-Based
     Compensation,  the Company  accounts for its  stock-based  compensation  in
     accordance with the provisions of Accounting Principles Board (APB) Opinion
     No. 25,  Accounting  for Stock Issued to Employees.  As such,  compensation
     expense is recorded  for options  granted to employees on the date of grant
     only if the current  market  price of the  underlying  stock  exceeded  the
     exercise  price.  Certain  pro forma net  income  and EPS  disclosures  for
     employee  stock  option  grants  are  also  included  in the  notes  to the
     financial statements as if the fair value method as defined in SFAS No. 123
     had been applied. Transactions in equity instruments with non-employees for
     goods or services are accounted for by the fair value method.

     Impact of Recently Issued Accounting  Standards - SFAS No. 133,  Accounting
     for Derivative Instruments and Hedging Activities, was issued in June 1998.
     This  statement   establishes   accounting  and  reporting   standards  for
     derivative  instruments  and for hedging  activities.  It requires  that an
     entity  recognize all  derivatives  as either assets or  liabilities in the
     statement  of  financial  position and measure  those  instruments  at fair
     value. This statement is effective for the Company's  financial  statements
     for the year ended  December 31, 2000 and the adoption of this  standard is
     not  expected  to  have  a  material  effect  on  the  Company's  financial
     statements.

     Use of Estimates - The preparation of the Company's financial statements in
     conformity  with  generally  accepted  accounting  principles  requires the
     Company's  management  to make  estimates and  assumptions  that affect the
     amounts  reported in these  financial  statements and  accompanying  notes.
     Actual results could differ from those estimates.

     Reclassifications  -  Certain  reclassifications  have  been  made  to 1998
     financial   information   to   conform   to   1999   presentations.    Such
     reclassifications had no effect on net income.



                                      F-8

<PAGE>
                                   AVERT, INC.

                          NOTES TO FINANCIAL STATEMENTS


II.   PROPERTY AND EQUIPMENT:

      Property and equipment consist of the following at December 31, 1999:


          Land                                        $   210,000
          Building and improvements                     1,219,000
          Computer hardware and software                2,864,000
          Furniture and equipment                         617,000
                                                      -----------
                                                        4,910,000
          Less accumulated depreciation                (2,113,000)
                                                      -----------
                                                      $ 2,797,000
                                                      ===========
III.  INCOME TAXES:

       The actual  income tax expense  differs from the  "expected"  tax expense
       (computed by applying the U.S.  Federal  corporate income tax rate of 34%
       for each period) as follows:

<TABLE>
<CAPTION>
                                                             Years Ended December 31,
                                                         ------------------------------
                                                         1999                      1998
                                                         ----                      ----
                                                         Amount           %        Amount              %
                                                         -----          --         ------            --
<S>                                                   <C>            <C>         <C>               <C>
Computed "expected" tax expense ...................   $ 1,044,000     34.0%      $ 412,000         34.0%
State income taxes, net of Federal income
  tax benefit .....................................       123,000      4.0%         49,000          4.0%
Non-deductible expenses and other .................         6,000       .2%         11,000          0.9%
                                                      -----------      -----     ---------         -----
Total income tax expense ..........................   $ 1,173,000      38.2%     $ 472,000         38.9%
                                                      ==========       =====     =========         =====
</TABLE>

     Income tax expense (benefit) consists of the following:

                                         Years Ended December 31,
                                         -----------------------
                                          1999             1998
                                          ----             ----
     Current                           $1,280,000        $ 491,000
     Deferred                            (107,000)         (19,000)
                                       ----------        ---------
     Total income tax expense          $1,173,000        $ 472,000
                                       ==========        =========

     Temporary  differences between the financial statement carrying amounts and
     tax basis of assets and liabilities  that give rise to the net deferred tax
     liability relates primarily to differences in capitalized software costs.




                                      F-9
<PAGE>
                                   AVERT, INC.

