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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
                                   FORM 10-KSB
(Mark One)
|X|  Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 for the fiscal year ended December 31, 1999 or

[ ]  Transition report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 for the transition period from           to
                                                         ---------    ---------

                         Commission File Number 0-21819
                            ------------------------
                              MC INFORMATICS, INC.
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

               CALIFORNIA                                  94-3165144
     (State or other jurisdiction of                    (I.R.S. Employer
     Incorporation or organization)                    Identification No.)

          18881 Von Karman Avenue, Suite 100, Irvine, California 92612
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                  949-261-7100
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

           Securities registered pursuant to Section 12(b) of the Act:

    TITLE OF EACH CLASS                     NAME OF EXCHANGE ON WHICH REGISTERED
           None                                             None

           Securities registered pursuant to Section 12(g) of the 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 Securities 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 [ ]
NO |X|

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

The issuer's revenues for its most recent fiscal year was $8,570,347.

As of April 10, 2000, the aggregate market value of MC Informatics' voting stock
held by non-affiliates was approximately $5,131,784. As of April 10, 2000, there
were 15,589,291 shares of MC Informatics' common stock outstanding and warrants
to purchase 2,345,000 shares of common stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Parts of the definitive proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A not later than 120 days after the
end of MC Informatics' fiscal year and relating to MC Informatics' 2000 Annual
Meeting of Shareholders are incorporated by reference into Items 9-12 of Part
III of this Form 10-KSB.

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                                     PART I

ITEM 1.       DESCRIPTION OF BUSINESS.

FORWARD-LOOKING STATEMENTS

         This Annual Report on Form 10-KSB contains certain forward-looking
statements based on the Company's current expectations about the Company and the
healthcare industry. These forward-looking statements are identifiable by use of
words such as "expect," "anticipate," "estimate," "believe," "intend," "plan"
and other similar expressions. These forward-looking statements involve risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of the factors
described in the "Risk Factors" section of Management's Discussion and Analysis
of Financial Condition and Results of Operations and elsewhere in this document.
The Company undertakes no obligation publicly to update any forward-looking
statements for any reason, even if new information becomes available or other
events occur in the future.

BACKGROUND

         MC Informatics, Inc. (the "Company") is a provider of
business-to-business applications services, consulting services and information
technology solutions to the healthcare industry. The Company was established in
August 1992 under the name HealthDesk Corporation ("HealthDesk"). In 1998,
HealthDesk underwent a major change in its strategic direction through the
implementation of a plan to discontinue its then-current operations and to sell
substantially all of its assets, including its HealthDesk online operations and
substantially all of its intellectual property rights, inventories, certain
office equipment and packaged software to Patient Infosystems, Inc. ("PATI"). In
August 1998, HealthDesk entered into an Agreement and Plan of Reorganization
with MC Acquisition Corporation, a California corporation and a wholly-owned
subsidiary of HealthDesk, MC Informatics, Inc., a California corporation
("MCII"), and certain shareholders of MCII, pursuant to which, among other
things, MCII merged with and into MC Acquisition Corporation through the
issuance of 5,645,230 shares of HealthDesk common stock in exchange for all of
the outstanding shares of MCII common stock. The HealthDesk shareholders
approved the sale of assets to PATI and the merger with MCII on February 26,
1999 and, contemporaneously with the closing of the two transactions on March 2,
1999, HealthDesk changed its name to MC Informatics, Inc. ("MCIF"). Although
HealthDesk was the legal entity surviving the HealthDesk/MCII merger, the merger
has been accounted for as a reverse acquisition whereby MCII has been identified
as the acquiring corporation for financial reporting purposes because HealthDesk
had no ongoing business or operations at the time of the merger and the
executive officers and members of the Board of Directors of the post-merger
entity were primarily comprised of individuals previously associated with MCII.
As a result of the foregoing, the discussion below relates to the current
business of MC Informatics, Inc. and, solely for the purposes of financial
reporting, the discussion addressing periods prior to March 2, 1999 reflects the
accounts of the pre-merger MCII entity. Unless otherwise indicated, references
herein to MCIF or the Company refer to the merged HealthDesk/MCII entity.

         Effective June 1, 1999, the Company acquired substantially all of the
assets of Medical Systems Solutions, Inc., a company providing encrypted,
validated connections via the Internet which enable users outside of a
healthcare organization to access their organization's host system via secured
Internet connections. The assets purchased included inventory of computer
hardware and software programs, computer equipment and existing customer
contracts of Medical Systems Solutions. This acquisition provided the Company
with the opportunity to present its services to hospitals previously contracted
with Medical Systems Solutions, thus allowing the Company to broaden its client
base. The acquisition also enabled the Company to reposition itself in the
healthcare industry by providing it with the resources necessary to expand its
service offerings to include applications services and thus build upon its
established core competencies of information technology ("IT"), operations and
management consulting services.

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         In October 1999, the Company acquired all of the outstanding stock of
HSG Acquisitions, Inc., dba Inteck, Inc. Inteck is a seventeen-year-old
healthcare consulting company with experience in strategic IT planning,
information systems analysis, selection and implementation, contract
negotiations, network design and implementation, system integration,
outsourcing, physician support service and computer security. As a result of
this acquisition, the Company significantly broadened its IT consulting
capabilities and developed client relationships with healthcare organizations
for which Inteck was providing consulting services.

THE COMPANY'S BUSINESS

         The Company is a professional services firm providing a broad spectrum
of applications services, consulting services, strategic and operations
management services and IT solutions for the healthcare industry. The Company's
focus is to assist healthcare organizations maximize the benefits of their
information systems and enable technology to serve their strategic objectives.
Through its IT consulting services, the Company provides healthcare entities
with direction in developing long-term IT strategy through the selection of
technology and products, system implementation, integration and management, and
contract negotiations. As an applications service provider, or ASP, the Company
additionally offers proprietary Web-based software and non-proprietary software
applications to healthcare providers and payors. In addition, the Company
provides complete operational support for all IT functions, including Internet
services, e-mail, Web hosting, Web publishing and business-to-business and
business-to-consumer connectivity; distance learning programs; network services;
desktop services; secure Internet access to application servers in compliance
with the Health Insurance Portability and Accountability Act ("HIPAA");
electronic medical record support; and related applications services as may be
required by a healthcare organization.

         The Company serves a national client base across a broad cross-section
of the healthcare industry. The Company performs services for its clients
principally on a project-by-project basis through the development of a
custom-tailored solution for each client based upon the client's specific needs
and requirements. The Company believes that its in-depth institutional
knowledge, long-term relationships, extensive knowledge of its clients' needs
and its broad range of services provide it with significant advantages over its
competitors in marketing additional services and winning new engagements. The
Company's objective is to become the leading provider of applications services
and IT solutions in the healthcare industry.

INDUSTRY BACKGROUND

     Because of the nature of the Company's service offerings, the Company
competes primarily in the healthcare industry. The healthcare professional
services industry is highly fragmented and consists principally of: (i) larger
systems integration firms, including the consulting divisions of national
consulting firms, which offer healthcare as one of their specialty areas; (ii)
healthcare information systems vendors, which focus on services relating to the
software solutions they offer; (iii) healthcare consulting firms, many of which
focus on selected specialty areas, such as strategic planning or vendor-specific
implementation; and (iv) large general management consulting firms that do not
specialize in healthcare consulting and/or offer systems implementation. In
addition, the Company competes with applications service providers and IT
outsourcing companies. The Company believes that a competitive advantage will
increasingly be gained by those firms that: (a) possess the necessary expertise
and resources to offer comprehensive skill sets to clients; (b) have the
strength and consistency of advice along the entire service continuum (from
strategy to selection to implementation to support); and (c) offer the
flexibility and experience to meet the challenges of the rapid developments in
healthcare and IT industries.

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         GENERAL

         The United States healthcare industry is undergoing rapid change. The
Company believes that the consolidation of healthcare systems and the aging of
the U.S. population will result in continued dramatic change in the healthcare
industry. Healthcare providers today face external and internal pressures to
meet the competitive demands of the marketplace, comply with increasing
government regulations and cope with the advent of managed care. These
challenges, combined with increased demands on capital resources, are forcing
many healthcare providers to seek new ways to structure and manage their
organizations and deliver services. In the past, the financial risk of
healthcare delivery was absorbed principally by third-party payors, and
providers did not focus on cost containment. Today, through managed care
arrangements and provider capitation (under which providers are paid an annual
fixed fee per individual to deliver all healthcare services required by that
individual), the economic risk of healthcare delivery is shifting from payors to
providers. In order to manage this risk, many providers are seeking to enhance
their understanding of treatment costs, variability of costs and cost control
and often must restructure their processes and organizations to enhance
efficiency and accountability. The Company believes that providers must achieve
each of these objectives, while at the same time continuing to demonstrate
increasing quality and consistency in healthcare delivery.

         The shifting of risk from payor to provider has also encouraged and
accelerated consolidation among healthcare providers. In order to achieve
economies of scale, operating efficiencies, and enhanced contracting
capabilities, many healthcare organizations such as hospitals, primary care and
multi-specialty physician groups, laboratories, pharmacies, home health services
and nursing homes are integrating horizontally and vertically to create
integrated delivery networks ("IDNs"). The goal of IDNs is to deliver
comprehensive healthcare in a cost-effective manner and accordingly, much of
their success is dependent in part on effectively managing and delivering
information to the caregivers. As industry consolidation and IDN formations
create larger healthcare organizations, and as the demand for information
services is increasingly required to cross multiple points of care, the Company
believes that IDNs will need to place greater focus on information management
and business process solutions to control costs, demonstrate quality, measure
performance, predict outcomes and increase efficiency.

         CONSULTING

         The changing business environment has produced an evolving range of
strategic and operating options for healthcare entities. Several of these
options are unfamiliar to an industry that had long operated under a
non-aligned, third-party payor environment. In response, many healthcare
participants are formulating and implementing new strategies and tactics,
including redesigning business processes and workflows, acquiring better
technology and adopting or remodeling customer service and marketing programs.
The Company believes that healthcare participants will continue to turn to
outside consultants to assist in this process for the following reasons: (i) the
present and projected shortage of qualified IT professionals; (ii) the pace of
change is eclipsing their own internal resources and capacity to identify,
evaluate and implement the full range of options; (iii) consultants enable them
to develop better solutions in shorter time frames; and (iv) purchasing
consulting expertise can be more cost effective. The Company believes that by
employing outside expertise, healthcare providers can often improve their
ability to compete by more rapidly deploying new processes.

         INFORMATION TECHNOLOGY IN THE HEALTHCARE INDUSTRY

         The increased demand for tools to collect, analyze and interpret
clinical, operational and financial information rapidly, flexibly and in a
technological framework that supports today's healthcare environment is also
intensifying the reliance of the healthcare industry on IT solutions. The
Company believes that, as a result, healthcare organizations will continue to
increase their spending for IT. Healthcare IT spending is being driven not only
by the heightened need for better management information systems, but also
continued price-performance improvements in hardware and software, the ability
to develop increasingly user-friendly software applications and the emergence of
better application development tools.

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         The healthcare IT environment has grown increasingly complex, costly
and burdensome as a result of the challenges of deploying new technology,
maintaining older systems and meeting staffing requirements in a market with
what the Company believes to be an insufficient pool of qualified IT
professionals with knowledge of and experience with healthcare processes. At the
same time, external economic factors have forced many healthcare organizations
to focus on core competencies and trim work forces. The Company believes that
healthcare participants will increasingly turn to outside consultants, external
management of internal information systems and outsourcing--especially as
provided by ASPs--as a means of coping with the financial and technical demands
of information systems management. According to the Meta Group, an IT analyst
and market research firm, expenditures for healthcare IT outsourcing will
increase fifteen-fold over the next two to three years, from less than $200
million per year in 1999 to more than $3 billion by 2002-2003. Specific reasons
for this shift include:

         o    a continuing reduction in support personnel by software vendors
              through a shift of responsibility for system implementation and
              support to the customer;

         o    an increasing demand by patients for on-line access to medical
              literature, immediate access to their medical history and on-line
              access to their healthcare provider;

         o    the implementation of new standards on confidentiality and
              security of information resulting from the HIPAA that will
              overshadow recent year 2000 changes; and

         o    a heightening desire by providers for predictable IT costs, use of
              Internet/intranet capabilities for all members of their healthcare
              community, IT expertise and resources that are not available
              internally and that are difficult to retain, and vendors who
              deliver on promises.

         HEALTHCARE APPLICATIONS SERVICE PROVIDERS

         Because healthcare organizations are often unable to obtain or retain
the IT staff necessary to satisfy their needs, providers are increasingly
turning to outsourcing as a means of managing their technical demands. Software
vendors typically own their software and are responsible for providing upgrades,
enhancements and error correction. In the growing healthcare ASP environment,
healthcare ASPs are beginning to license such software from these vendors for
use by their clients and then rent the licensed software to these clients. The
clients are then responsible for using the software for the purpose for which it
is intended. Through this process, healthcare ASPs can utilize their vendor
contacts and offer a wide variety of proprietary and non-proprietary software
applications to fill a client's needs. Healthcare ASPs generally seek to deliver
a broad range of software applications, from basic e-mail and messaging
applications to a complete healthcare information system that incorporates
e-health programs and manages, controls and reports on the multiple aspects of
the organization. Healthcare ASPs typically enter into a multi-year contract
with each client, usually ranging from 36 to 84 months, pursuant to which the
client pays a fixed monthly payment to the ASP based on the services it
receives. This amount can be based on the number of users, number of
transactions, number of screen clicks or amount of usage time.

         Although the ASP market is becoming increasingly popular, there is no
one type of ASP model that has established itself as superior, resulting in many
ASP variations. Some examples include Internet service providers (ISPs),
telecommunication providers and independent software vendors. Full-service
healthcare business-to-business ASPs generally strive to offer all IT services

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necessary to enable a client to use any software package it desires and to share
information with an organization or individual it designates. The objective of
many healthcare ASPs is thus to offer a seamless integration of a full range of
software applications and related services including software selection,
software and system implementation, integration, testing, secure network
infrastructure, reliable mission-critical data center facilities, e-health
system design, implementation and support, and a highly skilled staff of IT
experts who can provide all of the above services.

