SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      DC 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, 2005





OR





o
      TRANSITION REPORT UNDER
      SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
      ACT OF 1934





Commission
      file number 000-24681




HEALTH
                  SYSTEMS SOLUTIONS, INC.(Exact
                  name of registrant as specified in its
                  charter)Nevada
              
              82-1513245(State
                  or other jurisdiction
              
              (IRS
                  Employerof
                  incorporation or
                  organization)
              
              Identification
                  No.)405
                  N. Reo Street, Suite 300, Tampa, Florida
                  33609(Address
                  of principal executive offices) (Zip
                  Code)(813)
                  282-3303Registrant's
                  telephone number, including area
                  code)Securities
                  registered under Section 12(b) of the
                  Exchange Act:Title
                  of each class: N/A
              
              Name
                  of each exchange on which registered:
                  N/ASecurities
                  registered under Section 12(g) of the
                  Exchange Act:Common
                  Stock, $.001 par value(Title
                  of Class)





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o





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




Indicate
      by check mark if disclosure of delinquent filers in response to Item 405 of
      Regulation S-B is not contained herein, and will not be contained, to the best
      of registrant's knowledge, in definitive proxy or information statements
      incorporated by reference to Part III of this Form 10-KSB or any amendment
      to
      this Form 10-KSB. o







Indicate
      by check mark whether the issuer is a shall company (as defined in Rule 12b-2
      of
      the Exchange Act). Yes oNo x




State
      issuer's revenues for its most recent fiscal year. $4,212,819





The
      aggregate market value of Common Shares held by non-affiliates of the Registrant
      (387,331 shares), as of March 10, 2006 (last sales price at which the Common
      Stock was sold on March 1, 2006 as reported by the OTCBB was $.52) was
      $201,412.





The
      number of Common Shares outstanding on December 31, 2005, was
      5,615,905


Documents
      Incorporated By Reference: Not Applicable.


Transitional
      Small Business Disclosure Form (check one): Yes o No x





HEALTH
      SYSTEMS SOLUTIONS, INC.


FORM
      10-KSB


INDEX





PART
                  IItem
                  1.
              Business
              1Item
                  2.
              Properties
              12Item
                  3.
              Legal
                  Proceedings
              12Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              12PART
                  IIItem
                  5.
              Market
                  for Common Equity and Related StockholderMatters
              13Item
                  6.
              Management's
                  Discussion and Analysis or Plan of Operations
              15Item
                  7.
              Financial
                  Statements
              29Item
                  8.
              Changes
                  in and Disagreements with Accountants on Accountingand
                  Financial Disclosure
              31Item
                  8A.
              Controls
                  and Procedures
              31Item
                  8B.
              Other
                  Information
              31PART
                  IIIItem
                  9.
              Directors
                  and Executive Officers of the Registrant;Compliance
                  with Section 16(a)of the Exchange Act
              32Item
                  10.
              Executive
                  Compensation
              34Item
                  11.
              Security
                  Ownership of Certain Beneficial Owners andManagement
                  and Related Stockholder Matters.
              38Item
                  12.
              Certain
                  Relationships and Related Transactions
              39Item
                  13.
              Exhibits
              41Item
                  14.
              Principal
                  Accountant Fees and Services
              42SIGNATURES
              
              44










**PART
      I**




**ITEM
      1.** **BUSINESS**




**Overview**




Health
      Systems Solutions, Inc., through its wholly owned subsidiary, Healthcare Quality
      Solutions, Inc. (“HQS”), designs, develops, markets, sells and supports
      web-based, management information and business intelligence services that assist
      home health care companies more effectively manage the clinical, operational
      and
      financial aspects of their business. Our systems are delivered using an ASP
      model and are implemented on our customers’ standard personal computers with
      access to the Internet over Microsoft Internet Explorer. Our architecture and
      fee structure enables our customers to rapidly and cost-effectively implement
      our services for a modest transactional fee charged when a customer uses our
      programs to process patient clinical assessments. These services have been
      designed to assist our customers in or by:




• Increasing
      revenue;




• Reducing
      cost;




• Standardizing
      processes;




• Improving
      the quality of patient outcomes; and




• Minimizing
      regulatory compliance risk.




Our
      services address the issues of measuring quality of care while simultaneously
      reducing cost, improving patient outcomes and minimizing compliance risk.
      Effective management of home health agencies requires accurate collection of
      many data elements and using this data to determine the reimbursement for the
      care and to measure and improve the quality of the care delivered. Our services
      offer cost-effective, accurate and automated methods of improving the quality
      of
      the data collected and enable our customers to use the data to provide daily
      reports that identify anomalies in clinical observations, identify profit or
      loss potential for an episode of care, assist with managing regulatory
      compliance risk, and perform benchmark observations about the data against
      our
      national database of over four million episodes of care.




Our
      services assist home health agencies on a daily basis to collect, edit and
      correct certain data and through daily and other periodic reports, assist in
      the
      management of regulatory compliance risk and measurement of the patient outcome.
      Data must be collected using a standard tool called Outcome and Assessment
      Information Set (or OASIS). The patient assessments containing the OASIS Data
      are the “transactions” on which we base our charges for these services.




We
      currently derive most of our revenues from per transaction charges applied
      to
      processing patient clinical assessments made by our customers during a month.
      As
      of December 31, 2005, we had approximately 80 customers in 41 states with
      approximately 470 sites using one or more of our services. During December
      2005,
      our customers processed over 66,000 patient clinical assessments using our
      programs.




In
      2005
      there were about 8,000 Medicare certified home health agencies nationally that
      provided services to 2.8 million patients. The Balanced Budget Act of 1997
      included mandates to the Centers for Medicare and Medicaid Services (CMS) to
      establish a Prospective Payment System (PPS) to reduce the cost of the home
      health benefit and to measure the effectiveness of the care delivered. The
      regulations are being implemented in phases over time and include a requirement
      that home health agencies collect assessment data on each patient at
      start-of-care, recertification and at discharge (OASIS Data).




Beginning
      in 1998, our predecessor businesses used the OASIS Data to provide to some
      of
      its home health agency (“HHA”) customers quarterly clinical performance
      benchmarking services. In addition, our predecessor businesses transmitted
      OASIS
      Data to state agencies as required under the Medicare regulations and to the
      Joint Commission on Accreditation of Healthcare Organizations as required under
      that organization’s accreditation procedures. Charges for these services were on
      a subscription basis. Home health agencies could pay the subscription fee
      annually in advance and obtain a discount from standard pricing. Revenue for
      customers paying up front was categorized as deferred and was earned over the
      course of the ensuing contract period, typically 12 months.




1


In
      late
      2002, in response to expanded PPS regulations, we introduced a series of new
      online processing and business intelligence services using transaction-based
      pricing. These products assist home health agencies on a daily basis to collect,
      edit and correct the OASIS Data and through daily and other periodic reports
      assist in the management of patient outcome analysis and regulatory compliance
      risk. We refer to individual patient assessments containing the OASIS Data
      as
      the “transactions” on which we base our charges for our business intelligence
      services.




From
      February through June 2003, we rolled-out our new transaction-based pricing
      services to 45 sites of Amedisys, Inc., a publicly-traded HHA, doubling our
      transaction-based volume from 10,000 to 20,000 per month. Simultaneously, we
      marketed these new services to our existing subscription customers. Those
      incumbent customers that accepted the new services changed from a subscription
      basis to the new transaction basis. The majority of customers that would not
      agree to move up to the new services were dropped. Though the majority of these
      customers were small single site agencies, one customer that only used our
      subscription services (PPS Trans) submitted over 100,000 assessments per year
      for processing. This customer was dropped. As this customer generated
      substantial negative gross margin, eliminating it from the statistics not only
      increased the average charge per transaction but improved the gross margin.
      At
      December 31, 2005, 15% of our customers remain under a subscription basis.
      Due
      to their small size we do not anticipate converting these customers to a
      transaction basis; but they will remain as subscription based customers.




The
      acceptance of the transaction services by new customers, the conversion of
      subscription customers and the elimination of low or negative margin customers
      resulted in an increase in transaction-based revenue relative to
      subscription-based revenue, as well as an increase in the revenue per
      transaction. Fees are negotiated on a customer basis. Price increases for
      existing services are unlikely in the foreseeable future.




We
      believe that we achieve best results with larger, multi-site customers who
      tend
      to have more sophisticated management. The majority of our current HHA customers
      are expanding organically and through acquisition. We believe that our results
      of operations are best enhanced by the adding of additional site(s) to a current
      customer than it is to bring on a single site new customer.




Our
      executive offices are located at 405 N. Reo Street, Suite 300, Tampa, Florida
      33609 and our telephone number is 813-282-3303. Our website
      is located at www.HQSonline.com. Information on our website is not a part of
      this report.




References
      throughout this annual
      report to
“Health Systems Solutions,” “HSS,” “the Company,” “we,” “us” and “our” refer to
      Health Systems Solutions, Inc., a Nevada corporation, and our operating
      subsidiary, Healthcare Quality Solutions, Inc. (“HQS”).




**Recent
      Events**




On
      November 8, 2005, we entered into a Preferred Stock Purchase Agreement (the
“Agreement”) with Stanford International Bank Limited (“Stanford”), our
      principal stockholder, pursuant to which Stanford purchased 725,000 shares
      of
      our Series C Convertible Preferred Stock (the “Preferred Stock”) at a price of
      $2.00 per share and received warrants to purchase 217,500 shares of our Common
      Stock, $0.001 par value per share (“Common Stock”), at $0.001 per share. The
      proceeds were used to satisfy in full the principal balance of our credit line
      with Stanford, which was terminated, and to provide an additional $200,000
      in
      working capital for general corporate purposes through December 31, 2005.
      Stanford also agreed to purchase 200,000 additional shares of Preferred Stock
      and to receive, in connection therewith, an aggregate of 60,000 warrants to
      the
      extent requested by us on two weeks notice. Each share of Preferred Stock is
      convertible into one half share of our Common Stock and is entitled to one
      half
      vote per share. The exercise price of the warrants is $0.001 per share, and
      the
      warrants expire five years from the date of issuance. Stanford has assigned
      half
      of all warrants issuable under the Agreement, including 108,750 of the 217,500
      Warrants issued so far, to five of its employees pursuant to a warrant
      assignment agreement.





2





Stanford
      has the right at any time within two years of the initial closing to purchase
      an
      additional 3,700,000 shares of Preferred Stock at $2.00 per share and to receive
      in connection therewith an aggregate of 1,110,000 warrants exercisable at $0.001
      per share.




Pursuant
      to a registration rights agreement within, we are obligated to register the
      shares of Common Stock issuable upon conversion of the Preferred Stock or
      exercise of the warrants 90 days after the date of demand by the security
      holders. If we do not timely file the required registration statement, we must
      issue, upon default and each month thereafter that the registration statement
      is
      not filed, warrants to purchase an additional number of shares of Common Stock
      equal to the number of shares of Preferred Stock sold.




On
      February 21, 2006, we effectuated a 1-for-2 reverse stock split of all of the
      issued and outstanding shares of our Common Stock. The reverse stock split
      was
      approved by our board of directors and the holders of a majority of our voting
      stock on January 18, 2006.The reverse stock split is presented retroactive
      for
      all periods presented.




**History
      of our Business**




The
      ultimate predecessor of our business was a corporation known as Provider
      Solutions Corp. (“PSC”) that was formed to develop the technology that we employ
      in our business. PSC was a Florida corporation organized in 1992. PSC raised
      an
      aggregate of approximately $7 million on a secured basis. Summary results of
      operations data.




On
      July
      2, 2002, PSC filed an assignment for the benefit of creditors under Florida
      law.
      Stanford, one of PSC’s secured creditors, formed Provider Acquisition LLC
      (“PAL”) in order to make an offer to the Assignee to purchase all of the assets
      of PSC. In accordance with an Asset Purchase Agreement dated September 17,
      2002,
      PAL purchased all of the assets of PSC for a sum of $225,000, subject to secured
      indebtedness of approximately $7 million and assumed an obligation to pay the
      trust fund portion of PSC’s obligations to the Internal Revenue Service in the
      approximate amount of $400,000.




Following
      PAL’s acquisition of the assets of PSC, Stanford and the other holders of PSC’s
      secured indebtedness converted all of the indebtedness into equity of PAL.




On
      October 22, 2002, PAL consummated an agreement and plan of merger with Silver
      Key Mining Company, Inc. and its newly formed wholly-owned subsidiary,
      Healthcare Quality Solutions, Inc., a Florida corporation ("HQS"), whereby
      the
      business that PAL had acquired from PSC was transferred to HQS and the equity
      ownership interests in PAL were exchanged for the majority of the issued and
      outstanding shares of common stock of Silver Key Mining Company. On October
      23,
      2002, the effective time of the merger, the 100% equity interests of PAL were
      exchanged for an aggregate of 1,071,429 shares of our Common Stock. Stanford
      received 957,921 shares of our Common Stock issued pursuant to the Merger
      Agreement. An additional 237,399 shares were issued in connection with the
      merger to a third party in consideration of facilitating the merger. Prior
      to
      the merger, none of the holders of equity interests in PAL, including Stanford,
      owned any shares of Common Stock or had any other interest in our
      company.




**Industry
      Background**




In
      March 2006, MedPAC, the Medicare Payment Advisory Commission, reported to
      Congress about the growth and profitability of post acute care including the
      home health industry. As of October 2005, there were more than 8,000 Medicare
      certified agencies providing skilled nursing, therapy, home health aide, or
      medical social worker services to beneficiaries in their homes. These companies
      range from facility-based agencies that are publicly traded or privately held
      companies and visiting nurse associations which range in size from 100 episodes
      a year to over 5,000 episodes in one agency. According to CMS, post-acute
      expenditures were over $36 billion in 2004 which accounts for 12% of
      Medicare spending. The number of certified home health agencies has grown 10% in
      the last year alone and growth is expected to continue. Home care is now one
      third of all post-acute spending. MedPAC studies show that home care is a more
      favorable setting for post- acute care
      proven by cost analysis and higher clinical outcomes. More examination of
      profitability and efficiency of home care versus other post- acute  models continue
      to be a top priority for the
      government. To read more about the post-acute studies and the
      future of home care see the entire March 06 MedPAC report to Congress at http://www.medpac.gov .




3


We
      expect
      the consolidation of the industry which accelerated after the passage of the
      Balanced Budget Act of 1997, to continue. We believe that in the process of
      consolidation, home care management will require solutions that help them
      streamline their operations, standardize the delivery of care, maximize the
      reimbursement under the regulations, improve the quality of care delivered,
      and
      minimize the compliance risk. By providing outsourced services, we help reduce
      the information technology burdens of our customers, enabling them to focus
      on
      their core businesses and react quickly to dynamic market
      conditions.




In
      October 2000, the federal government introduced the Medicare Home Health
      Prospective Payment System (“PPS”). These rules require the collection and
      reporting of vast amounts of patient data that must be extracted, edited,
      corrected, formatted, exported and reported on rigorous schedules. The
      importance of ensuring the data is accurate and timely cannot be overstated,
      as
      the very success of a home care company participating in Medicare is dependent
      on meeting these requirements. Under these rules, home health agencies are
      mandated to prove that the care delivered improves the patient’s functional
      ability. The mandates introduce reimbursement levels calculated in advance
      based
      upon the assessed need of the patient. An error in collecting the data on the
      initial patient assessment can cost thousands of dollars in missed
      reimbursement. An error in collecting the data on the final assessment can
      bring
      on the rejection of an entire claim, or worse, an audit survey by a government
      agency that results in fraud and abuse charges.




The
      data
      must be collected using a standardized tool called the Outcome and Assessment
      Information Set (“OASIS”) to collect 109 data elements that must be reported to
      government agencies on rigorous schedules and must meet an extensive editing
      process. (There are over 400 mandated OASIS edits). It is critical for the
      home
      health business that the data is accurate and valid as the data is used to
      determine the level of reimbursement received for the care provided and is
      used
      by the government to measure, and publicly report on, the quality of care
      delivered.




Methods
      for capturing data include filling out paper forms then key entering the
      required data into a workstation or personal computer using free,
      government-supplied software, or directly into information management systems
      supplied by another party. The data is subsequently transmitted to the
      government. Government computers edit the answers highlighting errors. The
      HHA
      must dial into the government site to retrieve its reports, then in an off-line
      procedure correct the errors and resubmit the data. Either approach has minimal
      data validation capabilities, particularly as it relates to determining any
      clinical anomalies that might exist in the data.




In
      addition, the nature of home health care is such that the field nurse and the
      data entry staff, nursing supervisor, quality assurance staff, clinical manager
      and operations management are typically remote from one another, making
      collaboration over identified issues difficult if not impossible to resolve.
      The
      result is increasing overnight courier, fax and telephone costs combined with
      rejected claims, extended accounts receivable days outstanding and inconsistent
      care delivery. The clinical staff struggles to meet the government deadlines
      and
      regulations while the financial management pushes for faster turnaround to
      improve cash flow. Multiple sites compound the management problems.




**Our
      Solution**




We
      provide systems that are designed to assist our customers improve the quality
      of
      the data collected, identify clinical anomalies in nursing and therapy
      observations in the collected data, identify profit or loss potential, provide
      daily reports to assist with managing care delivery and compliance risk and
      benchmark observations about the data against our national database of over
      four
      million home care episodes. These services help manage the clinical, operational
      and financial aspects of a home care company in order to maintain a balance
      between the patient outcome and the Medicare reimbursement received. We refer
      to
      our products and services as our “PPS AdvantageTM” suite. PPS AdvantageTM enables
      our customers to realize the following benefits:




4


*A
      Data Collection Process That Is Cost Effective, Accurate and Timely.*




Using
      the
      Internet as a communication tool, we deliver cost-effective, accurate and timely
      PPS data collection services. We provide our customers with multiple methods
      for
      submitting data: a fax to our image server, a document image, an electronic
      file
      upload or on-line key entry. One of our data collection-related services
      provided to fax and scanning customers is the verification of data by our data
      services staff. Digital data extracted from faxed or scanned images is available
      for viewing and manipulation using the Web within two hours of
      receipt.