                          NOTES TO FINANCIAL STATEMENTS


IV.  SHAREHOLDERS' EQUITY:

     Stock Option Plan - In 1994,  the Company  adopted a stock  incentive  plan
     (the Stock  Option  Plan) that  authorizes  the  issuance  of up to 363,337
     shares of common  stock.  In 1997,  the  Company  increased  the  number of
     authorized  shares to  525,000.  Pursuant  to the Stock  Option  Plan,  the
     Company may grant  "incentive  stock  options"  (intended to qualify  under
     Section  422  of  the  Internal   Revenue   Code  of  1986,   as  amended),
     non-qualified stock options and restricted stock or a combination thereof.

     Incentive and non-qualified stock options may not be granted at an exercise
     price of less than the fair market value of the common stock on the date of
     grant  (except  for holders of more than 10% of common  stock,  whereby the
     exercise  price must be at least 110% of the fair market  value at the date
     of grant for  incentive  stock  options).  The term of the  options may not
     exceed 10 years.  At December  31,  1999,  the Company had granted  options
     under the Stock  Option Plan to purchase  464,000  shares of which  300,664
     options  are  vested  and the  balance  will vest  over one to five  years.
     Options  outstanding  for the Stock  Option Plan at December  31, 1999 have
     exercise prices that range from $4.19 to $9.97.

     In 1994, the Company adopted the Non Employee  Directors' Stock Option Plan
     (the  Outside  Directors'  Plan),  which  provides  for the  grant of stock
     options to  non-employee  directors of the Company and any  subsidiary.  An
     aggregate of 30,000 shares of common stock are reserved for issuance  under
     the Outside  Directors' Plan. The exercise price of the options will be the
     fair market value of the stock on the date of grant.  Outside directors are
     automatically  granted  options to purchase  1,000 shares  initially and an
     additional  1,000 shares for each  subsequent year that they serve, up to a
     maximum of 5,000 shares per director.  Each option is exercisable  one year
     after the date of grant and expires four years  thereafter.  As of December
     31, 1999, 15,000 options have been granted,  of which 12,000 are vested and
     outstanding.  Exercise  prices for the  directors'  options  outstanding at
     December 31, 1998 range from $5.25 to $8.00.

     The following is a table of activity under these plans.

                                                                        Weighted
                                                            Outside     Average
                                               Stock       Directors'   Exercise
                                            Option Plan      Plan        Price
                                            -----------    ----------  ---------
OPTIONS OUTSTANDING, January 1, 1998 ......    364,000       11,000     $  5.42
Options exercised or expired ..............    (10,000)        --       $  5.25
Options granted ...........................      --           3,000     $  6.79
                                              --------      -------       -----
OPTIONS OUTSTANDING, December 31, 1998 ....    354,000       14,000        5.44
Options exercised or expired ..............      --          (2,000)       5.25
Options granted ...........................    110,000        1,000        4.73
                                              --------      -------       -----
OPTIONS OUTSTANDING, December 31, 1999 ....    464,000       13,000     $  5.27
                                              ========      =======       =====

     For all options  granted during 1999 and 1998, the weighted  average market
     price of the  Company's  common  stock on the grant date was  approximately
     equal  to  the  weighted  average  exercise  price.  The  weighted  average
     remaining  contractual life for all options and warrants as of December 31,
     1999 was  approximately 6 years. At December 31, 1999,  options for 312,664
     shares were  exercisable,  with a weighted average exercise price of $5.38,
     and options for the remaining  shares become  exercisable  pro rata through
     2004. If not  previously  exercised,  options  outstanding  at December 31,
     1999, will expire as follows:



                                      F-10
<PAGE>
                                   AVERT, INC.