MCIF'S SOLUTION

         The Company uses its in-depth knowledge of healthcare delivery systems
and nationally deployed group of experienced consultants to help its clients
plan and execute business strategies. The Company offers its clients a continuum
of solutions, ranging from strategic planning and operations management
consulting, to interim management and contract negotiations, to information
system planning, implementation and integration, to operational support for all
IT functions through a broad spectrum of applications services. For each client
and engagement, the Company structures a project team that understands the
complexities of the healthcare environment for that particular client and can
concurrently address the management and technical ramifications of change and
improvement. In structuring an engagement, the Company does not impose any
preordained program on its clients. Rather, utilizing the professional judgment
derived from collective years of experience, the Company's consultants work in
concert with each client to develop custom-tailored solutions. This unified team
approach helps to ensure high-quality, consistent and geographically seamless
client service.

         The Company's services integrate many diverse facets and constituencies
of the healthcare industry. Through its strategic consulting, the Company brings
together the healthcare and business relationships required to establish and
maintain efficient and collaborative healthcare delivery networks. Through its
operations management consulting, the Company links the needs and optimizes the
contributions of clinical, information and management personnel. The Company's
staff has in-depth knowledge of and experience in clinical and physician use
systems. Through its value-added IT consulting and applications services, the
Company forges a link between healthcare information systems vendors and the
Company's clients by helping each group maximize the potential of existing
technology. The Company also provides a bridge between existing and emerging
technologies by supplying vendors with needed knowledge to develop innovations
focused on the changing needs of the marketplace and by assisting healthcare
industry participants to assess the relative merits and risks of selecting and
implementing new technologies, thereby enabling such participants to take
advantage of the opportunities presented by emerging technologies. Through this
process, the Company assists healthcare organizations in organizing,
implementing and managing a comprehensive IT strategy that fits their specific
needs.

MCIF'S STRATEGY

[TO BE PROVIDED]

SERVICES

         The Company offers its clients comprehensive applications services,
consulting services, strategic and operations management services and IT
solutions. The Company's principle role is to help its clients define what they
seek to provide for their constituency--that is, patients for providers or
members for health plans--and to develop custom-tailored solutions based on an
assessment of each client's needs. The Company offers services in the following
broadly defined categories:

         HEALTHCARE APPLICATIONS SERVICES. The Company offers a wide variety of
proprietary Wed-based software and non-proprietary software applications, and

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possesses a skilled staff of IT consultants with knowledge and experience in
providing integration and operational support for a broad range of
Internet-based IT solutions, including system design, implementation,
integration and support, Internet services, secure Internet access to
application servers in compliance with the HIPAA, electronic medical record
support, and other services as may be required by a healthcare organization.

         In conjunction with the creation of strategic relationships with
healthcare organizations, the Company will offer plans different models of its
ASP program, which are designed to tailor the relationship and services provided
to a healthcare organization's specific needs:

         o    STRATEGIC CLIENT PARTNER: For healthcare organizations desiring
              all of the services of a business-to-business healthcare ASP, the
              Company will provide a complete, risk-sharing arrangement pursuant
              to which the Company will purchase an organization's IT assets
              and, in exchange, will provide ASP services on a long-term basis.

         o    DATA CENTER PARTNER: For those healthcare organizations that do
              not have significant IT operations, the Company will provide its
              applications services via its Data Center Partner program,
              pursuant to which the Company will process and support all of the
              IT functions of the healthcare provider from a remote data center.

         o    OUTSOURCING PARTNER: For healthcare organizations that do not
              desire to have their systems located in another data center and
              that do not wish to have their resources shared with other
              healthcare organizations, the Company will furnish ASP services
              and will provide appropriate IT management and technical personnel
              as needed to balance the capabilities of the organization's
              existing IT staff.

         o    FACILITY MANAGER PARTNER: For those healthcare organizations that
              desire to continue to own their IT assets, the Company will
              provide facilities management services, consisting of providing
              the management and appropriate technical support staff to ensure
              the organization has the necessary technical resources to
              accomplish its mission.

         o    INTERNET SERVICE PARTNER: For those healthcare organizations that
              desire support only for their e-health program, the Company will
              provide an assessment and will help design and implement a
              comprehensive e-health program that will include voice, data and
              image, local area and wide area networks and integration of
              current software applications as needed by the organization.

         INFORMATION TECHNOLOGY CONSULTING. The Company provides high-quality
services in developing long-term IT strategy through information systems
analysis and budgeting, selection of technology and products, system design and
implementation, system integration (including electronic medical records, data
repositories and data warehouses), system management, network and client-server
planning and design, and contract negotiations for all new and replacement
applications with vendors. While the Company's consultants have a wide variety
of skills, the majority have concentrated capabilities in the IT area.

         MANAGEMENT CONSULTING. The Company's management consulting services
include focus areas such as strategic planning, analysis of current industry and
competitive conditions, integration services, formation of physician-hospital
alliances, mergers and affiliations, multi-specialty group practice formation,
facility planning, practice valuations and acquisitions, IDN formation,
financial advice and establishment of managed care organizations. The Company
also provides clinical consulting services and ambulatory practice management
consulting services.

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         OPERATIONS CONSULTING. The Company provides tactical planning and
operational improvement to help clients eliminate organizational redundancy,
reduce costs and implement changes in the areas of patient care, post-acute
care, administrative services, clinical resource allocation, quality management,
finance, physician support and nursing. The Company's services include
re-engineering and business process improvement and redesign, project
management, applications implementation, executive and staff education through
the Company's on-site or distance learning programs, and operational assistance.
In addition, the Company offers comprehensive management services, including
providing a chief information officer, if desired, and all management personnel
including the director of IT, all supervisory and technical management.

SALES AND MARKETING

         The Company's business development efforts are based upon a highly
organized, company-wide, consistent approach. All personnel are trained and
reinforced in the Company's marketing methods and philosophy, and are encouraged
to identify, develop and pursue client service opportunities. Senior management
directs the Company's marketing efforts. Business development is an integral
part of the formal responsibilities at all levels of the Company's management
and the Company sets business development goals on both a departmental and an
individual basis.

         The Company's business development efforts focus primarily on
identifying key decision makers in the healthcare industry, determining the
value to be provided to each potential client and then managing the sales
process to completion. At any given time, numerous Company professionals are
active in the development of business from either a new or existing client, and
the client resource database enables all Company personnel to access up-to-date
information on the Company's efforts with respect to a client or prospective
client, identifies other Company contacts with that client and highlights the
particular needs expressed by the client.

         In addition, the Company relies upon its reputation in the marketplace,
the personal contacts and networking of the Company's professionals, direct
industry marketing programs, trade shows and the industry presence maintained by
Company professionals to enhance its business development efforts. The Company's
marketing efforts are magnified by its presence within the healthcare industry
by virtue of speaking engagements by Company employees and employee publications
on topics affecting healthcare. The Company's views on a wide range of
healthcare and IT topics are frequently solicited and quoted for articles in
major industry journals and books. The Company's healthcare consultants have
been published extensively on current and emerging topics in healthcare
information and management and have participated in external speaking
engagements and presentations to industry associations and client audiences
across the nation.

COMPETITION

         The market for the Company's services is highly fragmented, highly
competitive and is subject to rapid change. The Company believes that it
currently competes principally with applications service providers, systems
integration firms, national consulting firms, including the consulting divisions
of the national accounting firms, information system vendors, service groups of
computer equipment companies, facilities management companies, IT outsourcing
companies, general management consulting firms and regional and specialty
consulting firms. Many of the Company's competitors have significantly greater
financial, technical and marketing resources than the Company, generate greater
revenues and have greater name recognition than the Company. Moreover, those
competitors that sell or license their own software may in the future attempt to
limit or eliminate the use of third-party consultants, such as the Company, to
implement and/or customize such software. In addition, vendors whose systems may
enjoy wide market acceptance and large market share could enter into exclusive

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or restrictive agreements with other consulting firms, which could eliminate or
substantially reduce the Company's implementation work for those systems.

         There are relatively low barriers to entry into the Company's markets,
and the Company has faced and expects to continue to face additional competition
from new entrants into its markets. In addition, combinations and consolidations
in the consulting industry will give rise to larger competitors, whose relative
strengths are difficult to predict. The Company also competes with its clients'
internal resources, particularly where these resources represent a fixed cost to
the client. This internal client competition may heighten as consolidation of
healthcare providers creates organizations large enough to support internal
information management capabilities.

         The Company believes that the principal competitive factors in its
market include reputation, highly experienced workforce, industry expertise,
full array of offerings, project management expertise, vendor neutrality, price,
quality of service, responsiveness and speed of implementation and delivery.
Despite the variety of current and potential competitors and the rapid
development of the healthcare and IT industries, the Company believes that it
presently competes favorably with respect to these competitive factors. In
addition, although competitors exist in a variety of industry segments, the
Company believes that no individual segment offers the integrated solution that
the Company provides. Nonetheless, there can be no assurance that the Company
will be able to continue to compete effectively on pricing or other requirements
with current and future competitors or that competitive pressures faced by the
Company will not cause the Company's revenue or operating margins to decline or
otherwise materially adversely affect its business, financial condition and
results of operations.

INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS

         The Company's success is in part dependent upon its proprietary
internal information and communications systems, tools, and the methods and
procedures that it has developed specifically to serve its clients. The Company
has no patents; consequently, it relies on a combination of non-disclosure and
other contractual arrangements and copyright, trademark and trade secret laws to
protect its proprietary systems, information, and procedures. There can be no
assurance that the steps taken by the Company to protect its proprietary rights
will be adequate to prevent misappropriation of such rights or that the Company
will be able to detect unauthorized use and take appropriate steps to enforce
its proprietary rights. The Company believes that its systems and procedures and
other proprietary rights do not infringe upon the proprietary rights of third
parties. There can be no assurance, however, that third parties will not assert
infringement claims against the Company in the future or that any such claims
will not require the Company to enter into materially adverse license
arrangements or result in protracted and costly litigation, regardless of the
merits.

GOVERNMENT REGULATION

         INTERNET REGULATION. There are increasing numbers of laws and
regulations relating to the Internet. Congress has recently passed legislation
regulating certain aspects of the Internet, including online content, copyright
infringement, user privacy, taxation, access charges and liability for
third-party activities. Federal, state and foreign governmental authorities are
considering other legislative and regulatory proposals to further regulate the
Internet. Areas of potential regulation include libel, pricing, intellectual
property ownership and infringement, regulation of professional services,
regulation of medical devices and regulation of the sale of other specified
goods and services. The Company cannot predict how courts will interpret
existing and new laws, and therefore the Company is uncertain as to how new laws
or the application of existing laws will affect its business. New legislation or
regulations, or any unanticipated application or interpretation of existing
laws, may decrease the growth in the use of the Internet, which could decrease
the demand for the Company's services, particularly its applications services,

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increase the Company's cost of doing business or otherwise have a material
adverse effect on its business, results of operations and financial condition.

         PRIVACY CONCERNS. The confidentiality of patient records and the
circumstances under which records may be released are subject to substantial
regulation by state governments. These state laws and regulations govern both
the disclosure and the use of confidential patient medical record information.
Although compliance with these laws and regulations is currently principally the
responsibility of the hospital, physician or other healthcare provider,
regulations governing patient confidentiality rights are evolving rapidly.
Additional legislation governing the dissemination of medical record information
has been proposed at both the state and federal level. This legislation may
require holders of this information to implement security measures that may
require significant expenditures by the Company. There can be no assurance that
changes to state or federal laws will not materially restrict the ability of
healthcare providers to submit information from patient records using the
Company's applications.

         FEDERAL AND STATE HEALTHCARE LEGISLATION. The Company's software
applications and IT services are designed to function within the current
healthcare financing and reimbursement system. Over the past several years, the
healthcare industry has been subject to increasing levels of government
regulation of, among other things, reimbursement rates and certain capital
expenditures. In addition, Congress has considered proposals to reform the
healthcare system. These proposals, if enacted, may further increase government
involvement in healthcare, lower reimbursement rates and otherwise change the
operating environment for our customers. As in the past, healthcare
organizations may react to these proposals and the uncertainty surrounding such
proposals in ways that could result in a reduction or deferral in the use of the
Company's technologies and services. The Company cannot predict with any
certainty what impact, if any, such proposals or healthcare reforms might have
on its business, financial condition or results of operations.

         HIPPA requires the use of standard transaction formats, identifiers,
codes sets and privacy and security requirements. Publication of transaction
standards is currently scheduled for June 2000 and compliance will be required
by August 2002. Other regulations are scheduled to be published in stages after
June 2000. Legislation such as the HIPAA could impact the manner in which the
Company conducts its business and could have a material adverse effect on the
Company's financial condition or results of operations.

         The Company must deliver HIPAA-compliant systems and its clients are
responsible for their overall HIPAA compliance. The Company's ability to provide
HIPAA-compliant applications to its clients could relieve clients of significant
application remediation requirements, which potentially represents a competitive
advantage for the Company. Conversely, any failure to become HIPAA-compliant
could negatively impact the Company and involve financial and/or criminal
penalties.

EMPLOYEES

         The Company believes that one of its key strengths lies in its ability
to attract, develop, motivate and retain a talented, creative and highly skilled
work force of senior-level professionals who are specialists in one or more
areas of healthcare, IT and/or applications services. The Company's employees
are highly experienced, many of whom have established their credentials as
healthcare executives and senior management of healthcare entities, business
office managers, medical records administrators, nurse administrators, nurses,
laboratory technicians, physician assistants, medical technologists, physicians,
hospital admissions directors, and information management and information
systems technical personnel.

                                       10
<PAGE>

         In addition to its skilled employees, the Company retains the services
of trained independent contractors on an as-needed basis to fulfill the
Company's contractual obligations. Such contractors typically have experience in
a specific software vendor's products, and the Company frequently uses these
contractors to implement such vendor's software. Through the combination of
employees and independent contractors, the Company is able to retain highly
talented and experienced professionals on its work force while maintaining the
flexibility to increase or decrease personnel as demanded by contractual needs.

         As of April 10, 2000, the Company had 45 employees, of which 44 were
full-time employees. In addition, as of that date, the Company employed 10
independent contractors.

ITEM 2.       DESCRIPTION OF PROPERTY.

         The Company's corporate headquarters are located in Irvine, California
in a leased facility consisting of approximately 5,900 square feet. The lease
expires in March 2002 and provides for an annual rental of $151,936 through
March 2000, $158,296 through March 2001, and $164,656 through March 2002. The
Company also leases office space in Colorado, Iowa and Massachusetts.

ITEM 3.       LEGAL PROCEEDINGS.