*A
      Data Edit and Correction Process That Ensures Data Accuracy Prior To
      Transmission.*




Once
      data
      is received at our data services center, our software performs a series of
      edits
      on the data including the more than 400 published by the government and the
      more
      than 150 of our proprietary SmartEditsTM processes. These proprietary edits
      compare responses to multiple questions to ensure the clinical responses are
      valid and clinically consistent across the questionnaire. All edits are
      identified and any authorized user, anywhere on the Internet with proper
      security can review the edits and make appropriate changes on-line. Multiple
      people can collaborate in real time in making revisions on the same data. As
      a
      part of this process, our systems calculate, on demand, the anticipated
      reimbursement using the customer’s cost data and determines whether a profit or
      loss can be expected based on the responses to certain questions. This enables
      the customer to verify if the data is accurate and a loss, as an example, should
      stand or if some responses should be modified. The system allows a “what-if”
approach to analyzing the impact of particular responses.




*A
      Data Transmission Process That Is Cost Effective and Timely.*




After
      the
      data is determined to be accurate and valid, our staff manages the transmission
      of the data to the government as required under the rules. Currently we transmit
      to over 40 states that act as intermediaries for the federal agency managing
      this program (the Centers for Medicare and Medicaid Services, or CMS). Reports
      posted to the state website are retrieved and posted to the customer portion
      of
      our site by our staff, substantially simplifying the customer’s job.




*A
      Daily Management Tracking System to Increase Revenue, Improve Care Delivery
      and
      Compliance Risk Management.*




Our
      service provides a series of daily reports that provide business intelligence
      and decision support intelligence for the customer relative to the rules for
      participating in the Medicare program (Conditions of Participation). Such things
      as meeting transmission date requirements (Lock Dates); recertification windows
      (56 to 60 days from the Start-of Care date); and other items are identified
      and
      used to ensure the appropriate process is being followed.




*The
      Application of Standard Operating Process is Ensured Across the Enterprise.*




By
      automating and centralizing the daily management of processes relating to
      patient care delivery and compliance management, our customers are able to
      consistently administer various policies and procedures. Those customers of
      ours
      that are growing through acquisitions of other home health agencies can
      implement our systems into the acquired agencies to rapidly integrate the newly
      acquired business into the existing process stream.




*Benchmarking
      Performance Relative to Our National Database of Outcomes.*




Using
      our
      national database of outcomes to compare an agency to the national norms,
      management can determine where they stand relative to national benchmarks of
      outcomes, reimbursement, quality of care by specific diseases, and other
      measures.




*Rapid
      Implementation.*




The
      only
      elements required at a customer site are Microsoft Internet Explorer, a personal
      computer or a workstation and an Internet connection. All operating software
      remains on our servers. This centralized approach radically limits the capital
      expenditure required to implement and support the solutions while simultaneously
      dramatically reducing the implementation cycle. We offer professional services
      that assist customer staff optimize the use of the services. These services
      qualify for Continuing Education Unit credits required for skilled nursing
      professionals to retain licensure.




5


*A
      Highly Flexible, Open and Scalable System.*




Our
      services are based on a modular platform using industry standard open
      architecture that is scalable from a company with a single user on a single
      personal computer to multi-site, multi-user enterprise. Our customers can add
      additional users or sites quickly and easily.




**Growth
      Strategy**




We
      believe that many home health agencies lack the technology and operational
      efficiency to succeed in today’s increasingly complex environment. Our objective
      is to extend our position as a leading provider of management solutions for
      home
      care and to enter the market for solutions to other post acute care industries.
      Key elements of this strategy include:




*Leverage
      Our Existing Customer Base.*




We
      believe significant opportunities exist to leverage our existing customer base
      by selling increased applications that we offer to customers that utilize less
      than the full suite of programs, as well as by expanding our suite of programs
      to provide our customers with enhanced functionality and increased transactional
      volumes. We intend to continue to develop our current service offerings and
      to
      introduce new solutions that assist in the management of specific disease states
      and complementary products or provide other industry services and may recommend,
      but not directly resell our services.




*Offer
      Our Services to Other Segments of The Post Acute Industry.*




We
      believe that the interest in tools to assist in the management of disease states
      and conditions will provide us with opportunities to further develop our
      platform to provide solutions to nursing homes, skilled nursing facilities
      and
      inpatient rehabilitation facilities.




*Strategic
      Acquisitions Allowing Further Expansion of our Platform of Solutions and
      Customer Base.*





Management
      endeavors to increase our platform of solutions to the home health agencies
      we
      serve. Management believes there may be opportunities to expand our product
      offerings and/or customer base through strategic acquisitions. As a result,
      we
      regularly evaluate such opportunities.







**Our
      Products and Services**




Our
      customers are required to capture large amounts of patient information on a
      daily basis, throughout the course of an episode of care and within short
      timeframes in order to meet inflexible deadlines. The accuracy and validity
      of
      the data is critical and the data must be analyzed and monitored continuously
      in
      order to ensure that appropriate reimbursement is received for care delivered,
      the recommended clinical procedures are diligently followed, a high level of
      patient outcome is maintained (as measured against national norms) and
      regulatory requirements are continuously met. Our services are designed to
      meet
      these requirements on a highly available, rapid response basis.




Our
      products are designed to assist the homecare agency more effectively manage
      its
      business under the emerging requirements of CMS' Prospective Payment System.
      Our
      products streamline the collection, correction and submission process for
      mandated OASIS data; improve reimbursement rates; improve cash flow; ensure
      regulatory compliance; and provide decision support to improve clinical
      practice. Our services are offered on a transaction fee and a subscription
      fee
      basis. Our products are marketed under the PPS AdvantageTM name.




6


PPS
      CollectTM is the umbrella name for a variety of methodologies by which a homecare
      agency's patient's OASIS assessment data can be submitted to our website. The
      offering includes faxing paper documents, uploading electronic files and keying
      data into an electronic form.




PPS
      Editor provides on-line access to patient assessment data and performs the
      following:




·
            Enables
                homecare staff to view, edit and correct assessment data over the
                Web.




·
            Applies
                400 CMS specified, clinical validity rules and over 150 PPS Smart
                Edits
                developed by our company. PPS Smart Edits are logical and intuitive
                edits
                that assist in ensuring the completion of correct and valid assessment
                data prior to transmission to the state survey agency.




·
            Assists
                clinical staff in identifying discrepancies and provides an explanation
                for ease of analysis and
                correction.




·
            Enables
                verbal collaboration by multiple users over the telephone as they
                view the
                same data over the Web.




·
            Applies
                CMS's PPS rules to the assessment data and calculates the reimbursement
                rate for the patient.




·
            Calculates
                the anticipated profit/loss for the patient episode based on the
                Plan of
                Treatment information.




PPS
      Dashboard provides a "work-in-progress" status report for the assessment data
      received from each agency site including the following:




·
            Displays
                assessment status relative to patient recertification and related
                deadlines mandated under PPS.




·
            Assessment
                Error Report tracks errors, duplicate assessments, orphan assessments,
                patient episodes due to be re-certified and reports on assessment
                status
                relative to Lock Dates.




·
            Also
                provides a rolling 7-day report of assessment status including a
                daily
                listing of patient episode counts and error
                references.




PPS
      Trans
      provides a single connection for the customer to our website that, in turn,
      provides communications links to various other locations.




PPS
      Outcomes is designed to enable agencies to monitor their patient status compared
      to our national database that includes in excess of two million assessments.
      PPS
      Outcomes supports the CMS Outcomes Based Quality Improvement (OBQI)
      process.




The
      CMS
      process provides annual reports that CMS uses to publish the "best and worst"
      homecare providers. PPS Outcomes supports the OBQI process by supplying such
      reports on a quarterly basis. Quarterly reports are not available from
      CMS.




PPS
      OASIS
      Auditor is designed to assist agencies evaluate their clinical performance
      by
      comparing their clinical data with the HQS national database. Discrepancies
      in
      performance, staff training and areas that could be out of compliance are
      highlighted.




PPS
      Advisory is a consulting service that assists homecare agencies improve their
      performance under PPS as follows:




·
            Interpret
                benchmarking data and how to use the data in order to improve operations
                and migrate toward "best
                practices."




·
            Presents
                seminars, OBQI report analysis, assistance in CMS-required improvement
                Plan preparation and monitoring of improvement
                plans.




7


**Customers**




Our
      solutions are provided to home health customers ranging in size from single
      to
      large multi-site organizations. As of December 31, 2005, we had approximately
      80
      customers in 41 states with approximately 470 sites operating one or more of
      our
      programs. Our largest customer Amedisys, Inc., a publicly traded company,
      represented approximately 45% of our revenues for the year ended December 31,
      2005. We are substantially reliant on the continued use of our products by
      Amedisys. Our only customer that accounted for 10% or greater of our revenues
      during the year ended December 31, 2005, was Amedisys, Inc.




Our
      largest customers, as measured by revenues during the twelve months ended
      December 31, 2005 include the following:


Amedisys,
                  LLC
              Girling
                  Health Care
              
              UMASS
                  Memorial Home HealthPersonal
                  Touch Home Care
              Mobile
                  Medical Industries
              
              Sta-Home
                  Health Agency




We
      have
      entered into an information management and operations services agreement with
      Amedisys, Inc. Under the agreement we have agreed to provide Amedisys with
      an
      internet-accessed, multi-user, post-acute healthcare information system that
      permits Amedisys to accomplish certain information management functions. Under
      the agreement we are required to maintain a help desk that provides telephone
      advice and guidance for Amedisys and its employees. We receive certain fixed
      rates for the base services we provide to Amedisys, plus additional compensation
      in the event that Amedisys orders and receives additional services in connection
      with education or help desk services. The original term of this agreement was
      through February 24, 2004 and automatically extended for successive periods
      of
      one year unless either party delivers written notice to the other party of
      its
      election not to extend the term of the agreement at least 90 days before the
      expiration of the then current term. The term was extended through February
      24,
      2007 pursuant to the agreement. The agreement may also be terminated by either
      party: (1) in the event that the other party defaults in performance of any
      material provision of the agreement and such default continues and is not cured
      within 30 days of written notice of such default; (2) in the event that the
      other party commits any material act of dishonesty, gross carelessness or gross
      misconduct in the performance of the agreement; or (3) in the event that
      voluntary or involuntary proceedings are commenced for the winding up or
      dissolution of the other party or for any action or relief taken or suffered
      by
      the other party as bankrupt or insolvent under any bankruptcy or insolvency
      laws.




**Sales
      and Marketing**




We
      sell
      our services primarily through a direct sales force.  We currently have one
      sales person but anticipate increasing this number to four by the fourth quarter
      of 2006. Since mid-2003, we have focused on expanding our vendor partnerships
      to
      enhance vendor assisted referrals. Our largest partnerships are with Briggs
      Corporation, Stratis, Inc., Visiting Nurses Association of America (VNAA),
      and
      Magellan Business Partners.  Briggs is the largest supplier of clinical
      documentation systems for home health care and with whom we have jointly
      developed a selection of scanner-readable home health forms. Stratis, Inc.
      is a
      provider of software solutions for private duty and Medicare certified agencies.
      VNAA with 200+ agencies has certified HQS as a GPO member. Magellan is a sales,
      marketing, technology management services company with a strong relationships
      with large consulting organizations. Briggs, Stratis, VNAA and Magellan refers
      leads to us identified during its sales process.




In
      2004,
      we began our first national advertisement campaign focused on brand name
      recognition. We currently have year long advertisements placed in the two
      prominent industry publications: Success
      In Home Care and The
      Remington Report .
      In
      2006, we also plan to add marketing staff to develop our public relations
      telemarketing and direct mail campaigns. We also plan to improve our use of
      our
      World Wide Web site for generating sales leads and increasing market
      awareness.




8


**Product
      Development**




We
      develop our service applications based on requirement specifications produced
      by
      our Product Strategy Group. This group is comprised of clinicians and other
      domain experts (including regulatory). By maintaining regular contact with
      customers and experts in the field and tracking the regulatory activity of
      CMS,
      the Product Strategy Group determines our product direction and product feature
      requirements.




The
      system architecture lends itself to rapid delivery of improved software and
      product functionality. Key systems are typically modified every 45 to 60 days.
      The systems are designed as very "thin-client" (customers need only a browser
      to
      access the services) minimizing the information technology infrastructure
      required at the customer site. Customer system requirements are limited to
      a PC
      with a standard Internet browser and an Internet connection.




Our
      system architecture is based on the widely accepted J2EE architecture that
      ensures "openness" and "scalability". This design and the centralized hosting
      approach facilitates managing and delivering changes and enhancements to the
      software and service.




Applications
      are developed in JAVA. We use XML as our messaging layer facilitating interfaces
      with third-party solutions such as billing vendors. We have implemented a
      transaction traceability and event tracking capability to the User ID and
      Password level that enables effective reporting of access and modification
      to
      patient health information as required under HIPAA. Adopting a store and forward
      messaging technique allows application components to function independently
      while maintaining near real-time communications and high levels of system
      availability.




In
      2004,
      we initiated development projects to produce new and enhanced products. The
      first such product, the HQS Medications Risk Manager, was introduced into beta
      test with one of our large customers in October 2005. This product will not
      add
      material revenue during 2006. General release is presently scheduled for Q2
      of
      2006. We expect to introduce two other new services that will be introduced
      into
      beta test mid 2006 with others to follow over the balance of that year. These
      products are not expected to add material revenue during 2006. Development
      of
      the underlying software will be produced with existing staff. Other research
      and
      development expenses associated with these products is not material and will
      increase slightly to cover costs related to short term software development
      contractors or consultants that will be used in the development
      cycle.




**Operations**




Our
      Customer Service organization provides a variety of operational support to
      customers including a verification service that ensures the accuracy of
      automated Optical Character Recognition translation of hand-written patient
      assessment information to digital data, assistance with customer data
      communications, upload data to/from our website, transmitting customer's patient
      data to appropriate State Departments of Health, acquiring customer reports
      from
      CMS and posting these reports to our website for access by the customer and
      producing customer benchmark reports from our national database **.**




Data
      Center Technical Services manages and supports the computer and communications
      infrastructure used by our customers including Web services administration,
      communications administration, application administration, database
      administration, systems administration and LAN administration.




Our
      products are critical to the operation of our customers and therefore require
      a
      high level of service availability. To minimize the risk to the customer, we
      have our servers that support customer and customer service activities installed
      in a secure facility managed by Qwest Communications that includes redundant
      power and air conditioning, redundant Internet connections and redundant
      telecommunications.




**Encryption
      and Security from Hackers**




Our
      company-owned services, software and communications equipment and the customer
      data integral to our service delivery are hosted at a Qwest CyberCenter in
      Tampa, Florida (“Qwest”). Qwest reports that its facilities are designed to
      withstand up to Category 5 hurricanes. Notwithstanding these assurances, there
      can be no guarantee that we would be able to operate effectively were the Qwest
      site to be damaged by a terrorist event or act of nature.




9


We
      have
      implemented various layers of security to ensure appropriate, controlled access
      to our services including establishing user level password systems and
      encryption schemes based on 1024 bit keys. We have implemented Secure Sockets
      Layer (SSL), an industry standard protocol for providing authentication and
      encryption, verified through the use of certificates provided through Verisign,
      an industry provider of secure Internet communications. Firewalls are
      implemented to protect against unauthorized entry and address translation
      schemes adds a further level of access protection from unauthorized access
      attempts. Our services agreements generally contain limitations on liability
      and
      we maintain insurance with coverage limits of $2,000,000 for general liability.
      However, the contractual provisions and insurance coverage may not provide
      adequate coverage against all possible claims that may be asserts.




**Competition**




The
      market for healthcare information systems is intensely competitive. The
      competitive factors affecting the market for our services include:




· vendor
      and product reputation,




· reliability
      of the service,




· availability
      of products on preferred computer and communications platforms,




· scalability,




· integration
      with other applications,




· functionality
      and features,




· ease-of-use,




· quality
      of support,




· documentation
      and training,




· product
      quality and performance,




· product
      innovation,




· price,
      and




· effectiveness
      of marketing and sales efforts.




Some
      of
      our competitors in the homecare market segment, such as McKesson Corporation,
      Siemens A G, Eclipsys Technologies Corporation and Keane, Inc. have
      significantly greater financial, technical, research and development and
      marketing resources. As a result, they may be able to respond more quickly
      to
      new or emerging technologies and changes in customer requirements, or to devote
      greater resources to the development, promotion, sales and support of their
      products than our company. In addition, consolidation in the healthcare
      information systems industry may permit our competitors to have access to
      increased financial and administrative resources, greater technological
      capabilities and to realize other operational efficiencies and competitive
      advantages. Moreover, purchasers may prefer to buy computer systems from a
      single source provider. Because we focus exclusively on assisting the homecare
      company manage under the Prospective Payment System (as opposed to scheduling
      or
      billing systems), we cannot serve as the sole source of computer software for
      homecare organizations.




**Proprietary
      Rights and Licenses**




We
      depend
      significantly upon proprietary technology. We rely on a combination of
      copyright, trade secret and trademark laws, confidentiality procedures and
      nondisclosure and other contractual provisions to protect our proprietary
      rights. We seek to protect our software, documentation and other written
      materials under trade secret and copyright laws, which afford only limited
      protection. We believe that, because of the rapid pace of innovation within
      the
      computer software industry, factors such as the technological and creative
      skills of our personnel, frequent product enhancements and reliable service
      delivery and ongoing reliable product maintenance and support are more important
      in establishing and maintaining a leadership position within the industry than
      are the various legal protections of our technology.