                          NOTES TO FINANCIAL STATEMENTS


                                                             Weighted
                                                              Average
                                           Number of         Exercise
          Year                              Shares             Price
          ----                             ---------         --------
          2000                               3,000            $6.17

          2001                               3,000            $5.58

          2002                               3,000            $7.46

          2003                               3,000            $6.79

          2004                             221,000            $5.23

          2006                              60,000            $5.00

          2007                              73,300            $6.17

          2008                                 700            $7.63

          2009                             110,000            $4.71
                                         ---------
                                           477,000
                                         =========

     Pro Forma  Stock-Based  Compensation  Disclosures - The Company applies APB
     Opinion 25 and related  interpretations in accounting for its stock options
     and warrants which are granted to employees.  Accordingly,  no compensation
     cost has been  recognized  for grants of options and  warrants to employees
     since  the  exercise  prices  were  not less  than  the  fair  value of the
     Company's  common  stock on the grant  dates.  Had  compensation  cost been
     determined  based on the fair  value at the grant  dates for  awards  under
     those plans  consistent  with the method of SFAS No. 123, the Company's net
     income and  earnings  per share  would  have been  reduced to the pro forma
     amounts indicated below.


                                                       Years Ended December 31,
                                                       -----------------------
                                                       1999              1998
                                                       ----              ----
Net income applicable to common stockholders:
     As reported .............................     $ 1,898,000     $     740,000
     Pro forma ...............................     $ 1,788,000     $     670,000
Net income per common share - basic:
     As reported .............................     $       .57     $         .22
     Pro forma ...............................     $       .54     $         .20
Net income per common share - diluted:
     As reported .............................     $       .55     $         .21
     Pro forma ...............................     $       .52     $         .19



                                      F-11
<PAGE>

                                   AVERT, INC.

                          NOTES TO FINANCIAL STATEMENTS


     For purposes of this  disclosure,  the  weighted  average fair value of the
     options  granted  in 1999 and 1998 was $1.96 and $4.59,  respectively.  The
     fair value of each employee option and warrant granted in 1999 and 1998 was
     estimated on the date of grant using the Black-Scholes option-pricing model
     with the following weighted average assumptions:


                                                       Years Ended December 31,
                                                       -----------------------
                                                       1999              1998
                                                       ----              ----
     Expected volatility                                52%               80%
     Risk-free interest rate                            6.0%              5.5%
     Expected dividends                                  --                --
     Expected terms (in years)                           5                 5


     Public  Offering - In June 1994,  the Company  completed its initial public
     offering of 1,000,000  units and received net proceeds of $4,382,300.  Each
     unit  sold for  $5.25 and  consisted  of one share of common  stock and one
     redeemable warrant. Two redeemable warrants entitled the holder to purchase
     one share of common stock for $6.50 through April 1997. In connection  with
     this offering,  the underwriter  received a redeemable  warrant to purchase
     100,000 units at $6.30 per unit.  This  redeemable  warrant expired without
     exercise in June 1999.  During 1997,  176,250  warrants were  exercised for
     88,125 shares of common stock at $6.50 per share and the remaining warrants
     expired unexercised. The Company received net proceeds of $530,800.

     Preferred Stock - The Company has authorized  1,000,000 shares of preferred
     stock.  Such shares are issuable in such series and  preferences  as may be
     determined by the Board of Directors.


V.   COMMITMENTS:

     Employee  Bonus - In 1994,  the Company  formalized a five-year  employment
     agreement  whereby the Company  president  receives a bonus of 6% of income
     before taxes and bonus, but after deducting investment income. During 1999,
     the employment  agreement was extended an additional five years and revised
     whereby  the  percentage  of the bonus  increases  based on  profits  on an
     incremental  basis from 6% up to 9%. The total  bonus  expense for 1999 and
     1998 was approximately $181,000 and $56,000, respectively.




                                      F-12
<PAGE>


                                   AVERT, INC.

                          NOTES TO FINANCIAL STATEMENTS


     401(k) Savings - In 1995,  the Company  implemented a 401(k) profit sharing
     plan (the Plan). Eligible employees may make voluntary contributions to the
     Plan,  which are  matched  by the  Company  equal to 50% of the  employee's
     contribution   up  to  a  maximum  of  $1,500.   The  amount  of   employee
     contributions is limited as specified in the Plan. Company contributions to
     the Plan in 1999 and 1998 were insignificant.