         The Company is not presently involved in any legal proceedings.

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

         During the quarter ended December 31, 1999, no matters were submitted
for vote to the holders of the Company's common stock.


                                     PART II

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

         MARKET INFORMATION. The Company's common stock and warrants been traded
on the OTC Electronic Bulletin Board market under the symbol "MCIF" and "MCIFW",
respectively, since June 9, 1999. Prior to that time, between the completion of
the initial public offering of HeathDesk on January 16, 1997 until June 9, 1999,
the Company's common stock and warrants were traded on the Nasdaq Small Cap
Market. On June 9, 1999, the Company was delisted from the Nasdaq Small Cap
Market. Following a hearing with Nasdaq in March 1999, Nasdaq concluded that the
merger of MCII with and into a wholly-owned subsidiary of HealthDesk constituted
a reverse merger with MCII being the acquiring corporation. As a result, Nasdaq
required the Company to comply with the initial listing requirements to remain
listed on the Nasdaq Small Cap Market. Because the Company did not meet these
initial listing requirements, the Company was delisted.

         As of April 10, 2000, there were 15,589,921 shares of common stock and
warrants to purchase an aggregate of 2,345,000 shares of common stock
outstanding.

         The following table sets forth the range of the high and low bid prices
of the Company's common stock and warrants for the period from January 1, 1998
through December 31, 1999 as reported by National Discount Brokers. Such
information may reflect interdealer prices, without retail mark-up, mark-down or
commissions, and may not reflect actual transactions.

                                       11
<PAGE>

<TABLE>
<CAPTION>
                                                                 COMMON STOCK                      WARRANTS
                                                        ------------------------------  ------------------------------
                                                             LOW             HIGH            LOW            HIGH
                                                        --------------  --------------  --------------  --------------
<S>                                                      <C>             <C>             <C>             <C>
FISCAL 1998
-----------
1st Quarter (January 1 - March 31)                       $2.63           $3.41           $0.81           $0.88
2nd Quarter (April 1 - June 30)                          $1.03           $3.13           $0.50           $0.81
3rd Quarter (July 1 - September 30)                      $0.75           $1.94           $0.56           $0.56
4th Quarter (October 1 - December 31)                    $1.00           $1.63           $0.56           $0.56

FISCAL 1999
-----------
1st Quarter (March 2 - March 31)(1)                      $1.25           $3.00           $0.87           $1.05
2nd Quarter (April 1 - June 30)                          $2.50           $3.12           $0.87           $1.19
3rd Quarter (July 1 - September 30)                      $2.50           $3.06           $0.75           $0.87
4th Quarter (October 1 - December 31)                    $1.50           $2.62           $0.75           $0.87
</TABLE>
----------------------------

(1) The commencement date for first quarter of 1999 (March 2, 1999) reflects
prices as of the date on which the merger between HealthDesk and MCII was
effectuated.


         SECURITY HOLDERS. As of April 10, 2000, there were approximately 107
holders of record of the Company's common stock and 6 holders of record of the
warrants to purchase the Company's common stock. Within the holders of record of
the Company's common stock are depositories such as Cede & Co. that hold shares
of stock for brokerage firms which, in turn, hold shares of stock for beneficial
owners.

         DIVIDENDS. The Company has never paid any cash dividends to holders of
the Company's common stock, and the Company's Board of Directors does not intend
to declare or pay any dividends on shares of its common stock in the foreseeable
future. The Board of Directors currently intends to retain available earnings,
if any, generated by the Company's operations for the development and growth of
its business. Pursuant to state laws, the Company may be restricted from paying
dividends to its shareholders as a result of its accumulated deficit as of
December 31, 1999. In addition, the terms of the Company's bank financing
agreement restrict the Company's ability to pay dividends on the Company's
capital stock.

         RECENT SALES OF UNREGISTERED SECURITIES.

         In May 1999, the Company issued warrants to purchase 50,000 shares of
common stock to a bank in connection with an agreement for a revolving line of
credit. The warrants are exercisable at $2.87 per share and expire on May 27,
2004.

         In June 1999, in connection with the acquisition of substantially all
of the assets of Medical Systems Solutions, Inc., the Company issued 111,216
shares of common stock at a price of $2.75 per share.

         In October 1999, in connection with the acquisition of Inteck, Inc.,
the Company issued 245,000 shares of common stock to three individuals at a
price of $2.50 per share. On January 5, 2000, the Company issued an additional
120,000 shares of common stock to the same individuals as part of the same
acquisition.

         In November and December 1999, the Company sold an aggregate of
1,012,500 shares of Series C 6% Convertible Preferred Stock at a price of $2.00
per share to third parties in a private equity offering.

         The issuances of the Company's securities in the transactions
referenced above were effected in reliance upon the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended (the "Securities
Act"), as transactions not involving a public offering. Exemption from the
registration provisions of the Securities Act is claimed on the basis that such

                                       12
<PAGE>

transactions did not involve any public offering and the purchasers were
sophisticated with access to the kind of information registration would provide.

ITEM 6.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS.

         The following discussion and analysis should be read in conjunction
with the Company's Financial Statements and Notes thereto included elsewhere in
this document. The merger of HealthDesk and MCII on March 2, 1999 has been
accounted for as a reverse acquisition whereby MCII has been identified as the
acquiring corporation for financial reporting purposes. Accordingly, the
discussion in this Management's Discussion and Analysis of Financial Condition
and Results of Operations relates to the accounts of MCII prior to the merger
and the accounts of the merged HealthDesk/MCII entity for all periods following
March 2, 1999.

         Except for the historical information contained herein, the following
discussion contains certain forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this document
should be read as being applicable to all related forward-looking statements
wherever they appear herein. The Company's actual results may differ materially
from the results discussed in the forward-looking statements as a result of
certain factors including, but not limited to, those discussed under the heading
"Risk Factors" and elsewhere herein.

RESULTS OF OPERATIONS

         The following table sets forth, for the periods indicated, certain
financial data as a percentage of net sales:

<TABLE>
<CAPTION>
                                                                   Twelve Months Ended December 31
                                                                  --------------------------------
                                                                         1999           1998
                                                                      ----------     ----------
<S>                                                                     <C>              <C>

Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . .  100.0%           100.0%
Direct expenses . . . . . . . . . . . . . . . . . . . . . . . .. . . .   81.9             68.1
                                                                      ----------     ----------
Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . .. . . .   18.1             31.9

General and administrative expenses . . . . . . . . . . . . . .. . . .   55.3             35.2
                                                                      ----------     ----------

Loss from operations. . . . . . . . . . . . . . . . . . . . . .. . . .  (37.2)            (3.3)

Interest expense. . . . . . . . . . . . . . . . . . . . . . . .. . . .    1.0              0.8
Non-cash financing costs. . . . . . . . . . . . . . . . . . . .. . . .    1.5                -
Other income. . . . . . . . . . . . . . . . . . . . . . . . . .. . . .   (0.1)               -
                                                                      ----------     ----------

Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . .  (39.6)%           (4.2)%
                                                                      ==========     ==========
</TABLE>

COMPARISON OF TWELVE MONTHS ENDED DECEMBER 31, 1999 TO TWELVE MONTHS ENDED
DECEMBER 31, 1998

                                       13
<PAGE>

         REVENUES. The Company's revenues for the year ended December 31, 1999
were $8.6 million as compared to $3.7 million for the year ended December 31,
1998, an increase of $4.9 million or 131%. This increase was primarily a result
of a growth in the Company's IT consulting business during the first three
quarters of 1999 and, to a lesser extent, as a result of an expansion of the
Company's result of a growth in the client base resulting from the acquisition
of Medical Systems Solutions and Inteck.

         GROSS PROFIT. Gross profit increased by 31% to $1.6 million for 1999
from $1.2 million for 1998. Gross margin decreased from 32% for 1998 to 18% for
1999. The decrease in gross margin was primarily due to the expansion of the
Company's operations into the Hawaii market, the establishment of two new
departments, Physician Care and Clinical Care, which incurred significant
startup costs consisting principally of salary and travel expenses, and the
reduction in the Company's overall business in the fourth quarter of 1999. This
reduction in business during the fourth quarter of 1999 resulted in several
consultants not being billable for a period of time or being laid off.

         GENERAL AND ADMINISTRATIVE EXPENSES. For 1999, general and
administrative expenses increased by 262% to $4.7 million from $1.3 million for
1998. This $3.4 million increase was primarily due to the merger with
HealthDesk, the acquisition of Medical System Solutions and Inteck and an
increase in personnel. The increase was also attributable in part to the
relocation of the Company's corporate headquarters in April 1999 and the
execution of agreements to lease new facilities in Colorado, Iowa and
Massachusetts. The Company's rental expense amounted to $201,000 for 1999 as
compared to $16,000 for 1998.

         INTEREST EXPENSE. For 1999, interest expense increased to $85,000 from
$31,000 for 1998. This 174% increase was primarily due to borrowings under the
Company's revolving line of credit entered into in May 1999.

         NON-CASH FINANCING COSTS. For 1999, the $131,000 increase in non-cash
financing costs was primarily due to the incremental yield on common stock
issued at a discount to market in connection with a private placement of common
stock by HealthDesk immediately prior to the merger with MCII involving certain
individuals that were employed by the Company subsequent to the merger.

         INCOME TAXES. Income taxes were nominal in both respective periods as
the Company is in a loss carryforward position for federal income tax purposes.
At December 31, 1999, the components of the Company's deferred tax assets and
liabilities were comprised primarily of the future tax benefit of the Company's
net operating loss carryforwards of approximately $5.6 million.

         The utilization of the net operating loss carryforwards could be
limited due to restrictions imposed under federal and state laws upon a change
in ownership. The amount of the limitation, if any, has not been determined at
this time. A valuation allowance is provided when it is more likely than not
that some portion or all of the deferred tax assets will not be realized. As a
result of the Company's continued losses and uncertainties surrounding the
realization of the net operating loss carryforwards, management has determined
that the realization of deferred tax assets is not more likely than not.
Accordingly, a valuation allowance equal to the net deferred tax asset amount
has been recorded as of December 31, 1999.

         NET LOSS. Net loss for 1999 was $3.4 million as compared to $158,000
for 1998. The loss in 1999 was primarily attributable to the establishment of
two new profit centers that incurred significant start-up expenses without
realizing significant revenues, the severe decrease in revenue during the fourth
quarter of 1999 which the Company believes to be a direct result of year 2000
fears. This decline in business during the fourth quarter of 1999 resulted in an
unusual number of Company consultants not being billable and/or being laid off
which further resulted in the Company incurring significant costs associated
with the severance of these consultants. In addition, during 1999 the Company
relocated its corporate offices and opened or acquired three other offices. The
Company also incurred substantial increases in general and administrative
expenses as a result of the merger with HealthDesk.

LIQUIDITY AND CAPITAL RESOURCES

         During the year ended December 31, 1999, the Company financed its
operations and capital expenditures primarily through proceeds from the
Company's revolving line of credit and proceeds from a private placement of the
Company's of Series C Convertible Preferred Stock during November and December
1999.

         As of December 31, 1999, the Company had a working capital deficiency
of $396,000, an accumulated deficit of $4.1 million and  $637,000 in cash.

         Cash used in the Company's operating activities increased from $685,000
during 1998 to $3.6 million in 1999 primarily as a result of the cash portion of
the net loss of $3.4 million during 1999, increases in accounts receivable and
decreases in accrued liabilities, all of which were partially offset by cash
provided by increases in accounts payable and certain non-cash expenses.

         Cash provided in the Company's investing activities totaled $1.1
million for 1999 as compared to cash used in investing activities of $19,000
during 1998. During 1999, the Company received proceeds of $871,000 upon the
reverse merger with HealthDesk and collected $1.1 million from notes receivable
from related parties, which amounts were offset by payments to acquire Medical
System Solutions and Inteck in the aggregate amount of $412,000 (net of cash
acquired) and $432,000 in capital expenditures, primarily related to the
relocation of the Company's corporate facility.

                                       14
<PAGE>

         Cash provided in the Company's financing activities totaled $3.1
million for 1999. That amount was provided primarily through $1.2 million of net
borrowings under the Company's bank financing agreement, through the issuance of
$2.0 million of the Company's Series C Preferred Stock, through the collection
of a pre-merger subscription receivable aggregating $725,000, and through the
issuance of notes in the aggregate principal amount of $500,000 to certain
related parties, partially offset by the Company's repayment of $1.3 million on
notes payable to related parties. Cash provided in the Company's financing
activities totaled $721,000 for 1998 relating primarily to proceeds from notes
payable to related parties.

         In May 1999, the Company entered into an agreement with a financial
institution for a revolving line of credit of up to $1,700,000, which includes a
$200,000 sub-facility for an equipment term loan and a $150,000 sub-facility for
the issuance of letters of credit. The line of credit bears interest at the
bank's prime rate plus 1.5%. In connection with this line of credit, the Company
issued warrants to purchase 50,000 shares of its common stock, exercisable at
$2.87 per share. This line of credit is collateralized by substantially all of
the assets of the Company. At December 31, 1999, the Company had $1,025,000
outstanding under the revolving line of credit and $142,000 outstanding under
the equipment term loan. As of December 31, 1999, the Company had no amounts
available under the line of credit.

         The bank financing agreement contains certain restrictive financial
covenants. At December 31, 1999, the Company was not in compliance with certain
of these covenants and was in default of certain other provisions of the bank
financing agreement. On April 11, 2000, the Company entered into an agreement
with the bank which amended the bank financing agreement. The bank waived all
violations of the financial covenants included in the financing agreement from
inception up to and including March 31, 2000, and, as of April 1, 2000,
eliminated all previous financial covenants and added one new financial
covenant. As consideration for the amendment to the bank financing agreement, as
of April 10, 2000 the Company had repaid the overadvances on its borrowings
under the revolving line of credit in the aggregate amount of approximately
$379,000. Additionally, all borrowings with the bank are now personally
guaranteed by an individual who is a member of the Board of Directors and a
significant stockholder of the Company.

         In October 1999, the Company borrowed an aggregate of $500,000 from
certain officers and directors of the Company pursuant to promissory notes
bearing interest at a rate of 10%. As of December 31, 1999, the notes payable
had been repaid in full.