10


We
      distribute our products under services agreements that grant a customer a
      nonexclusive right to use our services for the customer's internal operation
      by
      designated users at designated sites. The service agreements may require us
      to
      make arrangements for hot standby systems or to deposit the source code and
      data
      necessary to deliver our services in an escrow account that may be accessed
      by
      the customer in the event of our company's liquidation, dissolution or
      bankruptcy, or if we fail to cure a material breach of contract.




**Governmental
      Regulation**




The
      healthcare industry is subject to changing political, economic and regulatory
      influences that may affect the procurement practices and operation of healthcare
      providers. Many federal and state legislators have announced that they intend
      to
      propose programs to reform the United States healthcare system at both the
      federal and state level. These programs may contain proposals to increase
      governmental involvement in healthcare, lower reimbursement rates, revise
      regulatory requirements and otherwise change the environment in which providers
      operate. Healthcare providers may react to these proposals and the uncertainty
      surrounding such proposals by curtailing or deferring investments, including
      investments in our products and related services **.**




The
      Health Insurance Portability and Accountability Act of 1996 ("HIPAA")
      establishes rules, regulations and penalties for ensuring the privacy of patient
      health information. In addition, HIPAA requires standards for the electronic
      interchange of healthcare and claims data. Though HIPAA will affect all aspects
      of all healthcare providers' operations, the greatest impact will be in the
      information technology area. The patient health information privacy phase of
      HIPAA went into effect in April 2003 and the standards for electronic
      interchange went into effect in October 2003. Conforming to the requirements
      is
      a difficult and expensive task. The preliminary document from CMS outlining
      the
      regulations exceeds 250 pages.




We
      have
      taken various steps to comply with HIPAA. Employees have been educated on the
      law's effects and a policy and procedure manual has been developed. We have
      appointed a privacy officer and a compliance officer whose duties
      include:




· Tracking
      regulatory changes;




· Performing
      initial and ongoing privacy risk assessments;




· Identifying
      all sources of Protected Health Information ("PHI");




· Conducting
      compliance monitoring activities;




· Providing
      guidance for Product Management;




· Managing
      education and training;




· Managing
      and ensuring sanctions for failure to comply; and




· Monitoring
      and reviewing all system-related information security plans to ensure
      compliance.




We
      have
      also updated our process for customers to sign onto the Web site by assigning
      individual passwords to each authorized user at customer sites.




It
      is
      difficult to assess the costs related to HIPAA compliance because these are
      sweeping changes for which we have no historical experience. Overall, costs
      of
      implementation and risk management may be significant as policy and process
      development is based on extensive assessment, staff training, IT solution
      purchases and ongoing compliance evaluation. There will be continuing costs
      to
      ensure compliance with the law over time.




11


**Employees**




At
      December 31, 2005, we had 59 full time employees, including two in sales; four
      in product management, education and implementation; 39 in operations and
      customer service; seven in software development; two in hardware support; and
      five in administrative and finance positions. None of our employees are
      represented by a labor union, nor governed by any collective bargaining
      agreements. We consider relations with our employees as
      satisfactory.




**Available
      Information**





We
      file annual reports, quarterly reports, proxy statements and other documents
      with the U.S. Securities and Exchange Commission (“SEC”) under the Securities
      Exchange Act of 1934 (the “Exchange Act”). The public may read and copy any
      materials that we file with the SEC at the SEC’s Public Reference Room at 100 F.
      Street, N.E., Room 1580, Washington, D.C. 20549. The public may obtain
      information on the operation of the Public Reference Room by calling the SEC
      at
      1-800-SEC-0330. Also, the SEC maintains a website that contains reports, proxy
      and information statements, and other information regarding issuers, including
      the Company, that file electronically with the SEC. The public can obtain any
      documents that we file with the SEC at http://www.sec.gov .




**ITEM
      2.**   **PROPERTY**




We
      currently rent approximately 13,617 square feet of executive office space
      located at 405 N. Reo Street, Suite 300, Tampa, Florida 33609. We rent this
      space for approximately $21,600 per month. The lease term is through January
      31,
      2009. This space is adequate to maintain and expand our business operations.




We
      also
      have a one year agreement with Qwest CyberCenter for our collocation of our
      data
      servers. Cost is approximately $5,000 per month. The current services agreement
      with Qwest extends from July 1, 2005 until June 30, 2006 and is automatically
      renewable for additional one year terms.




**ITEM
      3.**   **LEGAL
      PROCEEDINGS**




There
      are
      currently no material legal proceedings, nor pending legal proceedings involving
      our company.




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




No
      matters were submitted to a vote of security holders during the fourth quarter
      of the fiscal year covered by this report.




12


**PART
      II**




**ITEM
                5.**
            
            **MARKET
                FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**




**Market
      Information**




Our
      Common Stock has been listed for trading on the OTC Bulletin Board ("OTCBB")
      since June 3, 2002. Effective February 21, 2006, our trading symbol changed
      to
“HSSO.” Until March 23, 2005, there was no trading activity for our Common Stock
      since it became eligible for trading on the OTCBB. The
      following table sets forth the range of high and low bid prices for our Common
      Stock for the periods indicated.




**2005**
              
              **High**
              
              **Low**1stQuarter
              
              $
              2.30
              
              $
              0.252ndQuarter
              
              
              2.45
              
              
              1.053rdQuarter
              
              
              1.25
              
              
              .304thQuarter
              
              
              .55
              
              
              .30**2006**1stQuarter (thru March 27, 2006)
              
              
              .60
              
              
              .25







These
      prices may not be accurate indicators of the value of our shares. Bid and asked
      prices entered by market makers are inter-dealer price quotations and do not
      reflect retail markup, markdown or commissions.




Our
      Common Stock is covered by an SEC rule that imposes additional sales practice
      requirements on broker-dealers who sell such securities to persons other than
      established customers and accredited investors, which are generally institutions
      with assets in excess of $5,000,000, or individuals with net worth in excess
      of
      $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their
      spouse. For transactions covered by the rule, the broker-dealer must make a
      special suitability determination for the purchaser and transaction prior to
      the
      sale. Consequently, the rule may affect the ability of broker-dealers to sell
      our securities, and also may affect the ability of purchasers of our stock
      to
      sell their shares in the secondary market. It may also cause less broker-
      dealers to be willing to make a market in our Common Stock, and it may affect
      the level of news coverage we receive.




*Holders*




As
      of
      December 31, 2005, there were 73 holders of record of our Common
      Stock.




*Dividend
      Policy*




We
      have
      never paid cash dividends on our Common Stock. We presently intend to retain
      future earnings, if any, to finance the expansion of our business and do not
      anticipate that any cash dividends on our Common Stock will be paid in the
      foreseeable future. The future dividend policy will depend on our earnings,
      capital requirements, expansion plans, financial condition and other relevant
      factors.




**Related
      Stockholder Matters**






In
      connection with our acquisition of HQS, 125,001 shares of Common Stock were
      issued to Deluxe Investment Company. Such shares were subject to an escrow
      agreement which provided, among other things, that if we did not receive third
      party financing from sources other than Stanford, our principal stockholder,
      on
      or before October 22, 2004, that the 125,001 shares of Common Stock held by
      Deluxe would be immediately returned to the Company and cancelled. As required
      under the escrow agreement, on November 10, 2004, we sent the escrow agent
      a
      demand for the shares. On or about May 5, 2005, the certificates representing
      the shares were tendered to our transfer agent and cancelled. The shares are
      reflected as authorized, but unissued.




13


On
      March
      28, 2005, we issued incentive stock options to purchase an aggregate of 49,500 shares of our Common
      Stock to five employees under the 2003 Management and Director Equity Incentive
      and Compensation Plan (the “Plan”). The options are exercisable at $3.50 per
      share and vest to the extent of 25% of the respective aggregate granted for
      each
      twelve continuous months of employment subsequent to January 1, 2005. The
      options expire on the earlier of June 1, 2010 or the employee leaving the
      Company. The options were issued pursuant to the exemption from registration
      provided by Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”). The options contain legends restricting their transferability
      absent registration or applicable exemption. On March 28, 2005, we also canceled
      35,750 previously issued options as the option holders are no longer employed
      by
      the Company.




On
      May 9,
      2005, we issued incentive stock options to purchase an aggregate of 9,250 shares
      of our Common Stock to four employees under the Plan. The options are
      exercisable at $3.90 per share and vest to the extent of 25% of the respective
      aggregate granted for each twelve continuous months of employment subsequent
      to
      January 1, 2005. The options expire on the earlier of June 1, 2010 or the
      employee leaving the Company. On May 9, 2005, we also issued non-qualified
      stock
      options to purchase an aggregate of 10,000 shares of Common Stock to our two
      outside directors. Such options shall have an exercise price of $3.90 per share
      and shall vest to the extent of 25% of the respective aggregate granted for
      each
      twelve continuous months of board membership subsequent to May 9, 2005, with
      the
      unexercised portion of such respective options to expire June 1, 2010 or should
      the director leave the Board of Directors. The options were issued pursuant
      to
      the exemption from registration provided by Section 4(2) of the Securities
      Act.
      The options contain a legend restricting their transferability absent
      registration or exemption. The employees had access to information about the
      Company and had the opportunity to ask questions about the Company at the time
      of the option issuance. As of December 31, 2005, 371,250 stock options were
      issued leaving an unissued stock balance of 128,750.




On
      November 8, 2005, we entered into a Preferred Stock Purchase Agreement with
      our
      principal stockholder, Stanford International Bank Ltd. We agreed to issue
      to
      Stanford our Series C Preferred Stock at a price of $2.00 per share together
      with warrants exercisable for 3/10 of a share of Common Stock for each share
      of
      Series C Preferred Stock purchased. The Warrants are exercisable at a price
      of
      $0.001 per share. On November 8, 2005, we refinanced the outstanding amount
      of
      $1,250,000 under the loan and security agreement with Stanford by issuing
      625,000 shares of preferred stock and issued an additional 100,000 shares of
      preferred stock to meet working capital needs through December 31, 2005. Of
      the
      Series C Preferred Stock purchases, $237,789 has been attributed to the fair
      value of the warrants and included in additional paid in capital. We have an
      additional 200,000 shares to draw upon under the Preferred Stock Purchase
      Agreement on two weeks’ notice and the agreement provides for an additional 3.7
      million preferred shares that may be sold to Stanford to provide us with funds
      to complete acquisitions or additional working capital uses that may be approved
      by Stanford in its sole discretion.




As
      required under the Preferred Stock Purchase Agreement between the Company and
      Stanford, warrants to purchase up to an aggregate of 217,500 shares of our
      Common Stock at an exercise price of $0.001 per share were issued in conjunction
      with the issuance of the Series C Preferred Stock. Of the Series C Preferred
      Stock purchases, $237,789 has been attributed to the fair value of the warrants
      and included in additional paid in capital. 108,750 of the warrants were issued
      to five of Stanford’s assignees. All the warrants were exercised in December,
      2005, and 217,500 Common Stock shares issued.




On
      December 9, 2005 a registration statement filed with the SEC registering the
      re-sale of an aggregate of 735,404 shares (post reverse split) of our Common
      Stock was declared effective by the SEC. We receive no proceeds from the sale
      of
      shares included in the registration statement, as the registration statement
      prospectus covers shares being offered for resale by certain selling
      shareholders .




14


**ITEM
                6.**
            
            **MANAGEMENT'S
                DISCUSSION AND ANALYSIS OR PLAN OF
                OPERATIONS**





**Overview**




Through
      our wholly owned subsidiary, HQS, we design, develop, market, sell and support
      web-based, management information and business intelligence services that assist
      home health care companies effectively manage the clinical, operational and
      financial aspects of their business. Our systems are implemented on our
      customers’ standard personal computers with access to the Internet over
      Microsoft Internet Explorer. Our architecture and fee structure enable our
      customers to rapidly and cost-effectively implement our systems for a modest
      transactional fee charged when a customer uses our programs to make patient
      clinical assessments. These systems have been designed to assist our customers
      to:




• Increase
      revenue;




• Reduce
      cost;




• Standardize
      processes;




• Improve
      the quality of patient outcomes; and




• Minimize
      regulatory compliance risk.




Our
      products address the issues of measuring quality of care while simultaneously
      reducing costs, improving patient outcomes and minimizing compliance risk.
      Effective management of home health agencies requires accurate collection of
      many data elements and using this data to determine the reimbursement for the
      care and to measure and improve the quality of the care delivered. Our services
      offer cost-effective, accurate and automated methods of improving the quality
      of
      the data collected and enable our customers to use the data to provide daily
      reports that identify anomalies in clinical observations, identify profit or
      loss potential for an episode of care, and assist with managing regulatory
      compliance risk and performing benchmark observations about the data against
      our
      national database of over four million episodes of care.




Our
      services assist home health care agencies on a daily basis to collect, edit
      and
      correct the OASIS Data and, through daily and other periodic reports, assist
      in
      the management of regulatory compliance risk and measurement of the patient
      outcome. The patient assessments containing the OASIS Data are the
“transactions” on which we base our charges for these services.




We
      currently derive most of our revenues from per transaction charges applied
      to
      processing patient clinical assessments made by our customers during a month.
      As
      of December 31, 2005, we had approximately 80 customers in 41 states with
      approximately 470 sites using one or more of our services. During December
      2005,
      our customers processed over 66,000 patient clinical assessments using our
      programs.




In
      2005
      there were about 8,000 Medicare certified home health agencies nationally that
      provided services to 2.8 million patients. The Balanced Budget Act of 1997
      included mandates to the Centers for Medicare and Medicaid Services (CMS) to
      establish a Prospective Payment System (PPS) to reduce the cost of the home
      health benefit and to measure the effectiveness of the care delivered. The
      regulations are being implemented in phases over time and include a requirement
      that home health agencies collect assessment data on each patient at
      start-of-care, recertification and at discharge (OASIS Data). These
      assessments determine the reimbursement for each patient for a 60 day episode
      of
      care.




Beginning
      in 1998, our predecessor businesses used the OASIS Data to provide to some
      of
      its home health agency customers quarterly clinical performance benchmarking
      services. In addition, our predecessor businesses transmitted OASIS Data to
      state agencies as required under the Medicare regulations and to the Joint
      Commission on Accreditation of Healthcare Organizations as required under that
      organization's accreditation procedures. Charges for these services were on
      a
      subscription basis. Home health agencies could pay the subscription fee annually
      in advance and obtain a discount from standard pricing. Revenue for customers
      paying up front was categorized as deferred and was earned over the course
      of
      the ensuing contract period, typically 12 months.




15


In
      late
      2002, in response to expanded PPS regulations, we introduced a series of new
      online processing and business intelligence services using transaction-based
      pricing. These products assist home health agencies on a daily basis to collect,
      edit and correct the OASIS Data and through daily and other periodic reports
      assist in the management of patient outcome analysis and regulatory compliance
      risk. We refer to individual patient assessments containing the OASIS Data
      as
      the "transactions" on which we base our charges for our business intelligence
      services.




From
      February through June 2003, we rolled-out our new transaction-based pricing
      services to 45 sites of Amedisys, Inc., a publicly-traded home health care
      agency, doubling our transaction-based volume from 10,000 to 20,000 per month.
      Simultaneously, we marketed these new services to our existing subscription
      customers. Those incumbent customers that accepted the new services changed
      from
      a subscription basis to the new transaction basis. Where the customer would
      not
      agree to move up to the new services, the majority of these customers were
      dropped Though the majority of these customers were small single site agencies,
      one customer that used only our PPS Trans (subscription) services that was
      dropped submitted over 100,000 assessments per year for processing. As this
      customer generated substantial negative gross margin, eliminating it from the
      statistics not only increased the average charge per transaction but improved
      our gross margin. Currently, approximately 15% of our customers remain on a
      subscription basis and due to their small size, we do not anticipate converting
      them to a transaction basis.




The
      acceptance of the transaction services by new customers, the conversion of
      subscription customers and the elimination of low or negative margin customers
      resulted in an increase in transaction-based revenue relative to
      subscription-based revenue, as well as increasing the revenue per transaction.
      Fees are negotiated on a customer by customer basis. Price increases for
      existing services are unlikely in the foreseeable future.




We
      believe that we achieve best results with larger, multi-site customers who
      tend
      to have more sophisticated managements. These home health care agencies are
      expanding organically and through acquisition. We believe that our results
      of
      operations are best enhanced by adding an additional site of a current customer
      than to bring on a single site new customer.




**Evaluation
      of Company Performance and Financial Condition**




The
      principle factor our management analyzes in evaluating our performance is
      changes in our principal sources of revenue. As a business that provides
      transaction processing services based on patient assessments submitted for
      processing by our customers, management focuses on circumstances that influence
      assessment volume. Management therefore focuses primarily on the volume of
      transaction sites added and the number of transactions processed in each fiscal
      period to evaluate our performance. To a lesser extent, management evaluates
      the
      efficiency of our operation and our staffing levels by reviewing changes in
      our
      revenue per employee and expenses per employee (which is determined by dividing
      revenue or expense during a period by the weighted overage headcount). To
      evaluate the effectiveness of our finance department and the strength of our
      financial position, management reviews our days of sales outstanding for each
      period.




**Operational
      Risks and Challenges**




Management
      believes that as we grow and expand our hosted on line services, we may
      increasingly encroach on the market of larger, more established vendor’s
      software offerings. It is likely that one or more of these more financially
      capable companies will develop a competing service.




We
      also
      bear the cost and risks associated with meeting regulatory compliance. For
      example, meeting the demands of HIPAA relating to protection of Private Health
      Information will require modifications to existing and development of new
      software to meet the HIPAA regulations. We must also assist our customers that
      must comply with Sarbanes-Oxley in demonstrating proper internal control
      processes. In addition to being complex issues requiring measured responses,
      both expose us to legal challenges.