     Profit  Sharing - In 1999,  the Company  implemented a bonus profit sharing
     plan,  whereby all employees  are  eligible.  Employees can receive up to a
     maximum  of 20% of  profits  in  excess  of 12% of  revenues.  This  bonus,
     however, is only paid if revenues increase at least 12% over prior year and
     the Company maintains at least 12% of revenues as profits. During 1999, the
     employees received approximately $59,000.

     Litigation - The Company is subject to legal  proceedings  and claims which
     have arisen in the ordinary  course of its business.  Management  believes,
     based on its  discussion  with  counsel,  that the outcome of these matters
     will  not have a  material  effect  on the  Company's  financial  position;
     however, there can be no assurance in this regard.


VI.  CONCENTRATIONS OF CREDIT RISK:

     Credit risk  represents the accounting loss that would be recognized at the
     reporting  date  if   counterparties   failed   completely  to  perform  as
     contracted. Concentrations of credit risk (whether on or off balance sheet)
     that arise from  financial  instruments  exist for groups of  customers  or
     counterparties when they have similar economic  characteristics  that would
     cause  their  ability  to  meet  contractual  obligations  to be  similarly
     effected by changes in economic or other  conditions.  Management  believes
     the  allowance  for doubtful  accounts is  sufficient  to cover the related
     credit risk on credit sales.

     Approximately 10% of the Company's search and product revenues are from one
     customer.










                                      F-13
<PAGE>

                                  EXHIBIT INDEX

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

         3.1   Articles of Incorporation, as amended, of the Registrant. (2)

         3.2   Bylaws, as amended, of the Registration. (2)

         3.3   Excerpt  from  Articles  of   Incorporation   of  the  Registrant
               Regarding Common Stock and Preferred Stock. (2)

         10.1  Form of Consumer Report User Agreement  between  Registration and
               customer of Registrant for changes in FCRA dated September, 1997.
               (8)

       10.1.1  Revised  form   of  Consumer  Report   User  Agreement-Employment
               between Registrant and customer of Registrant. (8)

       10.1.2  Revised form of Consumer Report User Agreement between Registrant
               and customer of  Registrant  for changes in  available  programs,
               billing  options,  etc.  for  customers  beginning  approximately
               September, 1999.

       10.1.3  Revised form of Consumer Report User Agreement between Registrant
               and customer of Registrant  for changes  necessary for use on the
               Avert web site.

       10.1.4  Revised  form   of   Consumer  Report   User  Agreement   between
               Registrant and ADP EBS customers  beginning  approximately  June,
               1999.

       10.1.5  Revised Form of Consumer Report User Agreement between Registrant
               and ADP MAJORS customers beginning approximately July, 1999.

       10.1.6  Consumer Report User Addendum between  Registrant and customer of
               Registrant for selection of payment methods.

       10.1.7  Revised form of Consumer Report User Addendum between  Registrant
               and customer of Registrant to be used for Staffing Related Firms.

       10.1.8  Revised form of Consumer Report User Addendum between  Registrant
               and customer of Registrant to be used for Security Related Firms.

       10.2    Revised  form of Consumer  Report User  Agreement-Non  Employment
               between Registrant and customer of Registrant.  (7)

       10.3    Employment  Agreement  dated as of January 1, 1994,  between  the
               Registrant and Dean A. Suposs. (2)

       10.3.1  Employment  Agreement Renewal dated January 5, 1999,  between the
               Registrant and Dean A. Suposs.

       10.4    Employer  Report  Subscriber  Agreement,  dated  March 29,  1991,
               between the Registrant and TRW, Inc. (1)

       10.4.1  Reseller Service Agreement, dated September 25, 1997, between the
               Registrant and TRW, Inc. (2)

       10.4.2  Experian   (formerly  TRW,  Inc.)   Reseller   Certification   of
               Compliance dated May 4, 1998. (8)