         The accompanying consolidated financial statements contained elsewhere
in this report have been prepared assuming that the Company will continue as a
going concern. The Company has suffered recurring losses from operations and
negative cash flows from operations. In addition, as described above, the
Company had a working capital deficiency at December 31, 1999. These factors,
among others, raise substantial doubt about the Company's ability to continue as
a going concern. As a result, the Company's report from its independent auditors
for 1999 contains an explanatory paragraph that describes the uncertainty as to
the Company's ability to continue as a going concern (see Note 2 to the
Consolidated Financial Statements included elsewhere in this report). The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

         The Company believes that it will have to obtain additional funds to
meet its projected cash requirements and fund its operations for the next twelve
months. During late 1999 and early 2000, the Company took certain actions in an
effort to become profitable and improve cash flow from operations in the future.
Management implemented a cost reduction program and developed and continues to
implement plans to reduce existing cost structures, improve operating
efficiencies and strengthen the Company's operating infrastructure. The Company
is also implementing a corporate finance program designed to improve its working
capital structure by considering certain financing alternatives. Such
alternatives include a proposed private placement of certain debt and/or equity
securities during the second or third quarter of 2000. In addition, the Company
has amended its existing bank financing agreement. Although the Company has been
successful in obtaining working capital to fund operations to date, there can be
no assurances that the Company will be able to generate additional capital in
the future or secure additional financing with reasonable terms, if at all. In
addition, there can be no assurance, or that the Company's funding requirements
or cash used in operating activities will not increase significantly as a result
of unforeseen circumstances. The inability to obtain such financing could have a
material adverse effect on the business, financial condition and results of
operations of the Company.

         In the event the Company exceeds its projected cash requirements, there
can be no assurance that the Company would be able to obtain public or private
third-party sources of financing or that favorable terms for such financing
would be available. In addition, given the trading history of the Company's
common stock and warrants to purchase common stock, there can be no assurance
that the Company will be able to raise additional cash through public or private
offerings of its common stock. If additional funds are raised by issuing equity
or convertible debt securities, options or warrants, further dilution to our
existing shareholders may result.

YEAR 2000 ISSUES

         The year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the

                                       15
<PAGE>

Company's programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000, which could result in major
system failure or miscalculations. A failure to identify and correct any
mission-critical internal or third-party year 2000 processing problem could have
a material adverse operational or financial consequence to the Company. The
Company believes that its most reasonably likely worst-case scenario would
relate to problems with the systems of third parties rather than with its
internal systems. The Company is limited in its ability to address the year 2000
issue as it relates to third parties and must rely solely on the assurances of
these third parties as to their year 2000 preparedness.

         Thus far, the Company has not experienced any significant problems
related to year 2000 issues associated with the computer systems, software,
other property and equipment used by the Company. However, the Company cannot
guarantee that the year 2000 problem will not adversely affect its business,
operating results or financial condition at some point in the future.

EFFECT OF INFLATION

         The Company believes that inflation has not had a material effect on
its net sales or profitability in recent years.

IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

         In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial
Statements." In SAB 101, the SEC staff expresses its view regarding the
appropriate recognition of revenue with regard to a variety of circumstances,
some of which are of particular relevance to the Company. The adoption of SAB
101 is not expected to have a material impact on the Company.

RISK FACTORS

         In addition to the other information contained elsewhere in this Form
10-KSB, the following factors should be considered carefully in evaluation the
business and prospects of the Company:

         LACK OF SUFFICIENT REVENUES; SIGNIFICANT AND CONTINUING LOSSES. The
Company has not achieved annual profitability and management cannot be certain
that the Company will realize sufficient revenues to achieve profitability. As
of December 31, 1999, the Company had an accumulated deficit of $4.1 million.
There can be no assurance that the Company will be able to generate meaningful
revenues or achieve profitable operations.

         The Company received a report from its independent certified public
accountants for the Company's fiscal year ended December 31, 1999 containing an
explanatory paragraph that describes the uncertainty related to the substantial
doubt about the Company's ability to continue as a going concern due to, among
other factors, the Company's recurring losses from operations, negative cash
flows from operations, and its working capital deficiency at December 31, 1999.

         NEGATIVE CASH FLOW; NEED FOR ADDITIONAL FINANCING. The Company obtained
a $1.7 million revolving line of credit from a bank in May 1999. In October
1999, the remaining amount available under the line of credit was utilized for
the acquisition of Inteck. In November and December 1999, the Company engaged in
a private equity offering of shares of Series C 6% Convertible Preferred Stock,
resulting in net cash proceeds of $2.0 million. The Company's capital
requirements are expected to continue to be significant and the Company believes
that it will have to obtain additional funds to meet its projected cash
requirements for the next twelve months. There can be no assurance that the
Company will be able to secure additional financing with reasonable terms, if at
all, or that the Company's funding requirements will not increase significantly
as a result of unforeseen circumstances or that the Company's cash used in

                                       16
<PAGE>

operating activities will not increase. In the event the Company exceeds its
projected cash requirements, there can be no assurance that the Company would be
able to obtain public or private third-party sources of financing or, that
favorable terms for such financing would be available. In addition, given the
trading history of the Company's common stock and warrants to purchase common
stock, there can be no assurance that the Company will be able to raise
additional cash through public or private offerings of its common stock. Any of
these developments could materially adversely affect the Company's business,
financial condition and results of operations.

         ABILITY TO IMPLEMENT ASP STRATEGY. The Company only recently expanded
its business to include an ASP component. There can be no assurance that the
Company will be able to assess accurately the investment required to negotiate
and perform in a profitable manner any of its ASP contracts. If the Company is
successful in implementing its ASP strategy, the Company anticipates that
competitors may increase their focus on this market, which could adversely
affect the Company's ability to obtain new contracts as well as the
profitability of any such contracts. In addition, any failure by the Company to
perform adequately under its ASP agreements may adversely effect its ability to
obtain future engagements from these or other clients. The Company's failure to
obtain future engagements could have a material adverse affect on the Company's
business, financial condition and results of operations.

         RETENTION AND RECRUITMENT OF PROFESSIONAL STAFF. The Company's business
involves the delivery of professional services and is labor-intensive. The
Company's success depends in large part upon its ability to attract, develop,
motivate and retain highly skilled consultants. There is significant competition
for employees with the skills required to perform the services offered by the
Company from other consulting firms, healthcare providers and other healthcare
industry participants, health information systems vendors, clients, systems
integrators and many other enterprises. There can be no assurance that the
Company will be able to attract and retain a sufficient number of highly skilled
employees in the future or that it will continue to be successful in training,
retaining and motivating employees. The loss of a significant number of
consultants and/or the Company's inability to hire a sufficient number of
qualified consultants would adversely affect the Company's ability to secure,
service and complete client engagements and could have a material adverse effect
on the Company's business, operating results and financial condition.

         CLIENT CONCENTRATION. The Company derives a significant portion of its
revenues from a relatively limited number of clients. Clients will typically
engage the Company on an assignment-by-assignment basis, and a client will be
able generally to terminate an assignment at any time without penalty. In
addition, the level of the Company's services required by any individual client
can diminish over the life of its relationship with the Company, and there can
be no assurance that the Company will be successful in establishing
relationships with new clients as this occurs. The loss of any significant
client could have a material adverse effect on the Company's business, financial
condition and results of operations.

         STRUCTURE OF CLIENT ENGAGEMENTS. Due to the structure of client
engagements, the Company typically provides services to its clients on a
project-by-project basis. As a result, the amount of personnel required to meet
the Company's contractual obligations at a given time varies depending on client
demands and the contractual arrangements then in place. This volatility can
result in indefinite periods in which certain or all Company consultants may not
be billable. In 1999, the Company was forced to lay off several of its
consultants. There can be no assurance that the Company will require the
services of such individuals in the future, or, if the Company does require
their services, that such consultants will return to work for the Company or
will refrain from working for competitors. This uncertainty may negatively
impact relationships between the Company and its employees which, in turn, could
have a material adverse effect on the Company's business, financial condition
and results of operations.

                                       17
<PAGE>

         PROJECT RISKS; LIMITED OUTSOURCING EXPERIENCE. Many of the Company's
engagements involve projects that are critical to the operations of its clients'
business and that provide benefits which may be difficult to quantify. The
Company's failure to meet a client's expectations in the performance of its
services could damage the Company's reputation and adversely affect its ability
to attract new business. In addition, the Company could incur substantial costs
and expend significant resources correcting errors in its work, and could
possibly become liable for damages caused by such errors. The Company has
assisted and expects to continue to assist clients in selecting and implementing
software applications for the clients' use in their business. While the Company
is not aware of any existing or potential claims, the Company could become
involved in disputes which could negatively impact client relationships and
which, in turn, could have a material adverse effect on the Company's business,
financial condition and results of operations, whether or not the Company bears
any responsibility, legal or otherwise.

         COMPETITION. The market for the Company's services is highly
fragmented, highly competitive and subject to rapid change. The Company believes
that it will compete principally with applications service providers, systems
integration firms, national consulting firms, including the consulting divisions
of large accounting firms, information system vendors, service groups of
computer equipment companies, facilities management companies, IT outsourcing
companies, general management consulting firms, and regional and specialty
consulting firms. Many of the Company's competitors have significantly greater
financial, technical and marketing resources than the Company, generate greater
revenues and have greater name recognition than the Company. Moreover, those
competitors who sell or license their own software may in the future attempt to
limit or eliminate the use of third-party consultants, such as the Company, to
implement and/or customize such software. In addition, vendors whose systems may
enjoy wide market acceptance and large market share could enter into exclusive
or restrictive agreements with other consulting firms, which could eliminate or
substantially reduce the Company's implementation work for those systems. There
are relatively low barriers to entry into the Company's markets, and the Company
faces and expects to face additional competition from new entrants into the
healthcare consulting industry. In addition, combinations and consolidations in
the consulting industry will give rise to large competitors whose relative
strengths are impossible to predict. The Company also competes with its client's
internal resources, particularly where these resources represent a fixed cost to
the client. This internal client competition may heighten as consolidation of
healthcare providers creates organizations large enough to support more
sophisticated internal information management capabilities. There can be no
assurance that the Company will be able to compete effectively with current and
future competitors or that competitive pressures, including wage pressures as
the consultant labor market tightens, will not cause the Company's revenue or
operating margins to decline, or otherwise materially adversely affect its
business, financial condition and results of operations.

         DEPENDENCE ON VENDOR RELATIONSHIPS. The Company depends, and will
continue to depend, upon its licensing and business relationships with
third-party vendors. The Company's success relies in part upon its ability to
maintain its existing vendor relationships and to form new relationships with
vendors in order to enhance the Company's services and to remain competitive in
providing applications services to its clients. Despite the vendor licensing
contacts in currently in place, there can be no assurance that the Company will
be able to maintain relationships with its vendors or establish relationships
with new vendors. In addition, client satisfaction of the Company's applications
services is dependent upon the use and reliability of the software, products and
services of the Company's application vendors. There can be no assurance that
the software, products or services of the Company's vendors will achieve market
acceptance or commercial success, or that the Company's existing or future
vendor relationships will result in sustained business partnerships or
successful Company product and service offerings.

         ACQUISITION STRATEGY. In 1999, the Company implemented its strategy of
expansion through the acquisitions of Medical Systems Solutions and Inteck. The
Company expects to continue to acquire companies as a part of its growth
strategy and in connection with the Company's increase in business-to-business

                                       18
<PAGE>

service offerings. The Company competes with other companies to acquire
businesses and expects this competition to continue to increase, making it more
difficult in the future to acquire suitable companies on favorable terms, if at
all. In addition, although the Company may acquire additional companies in the
future, it may be unable successfully to integrate such companies in an
effective and timely manner. If the Company is unable to integrate acquired
businesses, it may incur significant costs, delays or other operational,
technical or financial problems. The inability successfully to integrate
acquired businesses may also divert management's attention from existing
business and impair relationships with exiting clients and employees. To finance
future acquisitions, the Company may issue equity securities that could result
in dilution of the Company's common stock held by shareholders. The Company may
also incur debt and additional expenses as a result of future acquisitions which
could have a material adverse effect on the Company's business, financial
condition and operating results.

         DELISTING OF SECURITIES FROM NASDAQ SYSTEM; DISCLOSURE RELATING TO
LOW-PRICED STOCKS. On June 9, 1999, the Company was delisted from the Nasdaq
Small Cap Market. Following a hearing with Nasdaq in March 1999, Nasdaq
concluded that the merger of MC Informatics, Inc. with and into a wholly-owned
subsidiary of HealthDesk Corporation constituted a reverse merger with MC
Informatics, Inc. being the acquiring corporation. As a result, Nasdaq required
the Company to comply with the initial listing requirements to remain listed on
the Nasdaq Small Cap Market. Because the Company did not meet these initial
listing requirements, the Company was delisted. The trading of the Company's
securities is now conducted on the OTC Electronic Bulletin Board.

         Due to the delisting, an investor may find it more difficult to dispose
of, or to obtain accurate quotations as to the market value of, the Company's
securities. In addition, the trading of securities is subject to certain rules
promulgated under the Exchange Act, which require additional disclosure by
broker-dealers in connection with any trades involving a stock defined as a
penny stock (generally, any non-Nasdaq equity security that has a market price
of less than $5.00 per share, subject to certain exceptions). Such rules require
the delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith, and impose
various sales practice requirements on broker-dealers who sell penny stock to
persons other than established customers and accredited investors (generally
institutions). For these types of transactions, the broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transactions prior to sale. The additional
burdens imposed upon broker-dealers by such requirements may discourage
broker-dealers from effecting transactions in the common stock, which could
severely limit the market liquidity of the common stock and the ability of
shareholders to sell their common stock in the secondary market. There can be no
assurance that the Company's common stock will be listed on Nasdaq in the
foreseeable future.

         CONTROL BY MANAGEMENT. As of April 10, 2000, the officers and directors
of the Company beneficially owned, in the aggregate, approximately 80% of the
outstanding shares of common stock (assuming no exercise of outstanding warrants
to purchase common stock). Accordingly, such persons, acting together, are in a
position to control the election of all of the Company's directors and will thus
control the management, policies and business operations of the Company. Such
persons are also in a position to control the outcome of any matter submitted to
a vote of the Company's shareholders.

         OUTSTANDING OPTIONS. As of April 10, 2000, the Company had outstanding
options to purchase an aggregate of 2,596,362 shares of common stock at exercise
prices ranging from $1.00 to $5.00. The exercise price of certain options
represent a discount to market. Exercise of any of these options may have a
dilutive effect on the Company's shareholders. Furthermore, the terms upon which
the Company may be able to obtain additional equity financing may be adversely
affected, since the holders of the options can be expected to exercise them, if
at all, at a time when the Company would, in all likelihood, be able to obtain
any needed capital on terms more favorable to the Company than those provided in
the options.