16


**Research
      and Development**




In
      2004,
      we initiated development projects to produce new and enhanced products. The
      first such product, the HQS Medications Risk Manager, was introduced into beta
      test with one of our large customers in October 2005. This product will not
      add
      material revenue during 2006. General release is presently scheduled for the
      first quarter of 2006. We expect two other new services will be introduced
      into
      beta test mid 2006 with others to follow over the balance of that year. These
      products are expected to add material revenue during 2006. Development of the
      underlying software will be produced with existing staff. Other research and
      development expenses associated with these products is not material and will
      increase slightly to cover costs related to short term software development
      contractors or consultants that will be used in the development
      cycle




**Significant
      Accounting Policies**




*Revenue
      Recognition*




We follow
      the guidance of the SEC’s Staff Accounting Bulletin 104 for revenue recognition.
      In general, we record revenue when persuasive. We recognize revenue when
      persuasive evidence of a final agreement exists, delivery has occurred, the
      selling price is fixed or determinable and collectibility is reasonably assured.
      Currently, we primarily employ a web-based application service provider model
      to
      deliver our services to our home healthcare customers. In instances where the
      customer specifies final acceptance of the system or service, we defer revenue
      until all acceptance criteria have been met. Our revenue is classified into
      two
      categories: recurring and non-recurring. For the year ended December 31, 2005
      approximately 93% of our total revenue was recurring and 7% was non-recurring.
      We price these services primarily on a transaction fee basis (calculated based
      upon the number of patient clinical assessments made by a customer during a
      period) and, to a lesser extent, on a subscription fee basis. Clinical
      assessments, which are mandated by Medicare, require Home Health Care Agencies
      to collect assessment data on all patients requiring home health care at the
      start-of-care and at discharge. Our products, PPS Collect, Editor, Executive,
      Dashboard, Trans, Outcomes, and Oasis Auditor. all assist in the collection
      of
      assessment data and are all charged on a transaction basis and this recurring
      revenue is typically billed and recognized monthly. We earn the revenues from
      subscriptions ratably over the period of the respective agreement, generally
      one
      year. We record cash payments received in advance or at beginning of a contract
      as deferred revenue. We recognize transaction fee based revenues in the period
      the transaction is processed. We generate non-recurring revenue from
      implementation fees, consulting, training and customer support services and
      this
      non-recurring revenue is charged to customers on a fee basis usually based
      upon
      time spent. We recognize implementation fees in the month that the customer
      goes
      live and we recognize training, consultation, advisory and support revenue
      in
      the month that the service is performed. Implementation costs consisting of
      payroll and travel are expensed in the same period implementation fees are
      recognized. Typical sales terms would be 30 days from the date of
      invoice.




We
      currently recognize cancellations, allowances or discounts as they occur. This
      practice is based on factors that include, but are not limited to, historical
      cancellations and analysis of credit memo activities. Cancellations, allowances
      and discounts are not material.




*Allowance
      for Doubtful Accounts*




The
      allowance for doubtful accounts is based on our assessment of the collectibility
      of customer accounts and the aging of the accounts receivable. If there is
      a
      deterioration of a major customer’s credit worthiness or actual defaults are
      higher than our historical experience, our estimates of the recoverability
      of
      amounts due us could be adversely affected. We regularly review the adequacy
      of
      our allowance for doubtful accounts through identification of specific
      receivables where it is expected that payment will not be received. We also
      establish an unallocated reserve that is applied to all amounts that are not
      specifically identified. In determining specific receivables where collections
      may not be received, we review past due receivables and give consideration
      to
      prior collection history and changes in the customer’s overall business
      condition. The allowance for doubtful accounts reflects our best estimate as
      of
      the reporting dates. Changes may occur in the future, which may require us
      to
      reassess the collectibility of amounts and at which time we may need to provide
      additional allowances in excess of that currently provided.




*Software
      Development Costs*




We capitalize certain costs of software developed or obtained for internal use
      in
      accordance with AICPA SOP 98-1, Accounting for the Costs of Corporate Software
      Developed or Obtained for Internal Use (“SOP 98-1”). We capitalize software
      development costs when application development begins, it is probable that
      the
      project will be completed, and the software will be used as intended. Costs
      associated with preliminary project stage activities, training, maintenance
      and
      all other post implementation stage activities are expensed as incurred. Our
      policy provides for the capitalization of certain payroll and payroll-related
      costs for employees who are directly associated with developing or obtaining
      internal use software. Capitalizable personnel costs are limited to the time
      directly spent on such projects. Capitalized costs are ratably amortized using
      the straight-line method, over the estimated useful lives of the related
      applications of three years. We make on-going evaluations of the recoverability
      of our capitalized software by comparing the amount capitalized for each product
      to the estimated net realizable value of the product. If such evaluations
      indicate that the unamortized software development costs exceed the net
      realizable value, we write off the amount that the unamortized software
      development costs exceed net realizable value.




17


*Recent
      Accounting Pronouncements*




In
      June
      2005, the Financial Accounting Standards Board issued FAS No. 154, *Accounting
      Changes and Error Corrections - a replacement of APB Opinion No. 20 and
      FASB Statement No. 3* .
      This
      Statement generally requires retrospective application to prior periods’
financial statements of changes in accounting principle. Previously, Opinion
      No. 20 required that most voluntary changes in accounting principle were
      recognized by including the cumulative effect of changing to the new accounting
      principle in net income of the period of the change. FAS 154 applies to all
      voluntary changes in accounting principle. It also applies to changes required
      by an accounting pronouncement in the unusual instance that the pronouncement
      does not include specific transition provisions. When a pronouncement includes
      specific transition provisions, those provisions should be followed. This
      Statement shall be effective for accounting changes and corrections of errors
      made in fiscal years beginning after December 15, 2005. We do not expect
      the adoption of this statement to have a material impact on our results of
      operations, financial position or cash flow.




In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued
      Statement No. 123 (Revised 2004), *Share-Based
      Payment* (“SFAS
      123R”) which is a revision of FASB Statement No. 123, *Accounting
      for Stock-Based Compensation.* SFAS
      123R supercedes Accounting Principles Board Opinion No. 25, *Accounting
      for Stock Issued to Employees* ,
      and
      amends FASB Statement No. 95 *,
      Statement of Cash Flows.* SFAS
      123R requires the measurement of all share-based payments to employees,
      including grants of employee stock options, using a fair-value based method
      and
      the recording of such expense in our consolidated statements of income. The
      accounting provisions of SFAS 123R are effective for annual periods beginning
      after June 15, 2005. We are required to adopt SFAS 123R in the first
      quarter of 2006. The pro forma disclosures previously permitted under SFAS
      123
      no longer will be an alternative to financial statement recognition.. We are
      evaluating the requirements under SFAS 123R and does not expect the adoption
      to
      have a significant impact on our consolidated statements of income and net
      income per share.




Management
      does not believe that any recently issued, but not yet effective accounting
      pronouncements if currently adopted would have a material effect on the
      accompanying consolidated financial statements.




**Results
      of Operations Data**




The
      following table sets forth certain financial data expressed as a percentage
      of
      net sales for
      each
      of the periods indicated.




**For
                the Year
                Ended December 31,****2004**
              
              **2005**Net
                  sales
              
              
              100
              %
              
              100
              %Cost
                  of sales
              
              
              47
              
              
              46Gross
                  profit
              
              
              53
              
              
              54Operating
                  expenses:Selling
                  and marketing
              
              
              27
              
              
              16Research
                  and development
              
              
              16
              
              
              15General
                  and administrative
              
              
              35
              
              
              29Depreciation
                  and amortization
              
              
              4
              
              
              4Interest
              
              
              1
              
              
              2Total
                  operating expenses
              
              
              83
              
              
              66Other
                  non-operating expense
              
              
              1
              
              
              0Net
                  income (loss)
              
              
              (31
              )
              
              (12
              )




18


**Statistical
      Data**




The
      following table sets forth certain statistical data for each of the periods
      indicated. Our total assessments are the number of patient OASIS assessments
      received from customers including both transaction and subscription customers.
      Transaction revenue is derived by multiplying the transaction assessments
      received in the period multiplied by the customer’s per assessment charge.
      Subscription revenue is calculated based on a yearly subscription fee,
      regardless of the number of assessments received, and earned ratably over twelve
      months. The average charge per transaction is calculated by dividing the
      transaction revenue by the number of transactions assessments.




For
                  the Year Ended December 31,**2004**
              
              
              **2005**Total
                  customers (weighted average)
              
              
              99
              
              
              86Total
                  customers (end of period)
              
              
              100
              
              
              79Total
                  sites (weightedaverage)
              
              
              344
              
              
              407Total
                  sites (end of period)
              
              
              373
              
              
              471Totalassessments
              
              
              628,158
              
              
              725,664Transaction
                  customers (weightedaverage)
              
              
              77
              
              
              71Transaction
                  customers (end ofperiod)
              
              
              81
              
              
              67Transaction
                  sites (weightedaverage)
              
              
              323
              
              
              393Transaction
                  sites (end of period)
              
              
              356
              
              
              459Transaction
                  assessments
              
              
              610,034
              
              
              709,987Transaction
                  revenues
              
              $
              3,198,730
              
              $
              3,920,689Average
                  charge per transaction
              
              $
              5.24
              
              $
              5.52Subscription
                  customers (weighted average)
              
              
              22
              
              
              14Subscription
                  customers (end of period)
              
              
              19
              
              
              12Subscription
                  sites (weighted average)
              
              
              21
              
              
              14Subscription
                  sites (end of month)
              
              
              17
              
              
              12Subscription
                  assessments
              
              
              18,124
              
              
              15,677Subscription
                  revenue
              
              $
              211,549
              
              $
              46,463Training
                  revenue
              
              $
              123,812
              
              $
              99,033Implementation
                  and set-up revenue
              
              $
              64,375
              
              $
              96,250Other
                  revenue
              
              $
              39,161
              
              $
              50,385Weighted
                  average headcount
              
              
              45
              
              
              50Days
                  sales outstanding
              
              
              44
              
              
              53


19


**Year
      Ended December 31, 200** **5
      Compared to the Year Ended December 31, 2004**




Revenues
      for the year ended December 31, 2005 were $4,212,819 and for the year ended
      December 31, 2004 were $3,637,626, an increase of $575,193 or 16%. This increase
      resulted primarily from price increases and an increase in assessment
      transaction volume from existing customers.




The
      largest contributor to our revenue growth during the period was the increase
      in
      our transaction based revenue. Our average charge per transaction increased
      5%
      to $5.52 during the twelve months ended December 31, 2005, from $5.24 during
      the
      twelve months ended December 31, 2004, and the number of transactions processed
      increased 16% to 709,987 during the twelve months ended December 31, 2005 from
      610,034 during the twelve month period ended December 31, 2004. Revenues for
      these transactions increased 23% from the same period last year to $3,920,689
      from $3,198,730. This $721,958 increase in our transaction revenue is comprised
      of a 73% increase attributed to increased volume and 27% of the increase is
      attributed to price increases. The price increase is primarily due to the loss
      of small customers that discontinued services due to price increases and the
      addition of new customers at a higher rate per transaction. The number of
      transaction based customers decreased 17% to 67 customers at December 31, 2005
      compared to 81 customers at December 31, 2004. During the year ended December
      31, 2005, the number of transaction based sites increased 29% to 459 from 356
      at
      December 31, 2004 and the number of subscription based sites decreased 29%
      to 12
      from 17 at December 31, 2004.




Cost **** of
      sales
      for the year ended December 31, 2005 and the year ended December 31, 2004,
      respectively, were $1,941,735 and $1,727,205, or 46% and 47% of revenues. We
      include as part of our cost of sales the employee costs incurred from our
      customer service department, data verification department, implementation
      department and our clinical educators. Other costs include travel for our
      customer service personnel, professional fees, accreditation fees,
      teleconferencing, assessment forms shipping, depreciation expense for our
      internally developed software and hosted data center expense. The $214,530,
      or
      12%, increase in the cost of sales is principally attributed to an increased
      staffing in our customer service and training and education departments to
      support the increased customer volume resulting in an increase of $211,421
      in
      salaries and related expenses, increase in travel expense of $17,065 due to
      increased travel to customer sites for training and education, and an increase
      of $16,461 in communication expense due primarily to increased tele-conferencing
      expense resulting from increased customer training, These increases are
      partially offset by a decrease of $26,998 in professional services resulting
      primarily from the decrease in use of temporary staffing.




Operating
      expenses for the year ended December 31, 2005 and the year ended December 31,
      2004, respectively, totaled $2,760,679 and $3,005,950, resulting in a decrease
      in operating expenses of $245,271, or 8%. Operating expenses were comprised
      of
      selling and marketing, research and development, general and administration,
      depreciation and amortization and interest.




Selling
      and marketing expense for the year ended December 31, 2005 and the year ended
      December 31, 2004 was $660,037 and $966,870, respectively, resulting in a
      decrease in selling and marketing expense of $306,833 or 32%. We included in
      our
      selling and marketing expense the employee costs incurred from our marketing,
      sales, sales administration and sales support employees. Other costs included
      are the travel for our sales personnel, trade shows, advertising, telephone,
      teleconferencing, and office expense. The principal reason for the decrease
      was
      the decrease in salaries and benefits of $233,444 due to the decrease in the
      sales and marketing staff, commissions decreased $22,159 due to decreased new
      sales and the decrease in the number of sales people, marketing and promotion
      decreased $32,725 due primarily to a decrease in advertising expense, travel
      decreased $12,836 due to the decrease in staffing and a $5,694 decrease in
      professional fees primarily due to a decrease in recruiting fees paid in 2005.
      We anticipate increasing our sales staff by three additional sales people in
      2006. We anticipate hiring our first sales person in the second quarter and
      then
      adding one sales person in both the third and fourth quarter of
      2006.




Researc h
      and
      development expense was $629,473 for the year ended December 31, 2005 and the
      year ended December 31, 2004 was $576,194, resulting in an increase in research
      and development expense of $53,279 or 9%. Included in our research and
      development cost is the employee costs for our software developers and our
      data
      center and internal systems staff, professional fees for outside consultants
      and
      contractors, and supplies. The principal reason for the increase was an increase
      in salaries and benefits of $27,277 due to the increase in our development
      staff
      and an increase of $11,225 in professional fees for contract labor for
      developers.




20


General
      and administration expense was $1,221,470 for the year ended December 31, 2005
      and $1,269,242 for the year ended December 31, 2004, a decrease of $47,772,
      or
      4%. Included in our general and administration expense are salaries and related
      expenses for our executive officers and administrative employees. Also included
      in general and administration are corporate costs such as, but not limited
      to,
      legal and accounting, utilities, rent, office supplies and office
      equipment.




Depreciation
      expense was $167,713 for the year ended December 31, 2005 and $144,533 the
      year
      ended December 31, 2004, an increase of $23,180 or 16%. The principal reason
      for
      the increase in depreciation expense of $23,180 is the acquisition of computer
      equipment to support our growth and to keep our systems updated.




Interest
      expense was $81,986 for the twelve months ended December 31, 2005 and $49,111
      for the twelve months ended December 31, 2004, an increase of $32,875. The
      principal reason for the increase in interest expense is due to the additional
      $200,000 in loan and security agreement proceeds received during 2005 under
      the
      loan and security agreement.




Other
      non-operating expense was $0 for the twelve
      months ended December 31, 2005 compared to $29,139 for the twelve months ended
      December 31, 2004. The
      $29,139 represents an additional amount of tax due to the IRS
      on
      the outstanding tax liability we had assumed from a predecessor
      company.




The
      weighted average head count for the twelve month period ended December 31,
      2005
      was 50 and for the twelve months ended December 31, 2004 it was 45, resulting
      in
      an increase in the average headcount of five or 11%. The increase in staffing
      is
      principally attributed to the increased staffing in our verification department.
      Revenue per employee for the twelve months ended December 31, 2005 was $84,256
      compared to $80,836 for the twelve months ended December 31, 2004 resulting
      in
      an increase of $3,420 per employee or 4%. The increase was due to the increase
      in transaction assessment volume of 99,953, or 16%, for the twelve months ended
      December 31, 2005 compared to the twelve months ended December 31, 2004. These
      additional 99,953 assessments were handled with an 11% increase in the weighted
      average head count. The average price per transaction assessment increased
      to
      $5.52 for the twelve months ended December 31, 2005 compared to $5.24 for the
      twelve months ended December 31, 2004. This increase in price per transaction
      assessment, the increased transaction volume and our fixed administrative staffing levels, and our 11% increase in the weighted average
      head count has increased our profit margin per assessment.  Management
      believes that the increase in revenue per employee from prior periods indicates
      that operations continue to have positive growth. We anticipate revenue per
      assessment will continue to increase as our revenue from current products
      increase since we have the capacity to process additional assessments with
      only
      a minimal increase in customer service staffing over the next twelve months.
      Our
      goal for revenue per employee is $100,000 of revenue annually per employee.




**Liquidity
      and Capital Resources**




We
      have
      incurred an accumulated deficit at December 31, 2005 of $13,012,275 compared
      to
      $12,284,891 at December 31, 2004. We have working capital at December 31,
      2005 of $619,775 compared to working capital of $330,507 at December 31, 2004.
      We have incurred net operating losses for the year ended December 31, 2005
      and
      December 31, 2004 of $489,595 and $1,095,529, respectively.




On
      November 8, 2005, we entered into a Preferred Stock Purchase Agreement with
      our
      principal stockholder, Stanford International Bank Ltd. We agreed to issue
      to
      Stanford our Series C Preferred Stock at a price of $2.00 per share together
      with warrants exercisable for 3/10 of a share of Common Stock for each share
      of
      Series C Preferred Stock purchased. The Warrants are exercisable at a price
      of
      $0.001 per share. On November 8, 2005, we refinanced the outstanding amount
      of
      $1,250,000 under the loan and security agreement and have drawn down an
      additional $200,000 of working capital through December 31, 2005. We have an
      additional $400,000 to draw down under the Preferred Stock Purchase Agreement
      on
      two weeks’ notice and the agreement provides for an additional $7.4 million that
      may be sold to Stanford to provide us with funds to complete acquisitions or
      additional working capital uses that may be approved by Stanford in its sole
      discretion. We believe that the $400,000 available to us under the Preferred
      Stock Purchase Agreement and an additional $350,000 from the Preferred Stock
      Purchase Agreement for working capital, together with funds generated from
      operations, will be sufficient to meet our liquidity needs over the next twelve
      months.