       10.5    Credit Bureau Service  Agreement,  dated March 30, 1992,  between
               the Registrant And TransUnion. (1)



<PAGE>


       10.5.1  TransUnion Amendment to Service Agreement dated May 5, 1998. (8)

       10.5.2  TransUnion  Amendment  to Service  Agreement  dated  December 30,
               1999.

       10.6    Amended and Restated 1994 Stock Incentive Plan. (3)

       10.7    Non-Employee Directors' Stock Option Plan.  (2)

       10.8    Letter  Agreements,  Dated  March  24,  1995,  with Ace  Hardware
               Corporation and Loss Prevention Services relating to sales of the
               Registrant's Products. (4)

       10.9    Amended and  Restated  1994 Stock  Incentive  Plan and  Incentive
               Stock Option  Agreement  between Leonard Koch and the Registrant.
               (6)

       10.9.1  Amended and  Restated  1994 Stock  Incentive  Plan and  Incentive
               Stock Option Agreement  between Dean A. Suposs and the Registrant
               dated January 1, 2000.

       10.10   Amended and Restated 1994 Stock  Incentive Plan  Incentive  Stock
               Option Agreement,  dated June 10, 1996, between Jerry Thurber and
               the Registrant. (6)

       10.10.1 Amended and Restated 1994 Stock  Incentive Plan  Incentive  Stock
               Option Agreement dated December 16, 1999,  between Registrant and
               Jerry Thurber.

       10.11   Amended and Restated 1994 Stock  Incentive Plan  Incentive  Stock
               Option  Agreement,  dated July 1, 1996,  between Jamie Burgat and
               the Registrant. (6)

       10.12   Restrac/Avert  Avertnet Reseller  Agreement dated January 4, 1999
               between Registrant and Registrant. (8)

       10.13   Distribution   Partnership  Agreement  dated  December  13,  1998
               between Registrant and Heidrick and Struggles.

       10.14   Distribution   Partnership  Term  Sheet  between  Registrant  and
               Careermag.com dated June 8, 1999.

       10.15   Distribution and Marketing Rights  Agreement  between  Registrant
               and AtYourBusiness.com dated September 15, 1999.

       10.16   Agreement for Electronic  Payments  between  Registrant and First
               State Bank of Fort Collins dated June 7, 1999.

       10.17   Profit Sharing Plan for 1999

       23.1    Consent of Hein + Associates LLP

       27.1    Financial Data Schedule-1999

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

     (1)  Filed as an Exhibit to the initial  Registration  Statement  (File No.
          33-76726-D) filed with the Securities and Exchange Commission on March
          21, 1994.



<PAGE>


     (2)  Filed as an Exhibit to Amendment No. 1 to the  Registration  Statement
          (File  No.   33-76726-D)   filed  with  the  Securities  and  Exchange
          Commission on April 26, 1994.
     (3)  Filed as an Exhibit to Amendment No. 2 to the  Registration  Statement
          (File  No.   33-76726-D)   filed  with  the  Securities  and  Exchange
          Commission on May 24, 1994.
     (4)  Filed  as  an  Exhibit  to  Post-Effective  Amendment  No.  1  to  the
          Registration Statement (File No. 33-76726-D) filed with the Securities
          and Exchange Commission on May 4, 1995.
     (5)  Filed as an Exhibit to Form  10-KSB  for the year ended  December  31,
          1995 filed with the  Securities  and Exchange  Commission  on March 9,
          1996.
     (6)  Filed  as  an  Exhibit  to  Post-Effective  Amendment  No.  2  to  the
          Registration Statement (File No. 33-76726-D) filed with the Securities
          and Exchange Commission on October 23, 1996.
     (7)  Filed as an Exhibit to Form  10-KSB  for the year ended  December  31,
          1997 filed with the  Securities  and Exchange  Commission on March 30,
          1998.
     (8)  Filed as an Exhibit to Form  10-KSB  for the year ended  December  31,
          1998 filed with the  Securities  and Exchange  Commission on March 23,
          1999.