                                       19
<PAGE>

         NO DIVIDENDS. To date, the Company has not paid any cash dividends and
does not expect to declare or pay dividends on its common stock in the
foreseeable future.

         AUTHORIZED PREFERRED STOCK. The Company has authorized 3,000,000 shares
of Preferred Stock, of which 2,500,000 shares are designated as Series C 6%
Convertible Preferred Stock. The Series C Convertible Preferred Stock has a
liquidation preference of $2.00 per share and each share is convertible into one
share of common stock. The holders of Series C Convertible Preferred Stock are
entitled to receive cumulative dividends at a rate of 6%, payable annually. The
rights of the holders of the Company's common stock will be subject to and may
be adversely affected by the rights of holders of the Series C Convertible
Preferred Stock and any other preferred stock that may be issued in the future.
The ability to issue preferred stock without shareholder approval could have the
effect of making it more difficult for a third party to acquire a majority of
the voting stock of the Company, thereby delaying, deferring or preventing a
change in control of the Company.

         VOLATILITY OF STOCK AND WARRANTS PRICES. The trading price of the
Company's common stock and warrants to purchase common stock have experienced
substantial fluctuations and is subject to significant volatility due to factors
impacting the overall market which are unrelated to the Company's performance.
The historical results of operations and financial position of the Company are
not necessarily indicative of future financial performance. If revenues or
earnings fail to meet securities analysts' expectations, there could be an
immediate and significant adverse impact on the trading price of the Company's
common stock.

ITEM 7.       FINANCIAL STATEMENTS.

         The financial statements of the Company are filed with this report
beginning on page F-1 following the signature pages.

ITEM 8.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
              FINANCIAL DISCLOSURE.

         On August 12, 1998, PricewaterhouseCoopers LLP resigned as accountants
of HealthDesk. In connection with the audit of the two fiscal years ended
December 31, 1996 and December 31, 1997, respectively, and through the date of
resignation, there were no disagreements with PricewaterhouseCoopers LLP on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure which, if not resolved to the satisfaction of
PricewaterhouseCoopers LLP, would have caused it to make reference to the matter
in connection with its report. The report of PricewaterhouseCoopers LLP on the
financial statements of HealthDesk for the years ended December 31, 1996 and
December 31, 1997 did not contain an adverse opinion or disclaimer of opinion
and was not qualified or modified as to uncertainty, scope or accounting
principles.

         On February 18, 1999, the Company appointed BDO Seidman, LLP as its
independent certified public accountants. Prior to the appointment of BDO, the
Company did not consult with BDO regarding either the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Company's financial statements.

                                       20
<PAGE>

                                    PART III

ITEM 9.       DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
              COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

         The information appearing under the caption "Election of Directors,"
including the subcaption "Compliance with Beneficial Ownership Reporting Rules,"
contained in the Company's Proxy Statement for the 2000 Annual Meeting of
Shareholders to be filed with the Commission within 120 days after the end of
the Company's fiscal year ended December 31, 1999 (the "definitive Proxy
Statement") is incorporated by reference into this item.

ITEM 10.      EXECUTIVE COMPENSATION.

         The information appearing under the caption "Election of Directors,"
including the subcaption "Executive Compensation," contained in the Company's
definitive Proxy Statement is incorporated by reference into this item.

ITEM 11.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The information appearing under the caption "Election of Directors,"
including the subcaption "Principal Shareholders," contained in the Company's
definitive Proxy Statement is incorporated by reference into this item.

ITEM 12.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information appearing under the caption "Certain Relationships and
Related Transactions" contained in the Company's definitive Proxy Statement is
incorporated by reference into this item.

                                       21
<PAGE>

ITEM 13.      EXHIBITS AND REPORTS ON FORM 8-K.

         (a)      Exhibits:


3.1      Amended and Restated Articles of Incorporation of the Registrant (4)

3.2      Certificate of Determination of Rights, Preferences, Privileges and
         Restrictions of 6% Series C Convertible Preferred Stock of the
         Registrant

32       Bylaws of the Registrant, as amended (1)

10.1     1994 Founder's Stock Option Plan, as amended (1)

10.2     1999 Stock Option Plan *

10.3     Asset Purchase Agreement dated as of September 29, 1998, by and between
         HealthDesk Corporation, Patient Infosystems Acquisition Corp. and
         Patient Infosystems, Inc. (2)

10.4     Amendment to Asset Purchase Agreement dated as of December 1, 1998 by
         and between HealthDesk Corporation, Patient Infosystems Acquisition
         Corp. and Patient Infosystems, Inc. (3)

10.5     Second Amendment to Asset Purchase Agreement dated as of February 1,
         1999 by and between HealthDesk Corporation, Patient Infosystems
         Acquisition Corp. and Patient Infosystems, Inc. (3)

10.6     Agreement and Plan of Reorganization dated August 18, 1998, by and
         between HealthDesk Corporation, MC Acquisition Corporation, MC
         Informatics, Inc. ("MCII") and certain shareholders of MCII (2)

10.7     Amendment to Agreement and Plan of Reorganization dated February 24,
         1999 by and between HealthDesk Corporation, MC Acquisition Corporation,
         MCII and certain shareholders of MCII *

10.8     Amendment to Agreement and Plan of Reorganization dated February 25,
         1999 by and between HealthDesk Corporation, MC Acquisition Corporation,
         MCII and certain shareholders of MCII (3)

10.9     Asset Purchase Agreement dated June 29, 1999 by and between the
         Registrant, Medical Systems Solutions, Inc., Arthur H. Young and John
         B. Carey (5)

10.10    Stock Purchase Agreement dated October 1, 1999 by and between the
         Registrant and Donald M. Jacobs (6)

10.11    Office Building Lease dated February 11, 1999 by and between Spieker
         Properties, L.P. and the Registrant *

10.12    Loan and Security Agreement dated May 27, 1999 by and among the
         Registrant, MC Acquisition Corporation and Silicon Valley Bank *

10.13    Second Loan Moditication Agreement dated February 29, 2000 by and
         between the Registrant, MC Acquisition Corporation, HSG Acquisitions,
         Inc. and Silicon Valley Bank *

10.14    Third Loan Modification Agreement dated April 11, 2000 by and between
         the Registrant, MC Acquisition Corporation, HSG Acquisitions, Inc. and
         Silicon Valley Bank *

10.15    Revolving Promissory Note dated May 27, 1999 executed by the Registrant
         and MC Acquisition Corporation in favor of Silicon Valley Bank *

10.16    Amended and Restated Revolving Promissory Note dated February 4, 2000
         executed by the Registrant, MC Acquisition Corporation and HSG
         Acquisitions, Inc. in favor of Silicon Valley Bank *

10.17    First Amendment to Amended and Restated Revolving Promissory Note dated
         April 11, 2000 executed by the Registrant, MC Acquisition Corporation
         and HSG Acquisitions, Inc. in favor of Silicon Valley Bank *

                                       22
<PAGE>

10.18    Equipment Term Note dated May 27, 1999 executed by the Registrant and
         MC Acquisition Corporation in favor of Silicon Valley Bank *

10.19    Amended and Restated Equipment Term Note dated February 4, 2000
         executed by the Registrant, MC Acquisition Corporation and HSG
         Acquisitions, Inc. in favor of Silicon Valley Bank *

10.20    First Amendment to Amended and Restated Equipment Term Note dated April
         11, 2000 executed by the Registrant, MC Acquisition Corporation and HSG
         Acquisitions, Inc. in favor of Silicon Valley Bank *

10.21    Intellectual Property Security Agreement dated May 27, 1999 by and
         between the Registrant, MC Acquisition Corporation and Silicon Valley
         Bank *

10.22    Intellectual Property Security Agreement dated February 29, 2000 by and
         between HSG Acquisitions, Inc. and Silicon Valley Bank *

10.23    Warrant to Purchase Stock dated May 27, 1999 issued by the Registrant
         in favor of Silicon Valley Bank *

10.24    Unconditional Guaranty (Individual) dated March 24, 2000 executed by
         John Pappajohn *

10.25    Registration Rights Agreement dated May 27, 1399 by and between the
         Registrant and Silicon Valley Bank *

10.26    Registration Rights Agreement dated February 26, 1999 by and between
         HealthDesk Corporation and certain shareholders (4)

10.27    Employment Agreement dated February 1999 by and between the Registrant
         and Garfield F. Thompson *

10.28    Employment Agreement dated February 1999 by and between the Registrant
         and Bi11 W. Childs *

16.1     Letter on Change in Certifying Accountant from PricewaterhouseCoopers
         LLP (7)

21.1     Subsidiaries of the Registrant

27.1     Financial Data Schedule

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

*        To be filed be amendment.

(1)      Filed as an exhibit to the Registrant's Form SB-2 (Registration No.
         333-14519) and incorporated herein by reference.

(2)      Filed as an exhibit to the Registrant's Form 8-K filed October 6, 1998
         and incorporated herein by reference.

(3)      Filed as an exhibit to the Registrant's Form 8-K filed March 16, 1999
         and incorporated herein by reference.

(4)      Filed as an exhibit to the Registrant's Form lO-KSB filed April 15,
         1999 and incorporated herein by reference.

(5)      Filed as an exhibit to the Registrant's Form 8-K filed July 14, 1999
         and incorporated herein by reference.

(6)      Filed as an exhibit to the Registrant's Form 8-K filed October 15, 1999
         and incorporated herein by reference.

(7)      Filed as an exhibit to the Registrant's Form 8-K/A filed August 26,
         1998 and incorporated herein by reference.




                                       23
<PAGE>

                                 EXHIBIT INDEX


         (a)      Exhibits:

3.2      Certificate of Determination of Rights, Preferences, Privileges and
         Restrictions of 6% Series C Convertible Preferred Stock of the
         Registrant

21.1     Subsidiaries of the Registrant


27.1     Financial Data Schedule




                                       24
<PAGE>

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized thereunto duly authorized on this 14th day of April,
2000.

                                                     MC INFORMATICS, INC.


                                                     By: /s/ Jeffrey L. Pollard
                                                         -----------------------
                                                         Jeffrey L. Pollard
                                                         Chief Financial Officer



                                POWER OF ATTORNEY

         KNOW ALL THESE PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints and Bill Childs and Jeffrey L.
Pollard and each of them, jointly and severally, his attorneys-in-fact, each
with full power of substitution, for him in any and all capacities, to sign any
and all amendments to this Form 10-KSB, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each said
attorneys-in-fact or his substitute or substitutes, may do or cause to be done
by virtue hereof.

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Form 10-KSB has been signed below by the following persons on the date
indicated on behalf of the Registrant and in the capacities and on the dates
indicated:

NAME                                    TITLE                         DATE
----                                    ----                          ----

/s/ Bill Childs           Chief Executive Officer, Chairman       April 14, 2000
-----------------------   of the Board and Director
Bill Childs               (principal executive officer)


/s/ David Koeller         President, Chief Operating Officer      April 14, 2000
-----------------------
David Koeller


/s/ Jeffrey L. Pollard    Chief Financial Officer                 April 14, 2000
-----------------------   (principal financial and
Jeffrey L. Pollard        accounting officer)


/s/ John Pappajohn        Director                                April 14, 2000
-----------------------
John Pappajohn


/s/ Joseph R. Dunham      Director                                April 14, 2000
-----------------------
Joseph R. Dunham


/s/ David Joiner          Director                                April 14, 2000
-----------------------
David Joiner


/s/ Bruce Ryan            Director                                April 14, 2000
-----------------------
Bruce Ryan


/s/ Michael Richards      Director                                April 14, 2000
-----------------------
Michael Richards

                                       25
<PAGE>

                              MC Informatics, Inc.

                   Index to Consolidated Financial Statements

                     Years Ended December 31, 1999 and 1998



Report of Independent Certified Public Accountants                         F-2

Consolidated Balance Sheet                                                 F-3

Consolidated Statements of Operations                                      F-4

Consolidated Statements of Stockholders' Equity (Deficit)                  F-5

Consolidated Statements of Cash Flows                                      F-6

Notes to Consolidated Financial Statements                                 F-8

                                      F-1
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


         The Board of Directors
         MC Informatics, Inc.

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

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

         In our opinion, the consolidated financial statements referred to above
         present fairly, in all material respects, the financial position of MC
         Informatics, Inc. at 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.

         The accompanying consolidated financial statements have been prepared
         assuming that the Company will continue as a going concern. As
         discussed in Note 2 to the consolidated financial statements, the
         Company has suffered recurring losses from operations and negative cash
         flows from operations. In addition, the Company has a working capital
         deficiency at December 31, 1999. These factors, among others, raise
         substantial doubt about the Company's ability to continue as a going
         concern. Management's plans in regard to these matters are also
         described in Note 2. The consolidated financial statements do not
         include any adjustments that might result from the outcome of this
         uncertainty.