21


On
      July
      6, 2004, HQS entered into a $1,600,000 loan and security agreement with
      Stanford. Under this agreement, interest accrued at the rate of 8% per annum
      and
      principal matured and became payable three years from the date of the loan.
      The
      loan was secured by a security interest in all of the assets of our company
      and
      HQS and a corporate guaranty that was executed in favor of Stanford. HQS had
      borrowed $1,250,000 against the loan and security agreement when on November
      8,
      2005, we refinanced the outstanding amount of $1,250,000 by entering into the
      Preferred Stock Purchase Agreement with Stanford and thus terminating the loan
      and security agreement.




Operating
      activities used $74,671 for the twelve months ended December 31, 2005, whereas
      such activities used $710,230 for the twelve months ended December 31, 2004.
      Cash used by operating activities for twelve months ended December 31, 2005,
      is
      primarily attributable to a net loss of $489,595 an increase of $242,783 in
      accounts receivable and a decrease in deferred revenue of $20,076. These were
      partially offset by non cash items such as depreciation and amortization of
      $667,224, and an increase in accounts payable of $13,209.




Investing
      activities used $273,505 for the twelve months ended December 31, 2005, whereas
      such activities used $199,972 for the twelve months ended December 31, 2004.
      Cash used in investing activities in 2004 is attributable to purchases of
      property and equipment of $93,798 and capitalized software development cost
      of
      $179,707.




Financing
      activities provided $386,885 for the twelve months ended December 31, 2005,
      whereas such activities provided $1,038,695 for the twelve months ended December
      31, 2004. Cash provided by financing activities in 2005 is primarily attributed
      to $200,000 in proceeds from the Loan and Security Agreement, and $1,450,000
      in
      proceeds from the Preferred Stock Purchase Agreement. These are partially offset
      by the repayment of the Loan and Security Agreement with Stanford of $1,250,000
      and repayment of $13,550 of the capital lease obligation.




Cash
      at
      December 31, 2005 and December 31, 2004, respectively, was $338,930 and
      $300,221. At December 31, 2005 and December 31, 2004, respectively, we had
      total
      stockholders’ equity of $1,082,180 and $121,340. During the year ended December
      31, 2005, we received proceeds from the loan and security agreement with
      Stanford in the amount of $200,000 and an additional $200,000 from the Preferred
      Stock Purchase Agreement.




Accounts
      receivable at December 31, 2005 was $686,164 as compared to $455,440 at December
      31, 2004, an increase of approximately 50%. Days of sales outstanding was 53
      days for the year ended December 31, 2005 compared to 44 days at December 31,
      2004. Our standard contract states that payment is due within 30 days of the
      date of the invoice. For the year ended December 31, 2005, 45% of our revenues
      were generated from Amedisys and 61% of our accounts receivable were due from
      Amedisys. As disclosed under “Risk Factors,” the loss of Amedisys would
      materially decrease our revenues. We believe that our services are an integral
      part of the Amedisys daily operation having a direct impact on Amedisys
      clinical, financial and field operations.




Other
      assets at December 31, 2005 were $552,234 as compared to $936,695 at December
      31, 2004. These amounts were primarily due to property and equipment of $447,266
      and $841,462, respectively, which consist principally of $218,310 and $538,113,
      respectively, of internally developed software. The decrease in internally
      developed software is due to an increase in accumulated depreciation which
      is
      partially offset by capitalized software development costs for the year ended
      December 31, 2005 pursuant to SOP 98-1. ****




22


Accounts
      payable and accrued expenses at December 31, 2005 and December 31, 2004 were
      $249,859 and $242,101, respectively.




We
      anticipate that cash requirements will remain at the current level for the
      next
      12 months as we plan on continuing to utilize current resources to continue
      improving our infrastructure, develop our business, establish our sales and
      marketing network, operations, customer support and administrative
      organizations. We currently anticipate proceeds from the Preferred Stock
      Purchase Agreement will be sufficient to meet presently anticipated working
      capital and capital expenditure requirements through December 31, 2006. As
      of
      December 31, 2005, there were no commitments for long-term capital
      expenditures.




**Special
      Note Regarding Forward Looking Statements**




Certain
      statements in this Annual Report on Form 10-KSB constitute “forward-looking
      statements” within the meaning of Section 27A of the Securities Act and Section
      21E of the Exchange Act. Such statements are based on current expectations,
      and
      are not strictly historical statements. Forward-looking statements include,
      without limitation, statements set forth in this document and elsewhere
      regarding, among other things:




•
            Expectations
                of future financial performance




•
            Market
                acceptance of new product introductions




•
            Plans
                related to our capital expenditures;




•
            Assumptions
                regarding exchange rates




•
            Potential
                Acquisitions




Our
      actual results could differ materially from those expressed or implied in the
      forward-looking statements. Important assumptions and other important factors
      that could cause our actual results to differ materially from those in the
      forward-looking statements, include, but are not limited to:




•
            Access
                to sufficient working capital to meet our operating and financial
                needs;




•
            Our
                ability to respond to growing competition in our markets for web-based,
                management information and business intelligence services as well
                as the
                extent, timing and success of such competition;




•
            Our
                ability to expand into new markets and to effectively manage our
                growth;





•
            Changes
                in, or failure to comply with, applicable governmental regulation;




•
            General
                economic conditions or material adverse changes in markets we serve;




•
            Risk
                that our analyses of these risks could be incorrect and that the
                strategies developed to address them could be unsuccessful;




•
            Changes
                in our accounting assumptions that regulatory agencies, including
                the SEC,
                may require or that result from changes in the accounting rules or
                their
                application, which could result in an impact on our earnings;




•
            Integrating
                the operations of newly acquired businesses;




23


•
            Successful
                deployment of new products and realization of material savings therefrom;




•
            Various
                other factors discussed in this filing;




Industry
      trends and specific risks may affect our future business and results. The
      matters discussed below could cause our future results to differ from past
      results or those described in forward-looking statements and could have a
      material adverse effect on our business, financial condition, results of
      operations and stock price. Factors, which could cause results to differ from
      expectations, include risks described in greater detail below.





**Risk
      Factors**




You
      should carefully consider the risks described below before making an investment
      decision. This disclosure highlights all material risks regarding our business
      and this offering.




*We
      have a history of losses and if these losses continue you may lose your entire
      investment in our company.*




We
      have a
      history of operating losses in our business and have incurred significant net
      losses since our inception. For the fiscal year ended December 31, 2005, we
      incurred net losses totaling $727,384. At December 31, 2005, we had an
      accumulated deficit of $13,012,275. Our ability to generate and sustain
      significant additional revenues or achieve profitability will depend upon the
      factors discussed elsewhere in this "Risk Factors" section.




Our
      continued operating losses have contributed to the deterioration of our cash
      position. We expect that cash on hand together with funds available to us under
      our Preferred Stock Purchase Agreement with our principal stockholder will
      permit us to fund our operations for the next twelve months. Unexpected
      increases in negative cash flow from operations or the unavailability of funds
      under our line of credit would cause us to require additional external financing
      before that time. Under those circumstances, if we are unable to secure
      additional external financing on a timely basis, we will not have sufficient
      cash to fund our working capital and capital expenditure requirements and we
      will be forced to cease operations. In such event, the shares of our Common
      Stock may cease to have any value.




*We
      currently depend on repeat business for a substantial portion of our revenues,
      and need to increase our customer base to grow in the future or our revenues
      may
      decrease.*




Currently,
      a significant and increasing portion of our revenues is generated from existing
      customers. Many of our customers initially implement our products for a limited
      number of sites or for limited functions. These customers may not choose to
      purchase additional licenses to expand their use of our products. If this
      occurs, or if existing customers fail to renew services or maintenance
      contracts, then new customer revenue may not be sufficient to offset the
      resulting shortfall and enable us to sustain our current revenue
      levels.




The
      home
      healthcare market is highly fragmented and is dominated by small agencies that
      are not accustomed to using web-based management tools. If we fail to increase
      our customer base, our business and operations results would be
      harmed.




*One
      of our customers accounts for approximately 45% of our business and the loss
      of
      this significant customer would materially decrease our
      revenues.*




We
      had
      one customer, Amedisys, Inc., who accounted for approximately 45% of our revenue
      for the twelve months ended December 31, 2005 and 32% of our revenues for the
      year ended December 31, 2004. The loss of this customer would materially
      decrease our revenues. Please see “Customers” for a discussion of our agreement
      with Amedisys.




24


*We
      have a long sales cycle and may not be able to increase revenues as quickly
      as
      we must increase staffing to support additional activity. If we increase our
      staffing in anticipation of additional revenues that are delayed, we may incur
      losses which could result in you losing your investment in our
      company.*




Because
      most home health care agencies have not utilized management information systems
      to enhance their financial and clinical performance, selling our solutions
      requires us to educate potential customers on our solutions’ uses and benefits.
      As a result, our services have a long sales cycle, which can take up to eight
      months. Consequently, we face difficulty predicting the quarter in which
      revenues from expected customers may be realized. The sale of our services
      is
      also subject to delays from the lengthy budgeting, approval and competitive
      evaluation processes of our customers that typically accompany significant
      information technology commitments. If we increase our staffing in anticipation
      of additional revenues and those revenues are delayed, we may suffer
      losses.




*Selling
      our services involves a sophisticated sales effort which narrows the talent
      pool
      to replace our sales staff and if we are unable to retain or replace qualified
      sales staff, our revenues may decrease.*




Our
      solutions require a sophisticated sales effort targeted at senior management
      of
      our prospective customers. New hires in our sales department require extensive
      training and a long period of employment to achieve full productivity. There
      is
      no assurance that new sales representatives will ultimately become productive.
      If we were to lose qualified and productive sales personnel, our revenues could
      be adversely impacted.




*If
      we
      fail to properly manage our growth, we may lose customers and our revenues
      would
      decrease.*




We
      expanded our computer operations infrastructure in anticipation of our current
      and potential customer growth potential. Additionally, we must continue to
      develop and expand our services and operations infrastructure as the number
      of
      individual users accessing our services within each healthcare provider
      increases. The pace of our anticipated expansion, together with the level of
      expertise and technological sophistication required to manage infrastructure
      and
      provide implementation and support services, demands an unusual amount of focus
      on the transaction processing needs of our current and future customers for
      quality, on-line response time and reliability, as well as timely delivery
      of
      information and support. This development and expansion has placed, and we
      expect it to continue to place, strain on our managerial, operational and
      financial resources.




If
      we
      cannot manage our growth effectively, our business and operating results will
      suffer. Additionally, any failure on our part to develop and maintain our
      service levels if we experience rapid growth could significantly adversely
      affect our reputation and brand name which could reduce demand for our services
      and adversely affect our business, financial condition and operating
      results.




*Healthcare
      providers are highly regulated. If we fail to properly implement regulatory
      requirements in an effective and timely manner, we will lose customers, our
      reputation will be damaged and our revenues will decrease.*




Monitoring
      and ensuring our services are compliant with changes in Medicare Conditions
      of
      Participation (CoPs), provisions of the Health Insurance Portability and
      Accountability Act (HIPAA) and other regulatory requirements increase the levels
      of staff expertise we must maintain and require modifications to our internal
      operations and software underlying our services. Modifications can typically
      be
      completed within a timely basis. However, if we do not maintain an appropriate
      level of regulatory compliance or we incorrectly implement a required regulatory
      change we may experience negative publicity, the loss of customers, the slowing
      down of sales cycles which would decrease our revenues. Please see “Business -
      Product Development” for a discussion on product modification due to regulatory
      requirements.




*If
      competitors with greater resources develop a comprehensive electronic patient
      revenue system, our products may become obsolete which would greatly reduce
      the
      value of our company and could ultimately cause you to lose all or a portion
      of
      your investment in our company.*




25


We
      compete with many companies that have greater resources than us in an industry
      that is subject to significant technological changes and new products. If one
      of
      our competitors develops a comprehensive electronic patient revenue system,
      such
      system could supplant the functionality of our products. If the functionality
      of
      our products is supplanted and we are unable to develop new competitive
      products, we could lose our customers and our sources of revenues. In such
      instances, you could lose all or a portion of your investment in our
      company.




*If
      we
      can not develop required expertise to expand into new post-acute care markets
      we
      will be unable to grow and the addressable market for our products will be
      limited which would reduce our revenues.*




One
      element of our strategy involves applying our technology in new applications
      for
      additional post-acute care markets. To be successful in expanding our sales
      in
      new post-acute care markets, we will need to develop additional expertise in
      these markets. We may be required to hire new employees with expertise in new
      target markets in order to compete effectively in those markets. If we are
      not
      successful in hiring or developing the required industry domain expertise,
      sales
      in other post-acute care markets will not develop and we may not achieve desired
      sales growth.




*If
      we
      are unable to respond in an effective and timely manner to technological change
      and new products and services in the industry, we will lose customers and our
      revenues would decrease.*




In
      2004
      we initiated development projects to produce new and enhanced services for
      delivery in late 2004. Introduction of these systems was delayed as resources
      were re-assigned to meet federal regulatory changes. We currently expect to
      release a number of new products and enhancements to existing products in mid
      2006 and late 2006 and we do not anticipate that a material portion of our
      service revenue growth in 2006 will come from these new releases. If we
      experience material delays in introducing new products and enhancements, our
      prospects for growth will be impaired and our reputation with our customers
      may
      be damaged. The market for management information tools is characterized by
      rapid technological change, frequent new product introductions and enhancements,
      uncertain product life cycles, changes in government regulation, changes in
      customer demands and evolving industry standards. The introduction of products
      embodying new technologies, changes in applicable government regulation and
      the
      emergence of new industry standards can render existing products obsolete and
      unmarketable. Our future success will depend upon our ability to continue to
      enhance our current products while developing and introducing new products
      on a
      timely basis that keep pace with technological developments and government
      regulations and satisfy increasingly sophisticated customer requirements.




As
      a
      result of the complexities inherent in our software, new products and product
      enhancements can require long development and testing periods. Significant
      delays in the general availability of these new releases or significant problems
      in the installation or implementation of these new releases could harm our
      operating results and financial condition. We have experienced delays in the
      past in the release of new products and product enhancements. We may fail to
      develop and market on a timely and cost effective basis new products or new
      product enhancements that respond to technological change, changes in applicable
      government regulation, evolving industry standards or customer requirements.
      We
      may also experience difficulties that could delay or prevent the successful
      development, introduction or marketing of our products or reduce the likelihood
      that our new products and product enhancements will achieve market acceptance.
      Any such failures or difficulties would harm our business and operating results.




*Competition
      in the healthcare information systems industry is intense and the technology
      is
      changing rapidly and if we are unable to compete we will lose significant
      customers or be unable to attract customers and our revenues could
      decrease.*




Many
      companies are engaged in research and development activities relating to our
      range of products. The market for healthcare information systems is intensely
      competitive, rapidly changing and undergoing consolidation. We may be unable
      to
      compete successfully against our current and future competitors, which may
      result in price reductions, reduced margins and the inability to achieve market
      acceptance for our products. Our competitors in the field include: McKesson
      Corporation, Cerner Corporation, Mysis PLL, Patient Care Technology (PCTC),
      Siemens A G, Eclipsys Technologies Corporation and Keane, Inc., among others.
      Many of these competitors have substantially greater financial, marketing,
      sales, distribution and technical resources than us and have more experience
      in
      research and development, sales, service, and marketing. We anticipate increased
      competition in the future as new companies enter the market in response to
      recent HIPAA regulations. If we are unable to compete we will lose significant
      customers or be unable to attract customers and our revenues could
      decrease.




26


*If
      our customers lose confidence in the security of data on the Internet, they
      will
      be less inclined to purchase our products and our revenues could
      decrease.*




Maintaining
      the security of computers and computer networks is an issue of critical
      importance for our customers. Our customers are especially sensitive to the
      security of their data because HIPAA requires our customers to maintain the
      confidentiality of various patient data. Attempts by experienced computer
      programmers, or hackers, to penetrate customer networks security or the security
      of web sites to misappropriate confidential information are currently an
      industry-wide phenomenon that affects computers and networks across all
      platforms. Our customers may be exposed to claims by federal healthcare
      regulators if they use our Internet based services and we do not protect
      sensitive patient data from penetration by hackers. As we develop new products
      and improve existing products, our development and improvement efforts include
      the creation of features designed to optimize security in our products. Despite
      these efforts, actual or perceived security vulnerabilities in our products
      (or
      the internet in general) could lead some customers to seek to reduce or delay
      future purchases or to purchase competitive products which are not internet
      based applications. Customers may also increase their expenditures on protecting
      their computer networks from attack, which could delay adoption of new
      technologies. Any of these actions by customers would decrease our
      revenues.





*We
      have limited protection over our intellectual property rights and we may not
      be
      able to protect against misappropriation of our intellectual property, which
      could result in loss of revenues.*




Our
      success depends on our ability to sell products and services for which we may
      not have intellectual property rights. We rely upon a combination of service
      agreements, confidentiality procedures, employee and customer nondisclosure
      agreements and technical measures to maintain the confidentiality and trade
      secrecy of our proprietary information. We also rely on trademark and copyright
      laws to protect our intellectual property. We have not initiated a patent
      program. As a result, we may not be able to protect against misappropriation
      of
      our intellectual property.




*We
      depend upon a third party for hosting our servers and providing Internet and
      VPN
      connectivity and if access to this facility is lost we will have to find a
      new
      servicer and our revenues may decrease if we are unable to timely find a new
      server or find a quality servicer.*




Our
      company-owned server ,
      software and communications equipment and the customer data integral to our
      service delivery is hosted at a Qwest CyberCenter in Tampa, Florida. In the
      event our agreement with Qwest is terminated, we believe there are several
      third
      party hosting facilities that can provide us with adequate services. However,
      there can be no assurance that we would be able to operate effectively if the
      Qwest agreement were to be terminated without notice or the Qwest site is
      damaged by a terrorist event or act of nature. If the Qwest agreement is
      terminated or Qwest’s operations suspended without notice, our operations would
      be suspended until we replaced Qwest, which would significantly decrease our
      revenues.




*Our
      future success is dependent on the services of our key management, sales and
      marketing, professional services, technical support and research and development
      personnel, whose knowledge of our business and technical expertise would be
      difficult to replace.*




Our
      products and technologies are complex, and we are substantially dependent upon
      the continued service of existing key management, sales and marketing,
      professional services, technical support and research and development personnel.
      All of these key employees are employees “at will” and can resign at any time.
      The loss of the services of one or more of these key employees could slow
      product development processes or sales and marketing efforts or otherwise harm
      our business. The market for these highly skilled employees is characterized
      by
      intense competition, which is heightened by their high level of mobility. These
      factors make it particularly difficult to attract and retain the qualified
      technical personnel required. We have experienced, and expect to continue to
      experience, difficulty in hiring and retaining highly skilled employees with
      appropriate technical qualifications. If we fail to recruit and retain a
      significant number of qualified technical personnel, we may not be able to
      develop, introduce or enhance products on a timely basis. If we are unable
      to
      retain or hire qualified employees, our business will fail and you may lose
      your
      entire investment.




If
      we are
      unable to recruit and retain a sufficient number of technical personnel with
      the
      skills required for existing and future products, we may not be able to complete
      the development, upgrades, or enhancements of our products in a timely manner.
      Even if we are able to expand our staff of qualified technical personnel, they
      may require greater than expected compensation packages that would increase
      operating expenses.




*We
      depend upon software that we license from and products provided by third parties
      and the loss of these license or increase in cost of these licenses would
      require us to find other licenses which could cause us to suspend our operations
      until we obtain required software.*




We
      rely
      upon certain software licensed from third parties, including software that
      is
      integrated with our internally developed software and used in our products
      to
      perform key functions. There can be no assurance that these technology licenses
      will not infringe the proprietary rights of others or will continue to be
      available to us on commercially reasonable terms, if at all. The loss of or
      inability to maintain any such software licenses could result in shipment delays
      or reductions until equivalent software could be developed, identified, licensed
      and integrated.




*If
      we
      are subject to a claim that we infringe a third-party’s intellectual property,
      we may have to replace our current products, pay royalties to competitors or
      suspend operations, any of which could significantly increase our
      expenses.*




Substantial
      litigation regarding intellectual property rights and brand names exists in
      the
      software industry. We expect that software product developers increasingly
      will
      be subject to infringement claims as the number of products and competitors
      in
      this industry segment grows and the functionality of products in related
      industry segments overlaps. However, third parties, some with far greater
      financial resources than ours, may claim infringement of their intellectual
      property rights by our products.




Any
      such
      claims, with or without merit, could:




§
            Be
                time consuming to defend;




§
            Result
                in costly litigation;




§
            Divert
                management’s attention and
                resources;




§
            Cause
                product shipment delays;




§
            Require
                us to redesign products;




§
            Require
                us to enter into royalty or licensing agreements;
                or




§
            Cause
                others to seek indemnity from us.




If
      we are
      required to enter into royalty or licensing agreements to resolve an
      infringement claim, we may not be able to enter into those agreements on
      favorable terms. A successful claim of product infringement against us, or
      failure or inability to either license the infringed or similar technology
      or
      develop alternative technology on a timely basis, could harm our operating
      results, financial condition or liquidity.




*We
      may have difficulty collecting our receivables and that may result in the
      unanticipated need for external financing in order to continue our
      operations.*




27


We
      currently do not offer account terms to our customers, however, we may
      experience problems as our business grows and if we extend credit to our
      customers. The collection of our accounts receivable is affected by several
      factors, including our credit granting policies, our customers’ ability to pay,
      and industry and economic conditions. Adverse changes in any of these factors,
      many of which we cannot control, could create delays in collecting or an
      inability to collect our receivables. If we are not able to collect our
      receivables within the time anticipated, we would need to seek external
      financing in order to continue our operations as planned.




*Our
      shares of Common Stock are thinly t* *raded
      and you may find it difficult to dispose of your shares of our stock, which
      could cause you to lose all or a portion of your investment in our
      company* *.*




Our
      shares of Common Stock are currently quoted on the OTC Bulletin Board .
      Trading
      in shares of Common Stock has begun and we expect to have only a limited trading
      market in the foreseeable future. As a result, you may find it difficult to
      dispose of shares of our Common Stock and you may suffer a loss of all or a
      substantial portion of your investment in our Common Stock.




*Our
      Common Stock is covered by SEC “penny stock” rules which may make it more
      difficult for you to sell or dispose of our Common Stock* *,
      which could cause you to lose all or a portion of your investment in our
      company* *.*




Our
      Common Stock is covered by an SEC rule that imposes additional sales practice
      requirements on broker-dealers who sell such securities to persons other than
      established customers and accredited investors, which are generally institutions
      with assets in excess of $5,000,000, or individuals with net worth in excess
      of
      $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their
      spouse. For transactions covered by the rule, the broker-dealer must make a
      special suitability determination for the purchaser and transaction prior to
      the
      sale. Consequently, the rule may affect the ability of broker-dealers to sell
      our securities, and also may affect the ability of purchasers of our stock
      to
      sell their shares in the secondary market. It may also diminish the number
      of
      broker-dealers that may be willing to make a market in our Common Stock, and
      it
      may affect the level of news coverage we receive.




*The
      interests of our controlling shareholders could conflict with those of our
      other
      shareholders resulting in the approval of corporate actions that are not in
      your
      interests.*




Our
      principal shareholder, Stanford, owns or controls approximately 82% of our
      Common Stock. This shareholder is able to control the outcome of shareholder
      votes, including votes concerning amendments to our charter and by-laws and
      the
      approval of significant corporate transactions like a merger or sale of our
      assets. Although none of our directors or officers are affiliated with Stanford
      or have any relationships with Stanford, Stanford is able to control the
      election of the board of directors through its ownership of a majority of our
      Common Stock. In addition, Stanford has provided us with significant financing.
      This controlling influence could have the effect of delaying or preventing
      a
      change in control, even if our other shareholders believe it is in their best
      interest.




*We
      may issue additional shares of preferred stock that could defer a change of
      control or dilute the interests of our common shareholders and our charter
      documents could defer a takeover effort, which could inhibit your ability to
      receive an acquisition premium for your shares or your ability to sell your
      shares of Common Stock* .




Our
      articles of incorporation permit our board of directors to issue up to
      15,000,000 shares of preferred stock without shareholder approval. Currently
      725,000 shares of the preferred stock are issued and outstanding. Shares of
      preferred stock, if issued, could contain dividend, liquidation, conversion,
      voting or other rights which could adversely affect the rights of our common
      shareholders and which could also be utilized, under some circumstances, as
      a
      method of discouraging, delaying or preventing our change in control. Provisions
      of our articles of incorporation, bylaws and Nevada law could make it more
      difficult for a third party to acquire us, even if many of our shareholders
      believe it is in their best interest. These provisions may decrease your ability
      to sell your shares of our Common Stock.




28


**ITEM
      7.**   **FINANCIAL
      STATEMENTS**




Our
      financial statements and the related notes are set forth commencing on page
      F-1
      attached hereto.







29




REPORT
        OF
        INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To
        the
        Stockholders and Board of Directors
 Health
        Systems Solutions, Inc.
 
 We
        have
        audited the accompanying consolidated balance sheet of Health Systems Solutions,
        Inc. as of December 31, 2005 and the related consolidated statements of
        operations, shareholders' deficit and cash flows for the years ended December
        31, 2005 and 2004. 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
        audit.
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the
        consolidated financial statements are free of material misstatement. An audit
        includes examining, on a test basis, evidence supporting the amounts and
        disclosures in the 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 Health Systems Solutions,
        Inc. as of December 31, 2005 and the results of their operations and their
        cash
        flows for the years ended December 31, 2005 and 2004, in conformity with
        accounting principles generally accepted in the United States of
        America.


By:/s/ Sherb & Co., LLPSherb & Co., LLPCertified Public AccountantsNew York, New YorkMarch 20, 200630
 **HEALTH
                    SYSTEMS SOLUTIONS, INC. AND SUBSIDIARY****CONSOLIDATED
                    BALANCE SHEET****DECEMBER
                    31, 2005****ASSETS****Current
                    assets:**Cash
                
                $
                338,930Accounts
                    receivable, net of allowance for doubtful accountsof
                    $17,058
                
                
                686,164Prepaids
                    and other current assets
                
                
                81,484**Total
                    current assets**
                
                
                1,106,578Property
                    and equipment, net of accumulated depreciationand
                    amortization of $411,646
                
                
                228,956Software
                    development costs, net of accumulated amortizationof
                    $1,590,830
                
                
                218,310Security
                    deposits
                
                
                23,484**Total
                    assets**
                
                $
                1,577,328**LIABILITIES
                    AND STOCKHOLDERS' EQUITY****Current
                    liabilities:**Current
                    portion of capital lease obligation
                
                $
                15,268Accounts
                    payable
                
                
                81,676Accrued
                    expenses
                
                
                168,183Deferred
                    revenue
                
                
                221,676**Total
                    current liabilities**
                
                
                486,803Capital
                    lease obligation, net of current portion
                
                
                8,345**Total
                    liabilities**
                
                
                495,148**Stockholders'
                    equity**Preferred
                    Stock; 15,000,000 shares authorized;Series
                    C $2.00 Convertible; 4,625,000 authorized,725,000
                    shares issued and outstanding
                
                
                1,450,000Common
                    Stock; $.001 par value; 150,000,000 shares authorized;5,615,905
                    shares issued and outstanding
                
                
                5,616Additional
                    paid-in capital
                
                
                12,638,839Accumulated
                    deficit
                
                
                (13,012,275
                )**Total
                    stockholders' equity**
                
                
                1,082,180**Total
                    liabilities and stockholders' equity**
                
                $
                1,577,328
  See
        accompanying notes to the consolidated financial statements.
  F-1
 
  **HEALTH
                      SYSTEMS SOLUTIONS, INC. AND SUBSIDIARY****CONSOLIDATED
                      STATEMENTS OF OPERATIONS****For
                      The Year**
                  
                  **For
                      The Year****Ended
                      December 31,**
                  
                  **Ended
                      December 31,****2005**
                  
                  **2004****Net
                      sales**
                  
                  $
                  4,212,819
                  
                  $
                  3,637,626**Cost
                      of sales**
                  
                  
                  1,941,735
                  
                  
                  1,727,205**Gross
                      profit**
                  
                  
                  2,271,084
                  
                  
                  1,910,421**Operating
                      expenses**Selling
                      and marketing
                  
                  
                  660,037
                  
                  
                  966,870Research
                      and development
                  
                  
                  629,473
                  
                  
                  576,194General
                      and administrative
                  
                  
                  1,221,470
                  
                  
                  1,269,242Depreciation
                      and amortization
                  
                  
                  167,713
                  
                  
                  144,533Interest
                  
                  
                  81,986
                  
                  
                  49,111**Total
                      operating expenses**
                  
                  
                  2,760,679
                  
                  
                  3,005,950**Net
                      operating loss**
                  
                  
                  (489,595
                  )
                  
                  (1,095,529
                  )**Non-operating
                      expenses**Other
                      non-recurring
                  
                  
                  -
                  
                  
                  29,139**Total
                      non-operating expenses**
                  
                  
                  -
                  
                  
                  29,139**Net
                      loss**
                  
                  
                  (489,595
                  )
                  
                  (1,124,668
                  )Deemed
                      preferred stock dividend
                  
                  
                  237,789
                  
                  
                  -**Net
                      loss applicable to common stockholders**
                  
                  $
                  (727,384
                  )
                  $
                  (1,124,668
                  )**Basic
                      and diluted net loss per share**
                  
                  $
                  (0.13
                  )
                  $
                  (0.34
                  )**Basic
                      and diluted weighted average shares outstanding**
                  
                  
                  5,449,138
                  
                  
                  3,268,078




See accompanying notes to the consolidated financial
      statements.





F-2
 
  **HEALTH
                    SYSTEMS SOLUTIONS, INC. AND SUBSIDIARY****CONSOLIDATED
                    STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY****YEARS
                    ENDED 2005 AND 2004****Total****Preferred
                    Stock**
                
                **Common
                    Stock**
                
                **Additional**
                
                **Accumulated**
                
                **Stockholders'****Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Paid-in
                    Capital**
                
                **Deficit**
                
                **Equity****Balance
                    December 31, 2003**
                
                
                4,380,341
                
                $
                4,200,000
                
                
                1,380,820
                
                $
                1,381
                
                $
                8,195,280
                
                $
                (11,160,223
                )
                $
                1,236,438Conversion
                    of Series A Convertible
                
                
                (1,880,341
                )
                
                (2,200,000
                )
                
                470,086
                
                
                470
                
                
                2,199,530
                
                
                -
                
                
                -Preferred
                    StockConversion
                    of Series B Convertible
                
                
                (2,500,000
                )
                
                (2,000,000
                )
                
                3,125,000
                
                
                3,125
                
                
                1,996,875
                
                
                -
                
                
                -Preferred
                    StockIssuance
                    of Common Stock for
                
                
                -
                
                
                -
                
                
                112,500
                
                
                112
                
                
                2,138
                
                
                -
                
                
                2,250Investor
                    Relations AgreementIssuance
                    of Common Stock to
                
                
                -
                
                
                -
                
                
                75,000
                
                
                75
                
                
                (75
                )
                
                -
                
                
                -President
                    of CompanyIssuance
                    of Common Stock by the
                
                
                -
                
                
                -
                
                
                360,000
                
                
                360
                
                
                360
                
                
                **-**
                
                
                720Exercising
                    of WarrantsValue
                    of Warrants Issued
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                6,600
                
                
                **-**
                
                
                6,600Net
                    Loss
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (1,124,668
                )
                
                (1,124,668
                )**Balance,
                    December 31, 2004**
                
                
                -
                
                $
                -
                
                
                5,523,406
                
                $
                5,523
                
                $
                12,400,708
                
                $
                (12,284,891
                )
                $
                121,340Shares
                    Cancelled Back to Unissued
                
                
                
                
                
                
                
                
                (125,001
                )
                
                (125
                )
                
                125
                
                
                -
                
                
                -Issuance
                    of Series C Convertible
                
                
                725,000
                
                
                1,450,000
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,450,000Preferred
                    StockWarrants
                    Issued in Connection With
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                237,789
                
                
                (237,789
                )
                
                -Preferred
                    StockIssuance
                    of Common Stock by the
                
                
                
                
                
                
                
                
                217,500
                
                
                218
                
                
                217
                
                
                -
                
                
                435Exercising
                    of WarrantsNet
                    Loss
                
                
                
                
                
                
                
                
                -
                
                
                -
                
                
                -
                
                
                (489,595
                )
                
                (489,595
                )**Balance
                    December 31, 2005**
                
                
                725,000
                
                $
                1,450,000
                
                
                5,615,905
                
                $
                5,616
                
                $
                12,638,839
                
                $
                (13,012,275
                )
                $
                1,082,180
  See accompanying notes to the consolidated financial
          statements.
  F-3
 
  **HEALTH
                        SYSTEMS SOLUTIONS, INC. AND SUBSIDIARY****CONSOLIDATED
                        STATEMENTS OF CASH FLOWS****For
                        the Year**
                    
                    **For
                        the Year****Ended
                        December 31,**
                    
                    **Ended
                        December 31,****2005**
                    
                    **2004**Cash
                        flows from operating activities:Net
                        loss
                    
                    $
                    (489,595
                    )
                    $
                    (1,124,668
                    )Adjustments
                        to reconcile net loss to net cash used inoperating
                        activities:Depreciation
                        and amortization of property and equipment
                    
                    
                    167,713
                    
                    
                    144,533Amortization
                        of software development costs
                    
                    
                    499,511
                    
                    
                    528,126(Gain)
                        or loss on fixed assets disposals
                    
                    
                    479
                    
                    
                    (421
                    )Stock
                        based compensation
                    
                    
                    -
                    
                    
                    8,850Changes
                        in operating assets and liabilities:Accounts
                        receivable
                    
                    
                    (242,783
                    )
                    
                    (7,401
                    )Allowance
                        for doubtful accounts
                    
                    
                    12,058
                    
                    
                    -Royalties
                        and referral fees receivable
                    
                    
                    (2,785
                    )
                    
                    1,550Prepaid
                        expenses and other current assets
                    
                    
                    (6,450
                    )
                    
                    (1,277
                    )Security
                        deposits
                    
                    
                    (500
                    )
                    
                    -Accounts
                        payable
                    
                    
                    13,209
                    
                    
                    39,162Accrued
                        expenses
                    
                    
                    (5,452
                    )
                    
                    (416,977
                    )Deferred
                        revenue
                    
                    
                    (20,076
                    )
                    
                    120,932Customer
                        deposits
                    
                    
                    -
                    
                    
                    (2,639
                    )Net
                        cash used in operating activities
                    
                    
                    (74,671
                    )
                    
                    (710,230
                    )Cash
                        flow from investing activities:Purchase
                        of property and equipment
                    
                    
                    (93,798
                    )
                    
                    (100,575
                    )Increase
                        in software development costs
                    