                                                           /s/ BDO Seidman, LLP

                                                               BDO SEIDMAN, LLP

         Orange County, California
         March 8, 2000, except as to the fourth
              paragraph of Note 7, which is as
              of April 11, 2000, and Note 14,
              which is as of April 10, 2000

                                      F-2
<PAGE>
<TABLE>

                                   MC INFORMATICS, INC.
                                CONSOLIDATED BALANCE SHEET
                                     DECEMBER 31, 1999
<CAPTION>

                                ASSETS (NOTES 4, 7 AND 14)

<S>                                                                         <C>
Current assets:
   Cash                                                                     $    636,504
   Accounts receivable, net of allowance for doubtful
     accounts of $298,570                                                      1,833,602
   Prepaid expenses and other current assets                                     342,460
                                                                            -------------

Total current assets                                                           2,812,566

Property and equipment, net (Note 5)                                             415,032
Goodwill, net of accumulated amortization of $137,289 (Note 4)                 2,168,372
Other assets                                                                      55,342
                                                                            -------------

                                                                            $  5,451,312
                                                                            =============

                           LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Revolving lines of credit (Note 7)                                       $  1,202,211
   Current obligation related to business acquisition (Note 4)                   900,539
   Accounts payable                                                              658,004
   Accrued liabilities                                                           329,160
   Deferred revenue                                                              119,148
                                                                            -------------

Total current liabilities                                                      3,209,062

Obligation related to business acquisition (Note 4)                              300,000
                                                                            -------------

Total liabilities                                                              3,509,062
                                                                            -------------

Commitments and contingencies (Notes 2 and 13)
Subsequent events (Notes 7 and 14)

Stockholders' equity (Notes 3, 4 and 9):
   Preferred Stock, no par value. Authorized 3,000,000 shares:
     Series C 6% Convertible Preferred Stock, $.01 par value. Issued
         and outstanding 1,012,500 shares (aggregate liquidation
         preference of $2,025,000)                                             2,432,257
   Common stock, no par value. Authorized 40,000,000 shares;
     issued and outstanding 15,469,291 shares                                  3,906,890
   Unearned compensation                                                        (274,450)
   Accumulated deficit                                                        (4,122,447)
                                                                            -------------

Total stockholders' equity                                                     1,942,250
                                                                            -------------

                                                                            $  5,451,312
                                                                            =============
</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                      F-3
<PAGE>
<TABLE>

                                         MC INFORMATICS, INC.
                                 CONSOLIDATED STATEMENTS OF OPERATIONS
                                YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>

                                                            1999                 1998
                                                       ----------------     ----------------
<S>                                                    <C>                  <C>
Revenues                                               $     8,570,347      $     3,716,585

Direct expenses                                              7,017,174            2,529,959
                                                       ----------------     ----------------

Gross profit                                                 1,553,173            1,186,626

General and administrative expenses                          4,740,553            1,309,601
                                                       ----------------     ----------------

Loss from operations                                        (3,187,380)            (122,975)

Interest expense (Note 6)                                       84,750               30,985

Non-cash financing costs (Note 3)                              131,250                    -

Other income                                                    (9,960)                   -
                                                       ----------------     ----------------

Loss before income taxes                                    (3,393,420)            (153,960)

Provision for income taxes (Note 10)                             1,600                3,800
                                                       ----------------     ----------------

Net loss                                               $    (3,395,020)     $      (157,760)
                                                       ================     ================

Basic and diluted loss per share (Note 11)             $          (.28)     $          (.03)
                                                       ================     ================
</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                      F-4
<PAGE>
<TABLE>

                                                         MC INFORMATICS, INC.
                                       CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                                YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>

                        Members'           Preferred Stock           Common Stock
                         Equity       -----------------------  -------------------------
                        (Deficit)                                                           Unearned      Accumulated
                         Amount         Shares      Amount        Shares       Amount      Compensation     Deficit        Total
                       -----------   ----------- ------------  ------------ ------------   ------------   -----------  ------------
<S>                    <C>            <C>        <C>            <C>         <C>            <C>            <C>          <C>
Balance,
   December 31, 1997   $  (92,389)           --  $        --            --  $        --    $        --    $       --   $   (92,389)

Net income, January 1
   through
   June 22, 1998           72,189(1)         --           --            --           --             --            --        72,189
Conversion of LLC to
   S-corporation           20,200            --           --     5,645,230       70,000             --       (90,200)           --
Net loss, June 23
   through
   December 31, 1998           --            --           --            --           --             --      (229,949)(1)  (229,949)
                       -----------   ----------- ------------  ------------ ------------   ------------   -----------  ------------

Balance,
   December 31, 1998           --            --           --     5,645,230       70,000             --      (320,149)     (250,149)

Stock issued in
   connection with
   reverse acquisition
   (Note 3)                    --            --           --     9,467,845    2,531,748             --            --     2,531,748
Stock issued in
   connection with
   acquisitions (Note
   4)                          --            --           --       356,216      918,344             --            --       918,344
Warrants issued in
   connection with
   bank financing
   (Note 7)                    --            --           --            --       38,967             --            --        38,967
Employee stock options
   issued as
   compensation
    (Note 9)                   --            --           --            --      329,340       (329,340)           --            --
Amortization of
   unearned
   compensation
    (Note 9)                   --            --           --            --           --         54,890            --        54,890
Compensation for
   non-employee stock
   options (Note 9)            --            --           --            --       18,491             --            --        18,491
Series C Preferred
   Stock issued in
   private equity
   offering (Note 9)           --     1,012,500    2,024,979            --           --             --            --     2,024,979
Preferred stock deemed
   dividend (Note 9)           --            --      407,278            --           --             --      (407,278)           --
Net loss                       --            --           --            --           --             --    (3,395,020)   (3,395,020)
                       -----------   ----------- ------------  ------------ ------------   ------------   -----------  ------------

Balance,
   December 31, 1999   $       --     1,012,500  $ 2,432,257    15,469,291  $ 3,906,890    $  (274,450)  $(4,122,447)  $ 1,942,250
                       ===========   =========== ============  ============ ============   ============  ============  ============
</TABLE>

(1) The total net loss for the year ended December 31, 1998 was $157,760.

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                      F-5
<PAGE>
<TABLE>

                                                MC INFORMATICS, INC.
                                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                       YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>

                                                                                   1999                  1998
                                                                            ------------------    ------------------
<S>                                                                         <C>                   <C>
Cash flows from operating activities:
   Net loss                                                                 $      (3,395,020)    $        (157,760)
   Adjustments to reconcile net loss to net cash used
     in operating activities:
     Depreciation and amortization                                                    198,333                 9,499
     Provision for doubtful accounts                                                  304,278                38,597
     Warrants issued in connection with bank financing                                 38,967                     -
     Non-cash financing costs                                                         131,250                     -
     Amortization of unearned compensation for employee options                        54,890                     -
     Compensation for non-employee stock options                                       18,491                     -
     Changes in assets and liabilities, net of business acquisitions:
       Accounts receivable                                                           (833,737)             (888,879)
       Prepaid expenses and other current assets                                      (38,684)              (57,261)
       Other assets                                                                     9,792               (13,368)
       Accounts payable                                                               289,621               148,913
       Accrued liabilities                                                           (333,507)              112,764
       Deferred revenue                                                               (83,557)              122,824
                                                                            ------------------    ------------------

Net cash used in operating activities                                              (3,638,883)             (684,671)
                                                                            ------------------    ------------------

Cash flows from investing activities:
   Purchases of property and equipment                                               (431,880)              (18,918)
   Cash received upon reverse acquisition                                             871,268                     -
   Collection of notes receivable from related parties                              1,111,819                     -
   Advances to related party                                                            7,285                     -
   Payments for business acquisitions, net of cash acquired                          (411,706)                    -
                                                                            ------------------    ------------------

Net cash provided by (used in) investing activities                                 1,146,786               (18,918)
                                                                            ------------------    ------------------

Cash flows from financing activities:
   Proceeds from revolving line of credit                                           1,367,211                     -
   Repayments on revolving line of credit                                            (200,000)                    -
   Proceeds from notes payable to related parties                                     500,000               848,819
   Repayments of notes payable to related parties                                  (1,288,819)             (100,000)
   Proceeds from notes payable                                                              -                50,000
   Repayment of notes payable                                                         (17,500)              (77,500)
   Collection of pre-merger subscription receivable                                   725,000                     -
   Proceeds from Series C Preferred Stock offering                                  2,024,979                     -
                                                                            ------------------    ------------------

Net cash provided by financing activities                                           3,110,871               721,319
                                                                            ------------------    ------------------
</TABLE>

                                      F-6
<PAGE>
<TABLE>

                                                MC INFORMATICS, INC.
                                  CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                       YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>

                                                                                   1999                   1998
                                                                            ------------------    -------------------
<S>                                                                         <C>                   <C>
Net increase in cash                                                                  618,774                 17,730

Cash, beginning of year                                                                17,730                      -
                                                                            ------------------    -------------------

Cash, end of year                                                           $         636,504     $           17,730
                                                                            ==================    ===================

Supplemental disclosures of cash flow information:
  Cash paid during the year for:
       Interest                                                             $          87,994     $           15,893
                                                                            ==================    ===================
       Income taxes                                                         $           1,600     $            1,920
                                                                            ==================    ===================
</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                      F-7
<PAGE>

                              MC INFORMATICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        BUSINESS AND ORGANIZATION

        MC Informatics, Inc. (the "Company") was incorporated in California on
        June 22, 1998. The Company is the successor to a California limited
        liability company that was formed on April 14, 1997. The Company
        operates in one segment and is a provider of consulting services and
        information technology solutions to the healthcare industry.

        Effective June 22, 1998, the members of the limited liability company
        converted their membership interests to shares of the Company's common
        stock.

        BASIS OF PRESENTATION

        As discussed more fully in Note 3, HealthDesk Corporation ("HealthDesk")
        merged with MC Informatics, Inc. ("MCIF") on March 2, 1999. The merger
        was accounted for as a purchase of HealthDesk by MCIF in a "reverse
        acquisition", since HealthDesk had no ongoing business or operations at
        the time of the merger and the executive officers and members of the
        board of directors of the post-merger entity were primarily comprised of
        individuals previously associated with MCIF. In a reverse acquisition,
        the accounting treatment differs from the legal form of the transaction,
        as the continuing legal parent company (HealthDesk) is not assumed to be
        the acquirer and the financial statements of the combined entity are
        those of the accounting acquirer (MCIF), including any comparative prior
        year financial statements presented by the combined entity after the
        business combination. Consequently, the consolidated financial
        statements include the accounts of MCIF, and beginning March 2, 1999,
        include the accounts of HealthDesk.

        In connection with the reverse acquisition, the Company assumed the
        number of authorized no par common shares (40,000,000 shares) and the
        number of authorized no par preferred shares (3,000,000 shares) of
        HealthDesk. Accordingly, all references to the number of shares and the
        per share information in the accompanying consolidated financial
        statements have been adjusted to reflect these changes on a retroactive
        basis.

        REVENUE RECOGNITION

        The Company recognizes revenue when services are rendered. Payments
        received from customers and invoices presented to customers in advance
        of services have been deferred until earned and are recorded as deferred
        revenue in the accompanying consolidated financial statements.

        PROPERTY AND EQUIPMENT

        Property and equipment are recorded at cost, less accumulated
        depreciation and amortization. Depreciation and amortization are
        computed using the straight-line method over the estimated useful lives
        of the assets (or lease term, if shorter) which range from two to seven
        years.

        Maintenance and repairs are expensed as incurred while renewals and
        betterments are capitalized.

        GOODWILL

        Goodwill represents the excess of the purchase price over net assets
        acquired through business combinations accounted for as purchases and is
        amortized on a straight-line basis over its estimated useful life of
        five to seven years.

        DEBT ISSUANCE COSTS

        The costs related to the issuance of the bank financing are capitalized
        and amortized over the term of the related debt.

                                      F-8
<PAGE>

                              MC INFORMATICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        LONG LIVED ASSETS

        The Company reviews the carrying amount of its long-lived assets and
        identifiable intangible assets for possible impairment whenever events
        or changes in circumstances indicate that the carrying amount of the
        assets may not be recoverable. Recoverability of assets to be held and
        used is measured by a comparison of the carrying amount of an asset to
        future undiscounted net cash flows expected to be generated by the
        asset. If such assets are considered to be impaired, the impairment to
        be recognized is measured by the amount by which the carrying amount of
        the assets exceeds the fair value of the assets. Assets to be disposed
        of are reported at the lower of their carrying amount or fair value less
        costs to sell.

        INCOME TAXES

        From inception through June 22, 1998, the Company was structured as a
        limited liability company ("LLC"). No liability for income taxes was
        recorded for Federal or state purposes since the LLC was recognized as a
        partnership for income tax purposes. Accordingly, all profits, losses
        and credits of the Company through June 22, 1998 were the responsibility
        of the LLC members.

        Upon the Company's conversion on June 22, 1998 from an LLC to an
        S-corporation under the provisions of Section 1362 of the Internal
        Revenue Code, the Company elected to be taxed as an S-corporation.
        Accordingly, the Company has not provided for any income taxes for the
        period from June 22, 1998 through March 2, 1999, except certain state
        franchise taxes, since the liability is that of the individual
        stockholders.

        Effective March 2, 1999, in connection with the merger with HealthDesk,
        the Company became a C Corporation for income tax purposes. The Company
        uses the liability method of accounting for income taxes in accordance
        with Statement of Financial Accounting Standards No. 109, "Accounting
        for Income Taxes." Deferred income taxes are recognized based on the
        differences between financial statement and income tax bases of assets
        and liabilities using enacted tax rates in effect for the year in which
        the differences are expected to reverse. Valuation allowances are
        established, when necessary, to reduce deferred tax assets to the amount
        expected to be realized. The provision for income taxes represents the
        state minimum tax payable for the period and the change during the
        period in net deferred tax assets and liabilities.

        STOCK-BASED COMPENSATION

        The Company applies APB Opinion 25, "Accounting for Stock Issued to
        Employees," and related interpretations in accounting for its employee
        stock-based compensation plans. Accordingly, no compensation cost is
        recognized for its employee stock option plans, unless the exercise
        price of options granted is less than fair market value on the date of
        grant. The Company has adopted the disclosure provisions of Statement of
        Financial Accounting Standards No. 123, "Accounting for Stock-Based
        Compensation".

        LOSS PER SHARE

        Loss per share is calculated pursuant to Statement of Financial
        Accounting Standards No. 128, "Earnings per Share". Basic earnings
        (loss) per share includes no dilution and is computed by dividing loss
        available to common shareholders by the weighted average number of
        shares outstanding during the period. Diluted earnings (loss) per share
        reflects the potential dilution of securities that could share in the
        earnings of the Company.

                                      F-9
<PAGE>

                              MC INFORMATICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        FAIR VALUE OF FINANCIAL INSTRUMENTS

        Statement of Financial Accounting Standards No. 107, "Disclosures about
        Fair Value of Financial Instruments" requires all entities to disclose
        the fair value of financial instruments, both assets and liabilities
        recognized and not recognized on the balance sheet, for which it is
        practicable to estimate fair value. This statement defines fair value of
        a financial instrument as the amount at which the instrument could be
        exchanged in a current transaction between willing parties.

        The carrying amount of accounts receivable, accounts payable and accrued
        liabilities are reasonable estimates of their fair value because of the
        short maturity of these items. The Company believes the carrying amounts
        of its revolving lines of credit approximate fair value because the
        interest rates on these instruments approximate market interest rates.
        As of December 31, 1999, the fair value of all financial instruments
        approximated carrying value.

        The fair value of the Company's obligations related to business
        acquisitions cannot be determined due to the financial instrument
        arising in connection with an acquisition transaction and therefore no
        market for such instrument.