                    
                    (179,707
                    )
                    
                    (101,250
                    )Sale
                        of property and equipment
                    
                    
                    -
                    
                    
                    1,853Net
                        cash used in investing activities
                    
                    
                    (273,505
                    )
                    
                    (199,972
                    )Cash
                        flow from financing activities:Repayment
                        of capital lease obligation
                    
                    
                    (13,550
                    )
                    
                    (12,025
                    )Repayment
                        of loans payable
                    
                    
                    (1,250,000
                    )
                    
                    -Proceeds
                        from loans payable
                    
                    
                    200,000
                    
                    
                    1,050,000Proceeds
                        from the issuance of Common Stock
                    
                    
                    435
                    
                    
                    -Proceeds
                        from the issuance of Series C Preferred Stock
                    
                    
                    1,450,000
                    
                    
                    -Proceeds
                        from the exercise of warrants
                    
                    
                    -
                    
                    
                    720Net
                        cash provided by financing activities
                    
                    
                    386,885
                    
                    
                    1,038,695Increase
                        in cash
                    
                    
                    38,709
                    
                    
                    128,493Cash,
                        beginning of year
                    
                    
                    300,221
                    
                    
                    171,728Cash,
                        end of year
                    
                    $
                    338,930
                    
                    $
                    300,221Supplemental
                        cash flow data:Cash
                        paid during the year for interest expense
                    
                    $
                    81,986
                    
                    $
                    42,511Cash
                        paid during the year for income taxes
                    
                    $
                    -
                    
                    $
                    -
  See accompanying notes to the consolidated financial
        statements.
  F-4
 
  **Health
          Systems Solutions, Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 **Years
          Ended December 31, 2005 and 2004**
 **1.
            Description of Business, Acquisitions and Consolidation**
  Health
            Systems Solutions, Inc. (“HSS”) through its wholly owned subsidiary, Healthcare
            Quality Solutions, Inc. (“HQS”) provides assistance to the home healthcare
            industry in managing their businesses throughout the United States of
            America,
            utilizing internally developed software. The software produces information
            to
            support clinical, financial and administrative decisions made by management
            in
            operating and administrating their organization. The Company operates
            in one
            segment.
  On
            September 17, 2002 Provider Acquisition, LLC (“PAL”), which was formed in the
            State of Florida on June 28, 2002, acquired certain assets of Provider
            Solutions
            Corp. (“PSC”) for $250,000 in cash, subject to certain liabilities. The
            principal reason for the acquisition was to purchase the technology that
            the
            Company currently employs in its business. Total consideration paid has
            been
            allocated as follows:
  Current
                      Assets
                  
                  $
                  357,820Goodwill
                  
                  
                  6,838,135Software
                      Development Costs
                  
                  
                  1,325,000Fixed
                      Assets
                  
                  
                  68,206Other
                      Assets
                  
                  
                  15,654Accounts
                      Payable and Accrued Expenses
                  
                  
                  (557,362
                  )Deferred
                      Revenue
                  
                  
                  (438,131
                  )Secured
                      Debt
                  
                  
                  (7,357,322
                  )Other
                      Liabilities
                  
                  
                  (2,000
                  )Purchase
                      price
                  
                  $
                  250,000
  Following
            PAL’s acquisition of the assets of PSC, the holder of PSC’s secured indebtedness
            converted all of the indebtedness into equity of PAL. The debt was converted
            to
            relieve the Company of the obligation. The debt conversion was recorded
            as
            additional paid-in capital.
  This
            acquisition created $6,954,927 of purchased goodwill that includes other
            excess
            costs of approximately $116,800. As of September 17, 2002 PAL determined
            that
            this goodwill was impaired and subsequently wrote off the entire
            balance.
  Silver
            Key Mining Company, Inc. (“Silver Key”), the predecessor to HSS, was originally
            incorporated in the State of Idaho on June 25, 1971. On September 17,
            2002
            Silver Key changed its domicile from Idaho to Nevada by filing Articles
            of
            Merger between Silver Key (Idaho) and Silver Key Mining Company, Inc.
            a Nevada
            corporation. The surviving entity Silver Key (Nevada) (the “Company”), which was
            incorporated in the State of Nevada on July 31, 2001, acquired 100% of
            the
            outstanding common stock of Silver Key (Idaho).
  On
            October 11, 2002 the Board of Directors of the Company approved a five
            to one
            reverse stock split with a record date of October 21, 2002. After the
            reverse
            stock split the Company had 512,601 shares of common stock outstanding.
            All
            share and per share amounts have been adjusted to reflect the reverse
            stock
            split.
  On
            October 15, 2002, the Company formed HQS, a Florida corporation, which
            was and
            remains wholly owned by the Company.
  On
            October 22, 2002 PAL entered into an Agreement and Plan of Merger (the
“Merger
            Agreement”) with the Company, HQS and certain principal stockholders of the
            Company, as defined in the Merger Agreement. Pursuant to the Merger Agreement,
            PAL was merged with and into HQS and HQS survived as the Company’s wholly owned
            subsidiary.
 
 F-5
  **Health
            Systems Solutions, Inc. and Subsidiary**
 **Notes
            to Consolidated Financial Statements**
 **Years
            Ended December 31, 2005 and 2004**
  
 **1.
            Description of Business, Acquisitions and Consolidation -
            continued**
  The
            merger became effective on October 24, 2002, (the “Effective Date”) concurrent
            with the Articles of Merger being filed with the Secretary of State of
            Florida.
            As a result of the former members of PAL acquiring a controlling interest
            (58%)
            of the outstanding common stock of the Company the transaction was accounted
            for
            as a “reverse merger.” Pursuant to the Merger Agreement the Company issued
            1,071,429 shares of its common stock to the members of PAL. Upon completion
            of
            the acquisition, the Company issued an additional 237,399 shares of its
            common
            stock to parties who were instrumental in arranging the merger. These
            shares of
            common stock were considered part of the cost of the acquisition and
            have been
            recorded at the fair value of $4,750 (quoted market price - $.02 per
            share) on
            the date of the transaction with a corresponding reduction of additional
            paid in
            capital. The acquisition was accounted for using the purchase method
            of
            accounting.
  Although
            Silver Key is the legal survivor in the merger and remains the registrant,
            until
            November 2002 (see below) with the Securities and Exchange Commission,
            under
            accounting principles generally accepted in the United States of America
            because
            the stockholders of PAL acquired more than 50% of the post transaction
            consolidated entity, PAL is considered to be the “acquirer” of Silver Key for
            financial reporting purposes. Accordingly, this requires Silver Key,
            among other
            things, to present in all future financial statements and other public
            filings
            after completion of the merger, prior historical financial information
            and other
            information of PAL and requires a retroactive restatement of PAL’s historical
            stockholders’ investment for the equivalent number of shares of common stock
            received in the merger.
  On
            December 10, 2002, the Company filed an articles of amendment to its
            articles of
            incorporation changing its name from Silver Key (Nevada) to Health Systems
            Solutions, Inc.
  **2.
            Summary of Significant Accounting Policies**
  Basis
            of presentation and consolidation: The
            accompanying consolidated financial statements which present the results
            of
            operations of HSS and its wholly owned subsidiary, HQS, for the years
            ended
            December 31, 2005 and 2004 have been prepared using accounting principals
            generally accepted in the United States of America. All material intercompany
            transactions and accounts have been eliminated in consolidation.
  Allowance
            for doubtful accounts: The
            allowance for doubtful accounts is based on the Company’s assessment of the
            collectibilty of customer accounts and the aging of the accounts receivable.
            If
            there is a deterioration of a major customer’s credit worthiness or actual
            defaults are higher than the Company’s historical experience, the Company’s
            estimates of the recoverability of amounts due it could be adversely
            affected.
            The Company regularly reviews the adequacy of the Company’s allowance for
            doubtful accounts through identification of specific receivables where
            it is
            expected that payments will not be received. The Company also establishes
            an
            unallocated reserve that is applied to all amounts that are not specifically
            identified. In determining specific receivables where collections may
            not be
            received, the Company reviews past due receivables and gives consideration
            to
            prior collection history and changes in the customer’s overall business
            condition. The allowance for doubtful accounts reflects the Company’s best
            estimate as of the reporting dates. Changes may occur in the future,
            which may
            require the Company to reassess the collectibility of amounts and at
            which time
            the Company may need to provide additional allowances in excess of that
            currently provided.
 
 Cash
            and cash equivalents: The
            Company considers all highly liquid short-term investments, with a remaining
            maturity of three months or less when purchased, to be cash
            equivalents.
 
 F-6
 **Health
            Systems Solutions, Inc. and Subsidiary**
 **Notes
            to Consolidated Financial Statements**
 **Years
            Ended December 31, 2005 and 2004**
 
 
 **2.
            Summary of Significant Accounting Policies - continued**
 
 Property
            and equipment: Property
            and equipment are stated 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. Estimated useful lives of three
            years
            are used for computer equipment and related software and five years for
            office
            equipment and furniture and fixtures. Amortization of leasehold improvements
            is
            computed using the shorter of the remaining lease terms or five years.
            The
            Company uses an accelerated method of depreciation for tax reporting
            which is
            not materially different from financial reporting. Normal maintenance
            and
            repairs of property and equipment are expensed as incurred while renewals,
            betterments and major repairs that materially extend the useful life
            of property
            and equipment are capitalized.
  Software
            development costs: The
            Company capitalizes certain costs of software developed or obtained for
            internal
            use in accordance with AICPA SOP 98-1, Accounting for the Costs of Corporate
            Software Developed or Obtained for Internal Use (“SOP 98-1”). We capitalize
            software development costs when application development begins, it is
            probable
            that the project will be completed, and the software will be used as
            intended.
            Costs associated with preliminary project stage activities, training,
            maintenance and all other post implementation stage activities are expensed
            as
            incurred. Our policy provides for the capitalization of certain payroll
            and
            payroll-related costs for employees who are directly associated with
            developing
            or obtaining internal use software. Capitalizable personnel costs are
            limited to
            the time directly spent on such projects. Capitalized costs are ratably
            amortized using the straight-line method, over the estimated useful lives
            of the
            related applications of three years. The Company makes on-going evaluations
            of
            the recoverability of its capitalized software by comparing the amount
            capitalized for each product to the estimated net realizable value of
            the
            product. If such evaluations indicate that the unamortized software development
            costs exceed the net realizable value, the company writes off the amount
            that
            the unamortized software development costs exceed net realizable value.
  Goodwill
            and other intangibles: Goodwill
            represents the excess of costs over fair value of assets of businesses
            acquired.
            The Company adopted the provisions of SFAS No. 142, “Goodwill and Other
            Intangible Assets” (“SFAS 142”), as of January 1, 2002. SFAS 142 requires
            goodwill to be tested for impairment on an annual basis and between annual
            tests
            in certain circumstances, and written down when impaired, rather than
            being
            amortized as previous accounting standards required. Furthermore, SFAS
            142
            requires purchased intangible assets other than goodwill to be amortized
            over
            their useful lives unless these lives are determined to be indefinite.
            In
            accordance with SFAS 142, the Company performed impairment
            tests on all goodwill and purchased intangible assets from the acquired
            assets
            and liabilities of Provider Solutions Corp. on September 17, 2002.  The
            goodwill was written off after the company performed these impairment
            tests and
            determined that the fair value of the goodwill exceeded its carrying
            value.  Fair value was determined by estimates of future cash flows. 
At September 17, 2002, the state of the business, the projected shortage
            of
            short term and future cash, the anticipation of continued losses and
            the reduced
            level of sales indicated that without ongoing investment, a source for
            which had
            not been identified, the business was not a going concern and that there
            was no
            utility to the value of the goodwill. We determined the company's projections
            for cash flow from the acquired assets was insufficient to support the
            goodwill
            as an asset and that an immediate goodwill impairment write-off was in
            order.
 Pursuant
            to the impairment tests, all goodwill and purchased intangibles of $6,954,927
            was written off as of September 17, 2002.
  Impairment
            of long-lived assets: In
            accordance with SFAS 144 “Accounting for the Impairment or Disposal of
            Long-Lived Assets”, the Company reviews long-lived assets for impairment
            whenever circumstances and situations change such that there is an indication
            that the carrying amounts may not be recovered. In such circumstances,
            the
            Company will estimate the future cash flows expected to result from the
            use of
            the asset and its eventual disposition. Future cash flows are the future
            cash
            inflows expected to be generated by an asset less the future outflows
            expected
            to be necessary to obtain those inflows. If the sum of the expected future
            cash
            flows (undiscounted and without interest charges) is less than the carrying
            amount of the asset, the Company will recognize an impairment loss to
            adjust to
            the fair value of the asset. At December 31, 2005 no long-lived assets
            were
            impaired.
  F-7
 **Health
            Systems Solutions, Inc. and Subsidiary**
 **Notes
            to Consolidated Financial Statements**
 **Years
            Ended December 31, 2005 and 2004**
 
  **2.
            Summary of Significant Accounting Policies - continued**
 
 Concentration
            of credit risk: Concentrations of credit risk with respect to trade receivables are limited
            to
            customers dispersed across the United States of America. All trade receivables
            are concentrated in the healthcare segment of the economy; accordingly
            the
            Company is exposed to business and economic risk. Although the Company
            does not
            currently foresee a concentrated credit risk associated with these trade
            receivables, repayment is dependent upon the financial stability of the
            healthcare industry.
  Income
            taxes: The
            Company uses the liability method for income taxes as required by SFAS
            No. 109
“Accounting for Income Taxes.” Under this method, deferred tax assets and
            liabilities are determined based on differences between financial reporting
            and
            tax basis of assets and liabilities. Deferred tax assets and liabilities
            are
            measured using enacted tax rates and laws that will be in effect when
            the
            differences are expected to reverse. Valuation allowances are established
            when
            necessary to reduce deferred tax assets to the amount expected to be
            realized.
  Revenue
            recognition and deferred revenue: The
            Company follows the guidance of the Securities and Exchange Commission’s Staff
            Accounting Bulletin 104 for revenue recognition. In general, the Company
            records
            revenue when persuasive. We
            recognize revenue when persuasive evidence of a final agreement exists,
            delivery
            has occurred, the selling price is fixed or determinable and collectibility
            is
            reasonably assured. Currently, we primarily employ a web-based application
            service provider model to deliver our services to our home healthcare
            customers.
            In instances where the customer specifies final acceptance of the system
            or
            service, we defer revenue until all acceptance criteria have been met. Our
            revenue is classified into two categories: recurring and non-recurring.
            For the
            year ended December 31, 2005 approximately 93% of our total revenue was
            recurring and 7% was non-recurring. **** We
            price
            these services primarily on a transaction fee basis (calculated based
            upon the
            number of patient clinical assessments made by a customer during a period)
            and,
            to a lesser extent, on a subscription fee basis. Clinical assessments,
            which are
            mandated by Medicare, require Home Health Care Agencies to collect assessment
            data on all patients requiring home health care at the start-of-care
            and at
            discharge. Our products PPS collect, editor, executive, dashboard, trans,
            outcomes, and Oasis auditor all assist in the collection of assessment
            data and
            are all charged on a transaction basis and this recurring revenue is
            typically
            billed and recognized monthly. We earn the revenues from subscriptions
            ratably
            over the period of the respective agreement, generally one year. We record
            cash
            payments received in advance or at beginning of a contract as deferred
            revenue.
            We recognize transaction fee based revenues in the period the transaction
            is
            processed. We generate non-recurring revenue from implementation fees,
            consulting, training and customer support services and this non-recurring
            revenue is charged to customers on a fee basis usually based upon time
            spent. We
            recognize implementation fees in the month that the customer goes live
            and we
            recognize training, consultation, advisory and support revenue in the
            month that
            the service is performed. Implementation costs consisting of payroll
            and travel
            are expensed in the same period implementation fees are recognized. Typical
            sales terms would be 30 days from the date of invoice.
  Advertising
            costs: The
            Company expenses all advertising costs as incurred. Advertising costs
            for the
            year ended December 31, 2005 were $79,884, and for the year ended December
            31,
            2004 were $114,207, and are included in selling and marketing expense
            in the
            accompanying consolidated statement of operations.
  Research
            and development costs: The
            Company expenses all research and development expenses, which consist
            of payroll
            and other related costs, as incurred. Research and development costs
            for the
            year ended December 31, 2005 were $629,473 and for the year ended December
            31,
            2004 were $576,194.
  Computation
            of net income (loss) per share: The
            Company presents basic earnings (loss) per share and, if appropriate,
            diluted
            earnings per share in accordance with SFAS 128, “Earnings Per Share (“SFAS
            128”). Under SFAS 128 basic net income (loss) per share is computed by dividing
            net income (loss) for the period by the weighted-average number of shares
            outstanding during the period. Diluted net income per share is computed
            by
            dividing net income for the period by the weighted-average number of
            common
            share equivalents during the period. At December 31, 2005, the Convertible
            Preferred Stocks were convertible into 362,500 Common Stock shares and
            there
            were stock options to purchase 371,250 Common Stock shares.
 