        CONCENTRATION OF CREDIT RISK

        Financial instruments, which potentially expose the Company to
        concentrations of credit risk, consist primarily of cash and accounts
        receivable. The Company places its cash with high quality financial
        institutions. At times, cash balances may be in excess of the amounts
        insured by the Federal Deposit Insurance Corporation.

        Credit is extended for all customers based upon an evaluation of the
        customer's financial condition and credit history and generally the
        Company does not require collateral. Credit losses are provided for in
        the consolidated financial statements and consistently have been within
        management's expectations.

        The Company had revenues from three customers, which accounted for
        approximately 25%, 17% and 16%, respectively, of revenues for the year
        ended December 31, 1999. The accounts receivable balance from these
        customers was approximately 10%, 36% and 2%, respectively, at December
        31, 1999. The Company had revenues from two customers which accounted
        for approximately 39% and 18%, respectively, of revenues for the year
        ended December 31, 1998.

        USE OF ESTIMATES

        The preparation of financial statements in conformity with generally
        accepted accounting principles requires management to make estimates and
        assumptions that affect the reported amounts of assets and liabilities
        and disclosure of contingent assets and liabilities at the date of the
        financial statements, and the reported amounts of revenues and expenses
        during the reporting period. Actual results could differ from those
        estimates.

        RECLASSIFICATIONS

        Certain reclassifications have been made to the prior year financial
        statements to be consistent with the 1999 presentation.

                                      F-10
<PAGE>

                              MC INFORMATICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

2.      GOING CONCERN

        The accompanying consolidated financial statements have been prepared
        assuming the Company will continue as a going concern. During the years
        ended December 31, 1999 and 1998, the Company experienced operating
        losses of $3,187,380 and $122,975, respectively, and had negative cash
        flow from operations of $3,638,883 and $684,671, respectively. In
        addition, the Company had a working capital deficiency of $396,496 at
        December 31, 1999. These factors, among others, raise substantial doubt
        about the Company's ability to continue as a going concern. The
        consolidated financial statements do not include any adjustments that
        might result from the outcome of this uncertainty.

        During late 1999 and early 2000, the Company took certain actions in an
        effort to become profitable and improve cash flow from operations in the
        future. Management embarked on an aggressive cost reduction program and
        developed and continues to implement plans to reduce existing cost
        structures, improve operating efficiencies, and strengthen the Company's
        operating infrastructure. There can be no assurances that the Company
        can achieve its plans to become profitable and improve cash flow from
        operations.

        The Company is also implementing a corporate finance program designed to
        improve its working capital structure by considering certain financing
        alternatives. Such alternatives include the private placement of certain
        debt and equity securities. In addition, management has amended its
        existing bank financing agreement (Note 7). Although management has been
        successful in obtaining working capital to fund operations to date,
        there can be no assurances that the Company will be able to generate
        additional capital in the future.

3.      MERGER WITH HEALTHDESK

        On March 2, 1999, MC Informatics, Inc. ("MCIF"), was merged with and
        into a wholly-owned subsidiary of HealthDesk Corporation ("HealthDesk")
        through the issuance of 5,645,230 shares of HealthDesk's common stock in
        exchange for all the outstanding common shares of MCIF pursuant to the
        terms of an Agreement and Plan of Reorganization, dated August 18, 1998
        (the "Agreement"). In connection with the merger, HealthDesk changed its
        name to MC Informatics, Inc. In accordance with the Agreement, upon the
        closing of the merger in March 1999, all of the outstanding shares of
        series B preferred stock of HealthDesk were converted into 2,525,000
        shares of common stock.

        The transaction has been accounted for as a reverse acquisition whereby
        MCIF has been identified as the acquiring corporation for financial
        reporting purposes. Accordingly, the accompanying consolidated financial
        statements reflect the accounts of MCIF for all periods presented, and
        include the accounts of HealthDesk from the date of the stock-for-stock
        exchange (March 2, 1999).

        The 5,645,230 shares of common stock issued to acquire the common stock
        of MCIF are reflected in the accompanying consolidated financial
        statements as if the shares were issued and outstanding for all periods
        presented. The 9,467,845 shares retained by the original HealthDesk
        shareholders (including the 2,525,000 shares of common stock issued upon
        conversion of the HealthDesk series B preferred stock) are reflected in
        the accompanying consolidated financial statements as consideration
        issued by MCIF to acquire the net assets of HealthDesk. The historical
        cost of the net assets acquired and, accordingly, the recorded value of
        the common stock issued was $2,531,748.

        The Company recorded $131,250 in the accompanying 1999 consolidated
        statement of operations for non-cash financing costs associated with
        common stock sold by HealthDesk, at a discount to market, to certain
        individuals that were employed by the Company subsequent to the merger.

        As used herein, the term the Company refers to MCIF prior to the merger
        of MCIF and HealthDesk Corporation and the combined entity after the
        merger.

                                      F-11
<PAGE>

                              MC INFORMATICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

3.      MERGER WITH HEALTHDESK (CONTINUED)

        The following represents the unaudited pro forma results of operations
        as if the merger had occurred at the beginning of the respective periods
        presented below.
<TABLE>
<CAPTION>
                                                                                1999                    1998
                                                                           ---------------         ---------------
<S>                                                                        <C>                     <C>
       Revenues                                                            $    8,570,347          $    3,716,585
                                                                           ===============         ===============

       Loss from continuing operations                                     $   (3,781,782)         $   (1,335,461)
                                                                           ===============         ===============

       Basic and diluted loss per share from continuing operations         $         (.27)         $        (0.14)
                                                                           ===============         ===============
</TABLE>

        The pro forma results of operations above do not purport to be
        indicative of the results that would have occurred had the merger taken
        place at the beginning of the respective periods presented or of results
        which may occur in the future.

4.      ACQUISITIONS OF BUSINESSES

        HSG ACQUISITION, INC.

        On October 1, 1999, the Company acquired all of the outstanding stock of
        HSG Acquisitions, Inc. (dba Inteck, Inc.) ("Inteck") pursuant to the
        terms of a Stock Purchase Agreement for a purchase price of $1,812,500
        subject to certain adjustments. The purchase price for the acquisition
        included the issuance of 245,000 shares of the Company's common stock
        valued at $2.50 per share (market value), an additional issuance of
        120,000 shares of common stock valued at $2.50 per share on January 5,
        2000, a cash payment of $300,000 and a promissory note for $600,000
        bearing interest at the rate of 8.5% per annum commencing October 1,
        1999. The terms of the promissory note include an interest only payment
        of $13,413 due on January 5, 2000, and nine monthly payments of
        principal and interest of $36,650 commencing January 5, 2000, with a
        balloon payment of $300,000 due on October 1, 2000. The acquisition has
        been accounted for using the purchase method of accounting and the
        assets acquired and liabilities assumed were recorded at their estimated
        fair values at the date of the acquisition. The cost in excess of net
        assets acquired was $1,845,247 which is being amortized on a
        straight-line basis over seven years.

        In connection with the acquisition, the Company assumed a deferred
        compensation liability of $144,983, which is due on demand. In addition,
        the purchase price was increased by $155,556 as a result of the
        subsequent realization of certain assets. This purchase price adjustment
        is payable to the seller on April 23, 2000. Such amounts have been
        included in current obligation related to business acquisition in the
        accompanying balance sheet. The amounts due to the seller as a result of
        the acquisition are collateralized by substantially all of the assets of
        Inteck.

        Supplementary information related to the acquisition of Inteck is as
        follows:

       Components of purchase price

                                      F-12
<PAGE>

                              MC INFORMATICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

4.      ACQUISITIONS OF BUSINESSES (CONTINUED)

<TABLE>
<CAPTION>
            <S>                                                                 <C>
            Cash                                                                $      300,000
            Promissory note                                                            600,000
            Future obligation to issue 120,000 shares of the Company's stock           300,000
            Issuance of 245,000 shares of the Company's common stock                   612,500
                                                                                ---------------

                                                                                     1,812,500

            Purchase price adjustment payable to seller                                155,556
            Acquisition costs                                                           79,561
                                                                                ---------------

       Total purchase price                                                          2,047,617

       Net assets acquired                                                             202,370
                                                                                ---------------

       Goodwill                                                                 $    1,845,247
                                                                                ===============
</TABLE>

        The following represents the unaudited pro forma results of operations
        as if the acquisition had occurred at the beginning of the respective
        periods presented below:

<TABLE>
<CAPTION>
                                                          1999                     1998
                                                   ------------------       -----------------
       <S>                                         <C>                      <C>
       Revenues                                    $      10,049,394        $      5,380,964
                                                   ==================       =================

       Net loss                                    $      (3,313,307)       $     (1,831,014)
                                                   ==================       =================

       Basic and diluted loss per share            $            (.27)       $           (.14)
                                                   ==================       =================
</TABLE>

        The pro forma results of operations above do not purport to be
        indicative of the results that would have occurred had the acquisition
        taken place at the beginning of the respective period presented or of
        results which may occur in the future.

        MEDICAL SYSTEMS SOLUTIONS

        Effective June 1, 1999, the Company acquired substantially all of the
        assets of Medical Systems Solutions, Inc. pursuant to the terms of an
        Asset Purchase Agreement. The assets purchased include inventory of
        computer hardware and software programs, computer equipment and all of
        the current customer contracts of Medical Systems Solutions, Inc. The
        purchase price for the acquisition included the issuance of 111,216
        shares of common stock (with a market value of $305,844) and a cash
        payment of $195,263. The acquisition has been accounted for using the
        purchase method of accounting and the assets acquired and liabilities
        assumed were recorded at their estimated fair values at the date of the
        acquisition. The cost in excess of the net assets acquired was $438,414
        which is being amortized on a straight-line basis over five years.

        The pro forma effect of this asset purchase for 1999 and 1998 would not
        be materially different than the amounts reported in the accompanying
        statements of operations.

5.      PROPERTY AND EQUIPMENT

        Property and equipment consist of the following:

                                                              December 31, 1999
                                                              ------------------

       Office equipment                                       $         308,951
       Furniture and fixtures                                           150,629
       Software                                                          21,241
                                                              ------------------

                                                                        480,821

       Accumulated depreciation and amortization                        (65,789)
                                                              ------------------

                                                              $         415,032
                                                              ==================

6.      NOTES RECEIVABLE AND PAYABLE TO RELATED PARTIES

        During 1998 and through February 1999, HealthDesk loaned amounts
        aggregating $1,111,819 to certain of the directors and officers of MCIF.
        These funds were subsequently loaned on substantially the same terms to
        MCIF by said directors and officers. The notes were unsecured, bore
        interest at 8.5% per annum and were payable on demand. As of December
        31, 1999, the notes receivable and notes payable had been collected and
        repaid in full.

                                      F-13
<PAGE>

                              MC INFORMATICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

6.      NOTES RECEIVABLE AND PAYABLE TO RELATED PARTIES (CONTINUED)

        In October 1999, certain officers and directors loaned an aggregate
        amount of $500,000 to the Company. The notes were unsecured and bore
        interest at 10% per annum. As of December 31, 1999, all amounts owed had
        been repaid.

        Interest incurred on notes payable to related parties was $27,522 and
        $30,385 during the years ended December 31, 1999 and 1998, respectively.

7.      REVOLVING LINES OF CREDIT

        On May 28, 1999, the Company entered into an agreement with a bank for a
        revolving line of credit of up to $1,700,000, which includes a $200,000
        sub-facility for an equipment term loan and a $150,000 sub-limit for the
        issuance of letters of credit. In connection with the bank financing
        agreement, the Company issued warrants to purchase 50,000 shares of the
        Company's common stock, exercisable at $2.87 per share and expiring on
        May 27, 2004. The estimated fair value of these warrants was $38,967 and
        such amount has been accounted for as a debt issuance cost in the
        accompanying consolidated financial statements. As of December 31, 1999,
        the Company had $1,025,000 outstanding under the revolving line of
        credit and $142,211 outstanding on the equipment term loan. No amounts
        are available under this revolving line of credit at December 31, 1999.

        The line of credit is collateralized by substantially all assets of the
        Company and bears interest at the bank's prime rate (8.5% at December
        31, 1999) plus 1.5%. The revolving line of credit is payable in monthly
        installments of interest only, with the unpaid principal balance and
        accrued interest due on May 26, 2000. The equipment term loan is payable
        in monthly installments of interest only at the bank's prime rate plus
        1.5% through May 27, 2000, at which time the outstanding balance was to
        be payable in equal monthly principal and interest installments through
        May 26, 2003.

        The bank financing agreement contains certain restrictive financial
        covenants. At December 31, 1999, the Company was not in compliance with
        certain of these covenants and was in default of certain other
        provisions of the bank financing agreement.

        On April 11, 2000, the Company entered into an agreement with the bank
        which amended the bank financing agreement. Pursuant to this amendment,
        the bank extended the maturity date to the earlier of (i) January 31,
        2001, or (ii) the date upon which the Company successfully raises
        $3,000,000 or more of debt or equity financing, as defined in the
        amended agreement. In addition, the bank waived all violations of the
        financial covenants included in the bank financing agreement from
        inception up to and including March 31, 2000, and as of April 1, 2000,
        eliminated all previous financial covenants and added one new financial
        covenant. As consideration for the amendment to the bank financing
        agreement, the Company repaid the overadvances on its borrowings under
        the revolving line of credit in the aggregate amount of approximately
        $379,000. Additionally, all borrowings with the bank are now personally
        guaranteed by an individual who is a member of the board of directors
        and a significant stockholder. In connection with the amended bank
        financing agreement, all amounts due have been presented in revolving
        lines of credit in the accompanying consolidated balance sheet.

        In connection with the acquisition of Inteck (Note 4), the Company
        assumed a revolving line of credit agreement for unsecured borrowings of
        up to $35,000. The line of credit bears interest at the bank's prime
        rate (8.5% at December 31, 1999) plus 2.5% and is due on demand. As of
        December 31, 1999, the Company had $35,000 outstanding under this line
        of credit.

8.      NOTES PAYABLE

        In July 1998, the Company borrowed $50,000 from an individual. The
        unsecured note payable accrued interest at 10%. The outstanding balance
        at December 31, 1998 was repaid in full in January 1999.

                                      F-14
<PAGE>

                              MC INFORMATICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

9.      STOCKHOLDERS' EQUITY

        PREFERRED STOCK

        The Company has authorized 3,000,000 shares of Preferred Stock, of which
        2,500,000 shares are designated as Series C Convertible Preferred Stock.
        The Series C Convertible Preferred Stock has a liquidation preference of
        $2.00 per share and each share is convertible into one share of common
        stock. The holders of Series C Convertible Preferred Stock are entitled
        to receive cumulative dividends at a rate of 6%, payable annually. At
        December 31, 1999, undeclared cumulative dividends totaled $17,420.

        PRIVATE EQUITY OFFERING

        On November 1, 1999, the Company sold an aggregate of 1,012,500 shares
        of Series C 6% Convertible Preferred Stock, at $2.00 per share, in a
        private equity offering. The net cash proceeds of this offering were
        $2,024,979. The Series C 6% Convertible Preferred Stock, which is
        convertible to common stock at a discount to the market, has been
        accounted for by treating such discount to the market as a deemed
        dividend. The Company computed the amount of the discount based on the
        difference between the conversion price and the fair value of the
        underlying common stock on the date these preferred shares were issued.
        Accordingly, $407,278 has been recorded as a deemed dividend and is
        considered in the calculation of loss per share (see Note 11).

        STOCK OPTION PLAN

        In February 1999, the Company adopted the 1999 Stock Option Plan (the
        "1999 Plan") under which eligible employees can receive options to
        purchase shares of the Company's common stock at a price generally not
        less than 100% of the fair value of the common stock on the date of the
        grant. The 1999 Plan allows for the issuance of a maximum of 374,356
        shares of the Company's common stock. The options granted under the 1999
        Plan are exercisable over a maximum term of ten years from the date of
        grant.

        In connection with the merger with HealthDesk (Note 3), the Company has
        an additional stock option plan (the "1994 Plan") under which eligible
        employees, directors and consultants can receive options to purchase
        shares of the Company's common stock at a price generally not less than
        100% and 85% of the fair value of the common stock on the date of grant
        for incentive stock options and non-statutory stock options,
        respectively. The 1994 Plan allows for the issuance of a maximum of
        3,000,000 shares of the Company's common stock. The options granted
        under the 1994 Plan are exercisable over a maximum term of ten years
        from the date of grant.

        The Company accounts for stock-based compensation for employees under
        the "intrinsic value" method. Under this method, no compensation expense
        is recorded for these plans and arrangements for current employees whose
        grants provide for exercise prices at or above the market price on the
        date of grant. Compensation expense for employees is recorded based on
        intrinsic value (excess of market price over exercise price on the
        measurement date) which is accounted for as unearned compensation and is
        reflected as a separate component of stockholders' equity until earned.
        Unearned employee compensation is amortized to expense over the vesting
        period and the expense recognized amounted to $54,890 during 1999.

        The Company accounts for stock-based compensation for non-employees
        using the fair value of the option award on the measurement date.
        Compensation for non-employee stock options are recorded in the period
        earned. The fair value of non-employee stock options granted in 1999
        totaled $50,319, of which $18,491 was earned and recorded during 1999
        and the balance forfeited due to the termination of the related
        consulting agreement.

                                      F-15
<PAGE>

                              MC INFORMATICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

9.      STOCKHOLDERS' EQUITY (CONTINUED)

        A summary of stock option activity is set forth below:
<TABLE>
<CAPTION>
                                                                                                        Weighted
                                                                                                        Average
                                                             Number of      Price        Aggregate      Exercise
                                                               Shares     Per Share        Price          Price
                                                            -----------  -----------   -------------   -----------
       <S>                                                   <C>         <C>           <C>             <C>
       Balance, December 31, 1997 and 1998                           -   $        -    $          -    $        -
       Options granted                                       2,871,805    1.00-3.06       5,112,419          1.78
       Options assumed in merger with HealthDesk               110,000    1.00-5.00         150,000          1.36
       Options forfeited/canceled                             (440,443)   1.00-3.06      (1,010,823)         2.30
                                                            -----------  -----------   -------------   -----------

       Balance, December 31, 1999                            2,541,362   $1.00-5.00    $  4,251,596    $     1.67
                                                            ===========  ===========   =============   ===========
</TABLE>

        The following table summarizes information with respect to stock options
        outstanding at December 31, 1999:

<TABLE>
<CAPTION>
                                            Options Outstanding                           Options Exercisable
                             --------------------------------------------------      -----------------------------
                                 Number           Weighted Avg.      Weighted            Number         Weighted
           Range of            Outstanding          Remaining        Average           Exercisable       Average
           Exercise            at December         Contractual       Exercise          at December      Exercise
            Price                31, 1999          Life (Years)        Price            31, 1999          Price
        -------------        ---------------     ---------------    -----------      --------------   ------------
          <S>                     <C>                 <C>           <C>                    <C>        <C>
          $1.00-1.62              1,992,362           8.1           $     1.39              77,083    $      1.00
           2.20-2.94                499,000           9.6                 2.61              25,000           2.53
                3.06                 40,000           9.3                 3.06                   -              -
                5.00                 10,000           6.0                 5.00               8,333           5.00
        -------------        ---------------     ---------------    -----------      --------------   ------------

          $1.00-5.00              2,541,362           8.4           $     1.67             110,416    $      1.64
        =============        ===============     ===============    ===========      ==============   ============
</TABLE>

        If the Company had elected the fair value method of accounting for
        stock-based compensation, compensation cost would be accrued at the
        estimated fair value of all stock option grants over the service period,
        regardless of later changes in stock prices and price volatility. The
        fair value of each option granted in 1999 has been estimated on the date
        of grant using the Black-Scholes option valuation model with the
        following weighted average assumptions: no dividend yield; expected
        volatility of 33% based on historical results; risk-free interest rate
        of 6.5%; and average expected lives of 3 to 5 years.

        The weighted average fair value of those options granted during the year
        ended December 31, 1999 was $0.69 per share.

        The following table sets forth the net loss per share amounts for the
        years presented as if the Company had elected the fair value method of
        accounting for stock options.

<TABLE>
<CAPTION>
                                                         1999               1998
                                                    ---------------    ----------------
       <S>                                          <C>                <C>
       NET LOSS
             As reported                            $   (3,395,020)    $      (157,760)
                                                    ===============    ================
             Pro forma                              $   (3,475,216)    $      (157,760)
                                                    ===============    ================

       BASIC AND DILUTED LOSS PER SHARE
             As reported                            $         (.28)    $          (.03)
                                                    ===============    ================
             Pro forma                              $         (.29)    $          (.03)
                                                    ===============    ================
</TABLE>

                                      F-16
<PAGE>

                              MC INFORMATICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

9.      STOCKHOLDERS' EQUITY (CONTINUED)

        The Black-Scholes option valuation model was developed for use in
        estimating the fair value of traded options which have no vesting
        restrictions and are fully transferable. In addition, option valuation
        models require the input of highly subjective assumptions including the
        expected stock price volatility. Because the Company's stock options
        have characteristics significantly different from those of traded
        options, and because changes in the subjective input assumptions can
        materially affect the fair value estimate, in management's opinion, the
        existing models do not necessarily provide a reliable single measure of
        the fair value of its stock options.

        Additional incremental compensation expense includes the excess of fair
        values of options granted during the year over any compensation amounts
        recorded for options whose exercise prices were less than the market
        value at date of grant, and for any expense recorded for non-employee
        grants. All such incremental compensation is amortized over the related
        vesting period, or expensed immediately if fully vested. The above
        calculations include the effects of all grants in the years presented.
        Because options often vest over several years and additional awards are
        made each year, the results shown above may not be representative of the
        effects on net income (loss) in future years.

        WARRANTS

        In connection with the merger with HealthDesk (Note 3), outstanding
        redeemable warrants to purchase 2,125,000 shares of common stock were
        assumed by the Company which entitle the registered holder thereof to
        purchase one share of common stock at a price of $2.50, subject to
        adjustment in certain circumstances, at any time through and including
        January 16, 2002. These warrants are redeemable by the Company upon
        notice of not less than 30 days, at a price of $.10 per warrant,
        provided the closing bid quotation of the common stock on all 30 of the
        trading days ending on the third day prior to the day on which the
        Company gives notice has been at least 150% ($3.75, subject to
        adjustment) of the then effective exercise price of the warrants.

        In addition, in connection with the merger with HealthDesk (Note 3), the
        Company assumed outstanding warrants to purchase up to 170,000 shares of
        the Company's common stock at an exercise price of $6.00 per share and
        rights to purchase up to 170,000 additional warrants at a purchase price
        of $.12 per warrant (each exercisable to purchase one share of common
        stock at a price of $8.25 per share). These warrants are exercisable
        over a five-year period through January 16, 2002.

        A summary of common stock purchase warrants activity is as follows:
<TABLE>
<CAPTION>
                                                                                            Warrant Price
                                                                                   --------------------------------
                                                                 Number of
                                                                   Shares             Per Share           Total
                                                               ---------------     --------------     -------------
       <S>                                                          <C>            <C>                <C>
       Balance outstanding, December 31, 1997 and 1998                      -      $           -      $          -

       Warrants assumed in merger with HealthDesk                   2,295,000          2.50-6.00         6,332,500

       Warrants issued (Note 7)                                        50,000               2.87           143,500
                                                               ---------------     --------------     -------------

       Balance outstanding, December 31, 1999                       2,345,000      $   2.50-6.00      $  6,476,000
                                                               ===============     ==============     =============
</TABLE>

                                      F-17
<PAGE>

                              MC INFORMATICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

9.      STOCKHOLDERS' EQUITY (CONTINUED)

        COMMON STOCK RESERVED FOR ISSUANCE

        At December 31, 1999, the total number of shares of common stock
        reserved for issuance upon exercise of outstanding stock options and
        warrants, and conversion of convertible preferred stock was 5,898,862
        shares.

        RESTRICTIONS ON DIVIDENDS

        Pursuant to state law, the Company may be restricted from paying
        dividends to its stockholders as a result of its accumulated deficit as
        of December 31, 1999.

10.     INCOME TAXES

        The provision for income taxes for the years ended December 31, 1999 and
        1998 is comprised of the minimum current state income tax. Differences
        between the statutory and effective tax rates are primarily due to
        valuation allowances recorded to offset deferred tax benefits associated
        with net operating losses.

        Deferred income taxes reflect the net tax effects of temporary
        differences between the carrying amounts of assets and liabilities for
        financial reporting purposes and amounts used for income tax purposes.
        Components of the Company's deferred tax assets and liabilities are
        comprised primarily of the future tax benefits of the Company's net
        operating loss carryforwards of approximately $5,600,000 at December 31,
        1999. Such deferred tax asset is offset by a valuation allowance equal
        to the total net deferred tax asset balance.

        As of December 31, 1999, the Company has a federal net operating loss
        carryforward of approximately $15,000,000 which expires at various dates
        between 2002 and 2019 and a state net operating loss carryforward of
        approximately $7,000,000 which expires at various dates between 2000 and
        2004.

        The utilization of the net operating loss carryforwards could be limited
        due to restrictions imposed under federal and state laws upon a change
        in ownership. The amount of the limitation, if any, has not been
        determined at this time. A valuation allowance is provided when it is
        more likely than not that some portion or all of the deferred tax assets
        will not be realized. As a result of the Company's continued losses and
        uncertainties surrounding the realization of the net operating loss
        carryforwards, management has determined that the realization of
        deferred tax assets is not more likely than not. Accordingly, a
        valuation allowance equal to the net deferred tax asset amount has been
        recorded as of December 31, 1999.

11.     LOSS PER SHARE

        The following table illustrates the computation of basic and diluted
        loss per share:

<TABLE>
<CAPTION>
                                                                                  1999                1998
                                                                             ---------------     ---------------
       <S>                                                                   <C>                 <C>
       Numerator:
       Net loss                                                              $   (3,395,020)     $     (157,760)
       Less:  preferred stock deemed dividend (Note 9)                              407,278                   -
       Less:  preferred stock dividends (Note 9)                                     17,420                   -
                                                                             ---------------     ---------------

       Net loss available to common stockholders                             $   (3,819,718)     $     (157,760)
                                                                             ===============     ===============

       Denominator:
       Weighted average number of common shares outstanding during the
          year                                                                   13,657,737           5,645,230
                                                                             ---------------     ---------------

       Basic and diluted loss per share                                      $         (.28)     $         (.03)
                                                                             ===============     ===============
</TABLE>

                                      F-18
<PAGE>

                              MC INFORMATICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

11.     LOSS PER SHARE (CONTINUED)

        The weighted average number of common shares outstanding for 1998
        assumes the common shares issued in connection with the conversion from
        a limited liability company on June 22, 1998 were outstanding for the
        entire year ended December 31, 1998.

        The computation of diluted loss per share excludes the effect of
        incremental common shares attributable to the exercise of outstanding
        common stock options and warrants and the potential conversion of
        preferred stock because their effect was antidilutive due to losses
        incurred by the Company during the years presented. See summary of
        outstanding stock options and warrants and discussion of convertible
        preferred stock in Note 9.

12.     PROFIT SHARING PLAN

        The Company has a profit sharing plan which is qualified under Section
        401(k) of the Internal Revenue Code. Any employee who has attained the
        age 21 and has completed three months of service is eligible to
        participate. Employees may contribute to the plan subject to the limits
        of Section 401(k) of the Internal Revenue Code. The Company may
        contribute to the profit sharing on behalf of the employees at the
        Company's discretion. There were no Company contributions to the plan
        during 1999 or 1998.

13.     COMMITMENTS

        LEASES

        The Company leases its corporate office under a lease agreement that
        expires in March 2002. Future obligations under existing operating
        leases at December 31, 1999 are as follows:

        YEARS ENDING DECEMBER 31,
        -------------------------

       2000                                                $      236,721
       2001                                                       212,066
       2002                                                        73,164
                                                           ---------------

                                                           $      521,951
                                                           ===============

        Total rent expense amounted to $201,000 and $16,000 for the years ended
        December 31, 1999 and 1998, respectively.

        EMPLOYMENT AGREEMENTS

        The Company has employment agreements with certain officers which
        provide for a base salary, incentive compensation and other benefits.

                                      F-19
<PAGE>

                              MC INFORMATICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

14.     SUBSEQUENT EVENT

        During March 2000 and through April 10, 2000, the Company received an
        aggregate of $500,000 from certain members of the Company's board of
        directors and related parties. It is the intent of the Company and these
        parties that such advances will be exchanged for promissory notes, the
        terms of which have not yet been finalized.

                                      F-20