 
 F-8
 **Health
            Systems Solutions, Inc. and Subsidiary**
 **Notes
            to Consolidated Financial Statements**
 **Years
            Ended December 31, 2005 and 2004**
 
 
 **2.
            Summary of Significant Accounting Policies - continued**
 
 Financial
            instruments: The carrying
            amounts of financial instruments, including cash, accounts receivable,
            prepaid
            expenses, customer deposits and deferred revenue approximate fair value
            as of
            December 31, 2005, due to the relatively short maturity of the instruments.
            The
            capital lease obligation approximates fair value based upon debt terms
            available
            to Company’s under similar terms.
  Use
            of
            estimates: The
            preparation of consolidated financial statements in conformity with accounting
            principles generally accepted in the United States of America requires
            management to make estimates and assumptions that affect the reported
            amounts of
            assets and liabilities and the disclosure of contingent assets and liabilities
            at the date of the financial statements and revenues and expenses during
            the
            reporting period. Actual results could differ from those estimates.
  Recent
            accounting pronouncements: In June
            2005, the Financial Accounting Standards Board issued FAS No. 154, *Accounting
            Changes and Error Corrections - a replacement of APB Opinion No. 20 and
            FASB
            Statement No. 3* This
            Statement generally requires retrospective application to prior periods’
financial statements of changes in accounting principle. Previously,
            Opinion No.
            20 required that most voluntary changes in accounting principle were
            recognized
            by including the cumulative effect of changing to the new accounting
            principle
            in net income of the period of the change. FAS 154 applies to all voluntary
            changes in accounting principle. It also applies to changes required
            by an
            accounting principle in the usual instance that the pronouncement does
            not
            include specific transition provisions. When a pronouncement includes
            specific
            transition provisions, those provisions should be followed. This Statement
            should be effective for accounting changes and corrections of errors
            made in
            fiscal years beginning after December 15, 2005. The Company does not
            expect the
            adoption of this statement to have a material impact on its results of
            operations, financial position or cash flow.
 
 In
            December 2004, the Financial Accounting Standards Board (“FASB”) issued
            Statement No. 123 (Revised 2004), *Share-Based
            Payment* (“SFAS
            123R”) which is a revision of FASB Statement No. 123, *Accounting
            for Stock-Based Compensation* .
            SFAS
            123R supercedes Accounting Principles Board Opinion No. 25, *Accounting
            for Stock Issued to Employees* ,
            and
            amends FASB Statement No. 95, *Statement
            of Cash Flows* .
            SFAS
            123R requires the measurement of all share-based payments to employees,
            including grants of employee stock options, using a fair-value based
            method and
            the recording of such expense in the Company’s consolidated statement of income.
            The accounting provisions of SFAS 123R are effective for annual periods
            beginning after June 15, 2005. The Company is required to adopt SFAS
            123R in the
            first quarter of 2006. The pro forma disclosures previously permitted
            under SFAS
            123 no longer will be an alternative to financial statement recognition.
            The
            Company is evaluating the requirements under SFAS 123R and does not expect
            the
            adoption to have a significant impact on the Company’s consolidated statements
            of income and net income per share.
 
 Management
            does not believe that any recently issued, but not yet effective accounting
            pronouncements if currently adopted would have a material effect on the
            accompanying consolidated financial statements.
  **3.
            Loan and Security Agreement**
  On
            July
            6, 2004, HQS entered into a $1,600,000 loan and security agreement with
            Stanford
            Venture Capital Holdings, Inc., the majority stockholder of the Company.
            Under
            this agreement, interest accrued at the rate of 8% per annum and principal
            was
            to mature and become payable three years from the date of the loan. The
            loan was
            secured by a security interest in all of the assets of the Company and
            HQS and a
            corporate guaranty of the Company that had been executed in favor of
            Stanford.
            HQS had borrowed $1,250,000 against the loan and security agreement when
            on
            November 8, 2005, the Company refinanced the outstanding amount of $1,250,000
            by
            entering into the Preferred Stock Purchase Agreement with Stanford and
            thus
            terminating the loan and security agreement.
  
 F-9
 
 **Health
            Systems Solutions, Inc. and Subsidiary**
 **Notes
            to Consolidated Financial Statements**
 **Years
            Ended December 31, 2005 and 2004**
 
  **4.
            Preferred Stock Purchase Agreement**
 
 On
            November 8, 2005, the Company entered into a Preferred Stock Purchase
            Agreement
            with its principal stockholder, Stanford International Bank Ltd. The
            Company
            agreed to issue to Stanford its Series C Convertible Preferred Stock
            at a price
            of $2.00 per share together with warrants exercisable for 3/10 of a share
            of
            common stock for each share of Series C Preferred Stock purchased. Each
            share of
            Preferred Stock is convertible into one half share of Common Stock and
            is
            entitled to one half vote per share. In the event of liquidation, holders
            of the
            Series C Preferred Stock shall be entitled to receive, prior and before
            any
            distribution of assets shall be made to the holders of any Common Stock,
            an
            amount equal to the Stated Value per share. The Warrants are exercisable
            at a
            price of $0.001 per share. On November 8, 2005, the Company refinanced
            the
            outstanding amount of $1,250,000 under the loan and security agreement
            and has
            drawn down an additional $200,000 of working capital through December
            31, 2005.
            The Company has an additional $400,000 to draw down under the Preferred
            Stock
            Purchase Agreement on two weeks’ notice and the agreement provides for an
            additional $7.4 million that may be sold to Stanford to provide it with
            funds to
            complete acquisitions or additional working capital uses that may be
            approved by
            Stanford in its sole discretion.
 
 
 **5.
            Property and Equipment and Software Development Costs**
 Property
            and equipment and software development costs consist of the
            following:
  December
                      31, 2005($
                      In Thousands)Office
                      equipment
                  
                  $
                  281Purchased
                      computer software
                  
                  
                  195Furniture
                      and fixtures
                  
                  
                  31Leasehold
                      improvements
                  
                  
                  134641Less
                      accumulated depreciation and amortization
                  
                  
                  412Total
                  
                  $
                  229Software
                      development costs
                  
                  $
                  1,809Less
                      accumulated amortization
                  
                  
                  1,591Total
                  
                  $
                  218
 
  Depreciation
            expense for property and equipment for the years ended December 31, 2004
            and
            December 31, 2005 for the Company was $144,533 and $167,713
            respectively.
 
 Amortization
            expense for software development costs for the years ended December 31,
            2004 and
            December 31, 2005 for the Company was $528,126 and $499,511
            respectively.
 
 
 F-10
 
 **Health
            Systems Solutions, Inc. and Subsidiary**
 **Notes
            to Consolidated Financial Statements**
 **Years
            Ended December 31, 2005 and 2004**
 
 
 **5.
            Property and Equipment and Software Development Costs -
            continued**
 
 The
            unamortized balance of software development costs was $218,310 at December
            31,
            2005 and the future amortization expense amounts are as follows:
  Fiscal
                      Year
                  
                  Amount2006
                  
                  $
                  116,0832007
                  
                  
                  74,9202008
                  
                  
                  27,307Total
                      future amortization expense
                  
                  $
                  218,310
  During
            the period ended December 31, 2002 the Company entered into a capital
            lease for
            $64,735 to acquire office equipment. For the years ended December 31,
            2004 and
            December 31, 2005 the Company recorded depreciation of $12,947 and $12,947
            respectively.
  **6.
            Income Taxes**
  For
            Federal income tax purposes, the Company has a net operating loss of
            approximately $6,715,000. The net operating loss expires in the year
            2025. The
            Company recorded a 100% valuation allowance on its deferred tax asset
            since it
            is more likely than not that their benefit will not be realized in the
            future.
 
 The
            significant components of the Company’s deferred tax asset as of December 31,
            2005 are as follows:
  Operating
                      loss carryforward
                  
                  $
                  2,686,000Goodwill
                      amortization
                  
                  
                  2,194,000Depreciation
                      and other
                  
                  
                  25,000Valuation
                      allowance
                  
                  
                  (4,905,000
                  )Total
                      deferred tax asset
                  
                  $
                  -
  
 Reconciliation
            between the statutory Federal income tax rate (35%) and the effective
            income tax
            rates based on continuing operations is as follows:
 Year
                      ended
                    December
                      31, 2005
                  
                  Year
                      ended
                    December
                      31, 2004Statutory
                      Federal income tax (benefit)
                  
                  $
                  (172,000
                  )
                  $
                  (392,000
                  )State
                      tax (benefit), net of federal effect
                  
                  
                  (24,000
                  )
                  
                  (34,000
                  )Increase
                      in valuation allowance
                  
                  
                  196,000
                  
                  
                  426,000$
                  -
                  
                  $
                  -
  F-11
  **Health
            Systems Solutions, Inc. and Subsidiary**
 **Notes
            to Consolidated Financial Statements**
 **Years
            Ended December 31, 2005 and 2004**
 
 
 
 **7.
            Capital Lease Obligation**
  The
            Company has entered into a capital lease for certain office equipment.
            Obligations under the capital lease have been recorded in the accompanying
            consolidated financial statements at the present value of future minimum
            lease
            payments, discounted at an interest rate of 12%.
  Future
            minimum payments under capital lease obligation are as follows at December
            31,
            2005:
  Fiscal
                      Year
                  
                  Amount2006
                  
                  
                  17,2802007
                  
                  
                  8,640Total
                      future payments
                  
                  
                  25,920Less
                      amount representing interest
                  
                  
                  2,307Present
                      value of future payments
                  
                  
                  23,613Less
                      current portion
                  
                  
                  15,268$
                  8,345
 
  **8.
            Equity Transactions**
  Common
            Stock Cancelled Back to Unissued: In
            connection with the Company’s acquisition of HQS, 125,001 shares of common stock
            were issued to Deluxe Investment Company. Such shares were subject to
            an escrow
            agreement which provided among other things, if the Company did not receive
            third party financing from sources other than Stanford on or before October
            22,
            2004, that the 125,001 shares of common stock held by Deluxe would be
            immediately returned to the Company and cancelled. As required under
            the escrow
            agreement, on November 10, 2004, the Company sent the escrow agent a
            demand for
            the shares. On or about May 5, 2005, the certificates representing the
            shares
            were tendered to the Company’s transfer agent and cancelled. The shares are
            reflected as authorized, but unissued.
  Preferred
            Stock Issued: On
            November 8, 2005, the Company entered into a Preferred Stock Purchase
            Agreement
            with its principal stockholder, Stanford International Bank Ltd. The
            Company
            agreed to issue to Stanford its Series C Convertible Preferred Stock
            at a price
            of $2.00 per share together with warrants exercisable for 3/10 of a share
            of
            common stock for each share of Series C Preferred Stock purchased. Each
            share of
            Preferred Stock is convertible into one half share of Common Stock and
            is
            entitled to one half vote per share. The Warrants are exercisable at
            a price of
            $0.001 per share. On November 8, 2005, the Company refinanced the outstanding
            amount of $1,250,000 under the loan and security agreement with Stanford
            by
            issuing 625,000 shares of preferred stock and has issued an additional
            100,000
            shares of preferred stock to meet working capital needs through December
            31,
            2005. $237,789 of the Series C purchases has been attributed to the fair
            value
            of the warrants and included in additional paid in capital. The Company
            has an
            additional 200,000 shares to draw upon under the Preferred Stock Purchase
            Agreement on two weeks’ notice and the agreement provides for an additional 3.7
            million preferred shares that may be sold to Stanford to provide it with
            funds
            to complete acquisitions or additional working capital uses that may
            be approved
            by Stanford in its sole discretion.
  F-12
 
 **Health
            Systems Solutions, Inc. and Subsidiary**
 **Notes
            to Consolidated Financial Statements**
 **Years
            Ended December 31, 2005 and 2004**
  
  **8.
            Equity Transactions - continued**
  Warrants
            Issued and Exercised: As
            required under the Preferred Stock Purchase Agreement between the Company
            and
            its principal stockholder, Stanford International Bank Ltd., warrants
            to
            purchase up to an aggregate of 217,500 shares of the Company’s common stock
            $0.001 par value per share at an exercise price of $0.001 per share were
            issued
            in conjunction with the issuance of its Series C Preferred Stock in the
            year
            ended December 31, 2005. $237,789 of the Series C purchases has been
            attributed
            to the fair value of the warrants and included in additional paid in
            capital.
            108,750 of the warrants were issued to five of Stanford’s assignees. All the
            warrants were exercised in December, 2005, and 217,500 common stock shares
            issued.
  **9.
            Contingencies**
  Operating
            Leases: The
            Company leases its office space in Tampa, Florida. Rent expense totaled
            $245,777
            and $244,035 for the years ended December 31, 2005 and 2004 and is included
            in
            general and administrative expenses in the accompanying consolidated
            financial
            statements. The Company also leases certain pieces of office and communication
            equipment as well as a co-location site for its application and data
            base
            servers. The Company’s lease for its office space has a duration through January
            31, 2009 with monthly payments approximating $22,000.
  Future
            minimum annual payments under all lease agreements are as
            follows:
  2006
                  
                  $
                  387,3322007
                  
                  $
                  332,3152008
                  
                  $
                  295,7662009
                  
                  $
                  23,786
 
 Legal
            Proceedings: There
            are presently no material pending legal proceedings to which the Company
            is a
            party or to which any of its property is subject and, to the best of
            management’s knowledge, no such actions against the Company are contemplated or
            threatened.
  **10.
            Employee Savings Plans**
  The
            Company has a savings plan, which qualifies under Section 401(k) of the
            Internal
            Revenue Code. Participating employees may contribute up to the maximum
            amount
            allowed by law. The Company will match 25% of the first 6% of salary
            the
            participants contribute provided they are here at year end or have worked
            the
            required amount of hours per the plan.
 
 **11.
            Stock Based Compensation and Warrants**
  On
            March
            28, 2005, the Company’s Board of Directors unanimously voted to authorize that
            incentive stock options to purchase an aggregate of 49,500 shares of
            the
            Company’s common stock be granted employees under the 2003 Management and
            Director Equity Incentive and Compensation Plan (the “Plan”). The options have
            an exercise price of $3.50 per share and shall vest to the extent of
            25% of the
            respective aggregate granted for each twelve continuous months of employment
            subsequent to January 1, 2005, with the unexercised portion of such respective
            options to expire June 1, 2010 or should the employee leave the employ
            of the
            Company. Further, on March 28, 2005, 35,750 previously issued options
            were
            cancelled.
  F-13
 
 **Health
            Systems Solutions, Inc. and Subsidiary**
 **Notes
            to Consolidated Financial Statements**
 **Years
            Ended December 31, 2005 and 2004**
   **11.
            Stock Based Compensation and Warrants - continued**
  On
            May 9,
            2005, the Company’s Board of Directors unanimously voted to authorize that
            incentive stock options to purchase an aggregate of 9,250 shares of the
            Company’s common stock be granted employees under the Plan. The options have
            an
            exercise price of $3.90 per share and shall vest to the extent of 25%
            of the
            respective aggregate granted for each twelve continuous months of employment
            subsequent to January 1, 2005, with the unexercised portion of such respective
            options to expire June 1, 2010, or should the employee leave the employ
            of the
            Company. Further, on May 9, 2005, the Board of Directors unanimously
            voted under
            the Plan to grant non-qualified stock options to purchase an aggregate
            of 10,000
            shares of common stock to the Company’s two outside directors. Such options have
            an exercise price of $3.90 per share and shall vest to the extent of
            25% of the
            respective aggregate granted for each twelve continuous months of board
            membership subsequent to May 9, 2005, with the unexercised portion of
            such
            respective options to expire June 1, 2010 or should the director leave
            the Board
            of Directors of the Company.
   As
            of
            December 31, 2005, 371,250 stock options were issued leaving an unissued
            stock
            option balance of 128,750.
  
 During
            the first quarter of 2003, the Company adopted, effective January 1,
            2003, the
            provision of Statement of Financial Accounting Standards No. 148 “Accounting for
            Stock-Based Compensation - Transition and Disclosure” an amendment of SFAS No.
            123. The Company has adopted the “disclosure only” alternative described in SFAS
            123 and SFAS 148 which require pro forma disclosure of net income and
            earnings
            per share as if fair value method of accounting had been applied. Had
            compensation cost for the stock option plan been determined based on
            the fair
            value of the options at the grant dates consistent with the method of
            SFAS 123,
“Accounting for Stock Based Compensation”, the Company’s net loss and loss per
            share would have been changed to the pro forma amounts indicated below
            for the
            years ended December 31, 2005 and 2004:
  
 
 
 Year
                      EndedYear EndedDecember
                      31, 2005
                  
                  
                  December
                      31, 2004Net
                      loss (as reported)
                  
                  $
                  (727,384
                  )
                  $
                  (1,124,668
                  )Deduct:
                      Total stock based compensation expense determinedunder
                      the fair value based method for all awards grantedmodified
                      or settled during the period, net of related taxes
                  
                  
                  21,563
                  
                  
                  -Pro
                      forma net loss
                  
                  $
                  (748,947
                  )
                  $
                  (1,124,668
                  )Basic,
                      as reported
                  
                  $
                  (.13
                  )
                  $
                  (.34
                  )Basic,
                      pro forma
                  
                  $
                  (.13
                  )
                  $
                  (..34
                  )
 
 The
            Company utilizes the Black-Scholes option-pricing model to calculate
            the fair
            value of each individual issuance of options with the following assumptions
            used
            for grants during the years ended December 31, 2005 and 2004:
 
 2005
                  
                  
                  2004Expected
                      dividend yield
                  
                  
                  0
                  %
                  
                  0
                  %Risk-free
                      interest rate
                  
                  
                  5
                  %
                  
                  4
                  %Annualized
                      volatility
                  
                  
                  68
                  %
                  
                  0
                  %
 
 
 F-14
  **Health
            Systems Solutions, Inc. and Subsidiary**
 **Notes
            to Consolidated Financial Statements**
 **Years
            Ended December 31, 2005 and 2004**
 
 
 **11.
            Stock Based Compensation and Warrants - continued**
 
 A
            summary
            of the stock options and warrants as of December 31, 2005 and changes
            during the
            periods is presented below:
 
 Year
                      Ended
                    December
                      31, 2005
                  
                  Year
                      Ended
                    December
                      31, 2004Number
                      of Options andWarrants
                  
                  Weighted
                      Average ExercisePrice
                  
                  Number
                      of Options andWarrants
                  
                  Weighted
                      Average ExercisePriceStock
                      options and warrantsBalance
                      at beginning of year
                  
                  
                  338,250
                  
                  $
                  2.000
                  
                  
                  -
                  
                  $
                  -Granted
                  
                  
                  286,250
                  
                  
                  0.868
                  
                  
                  711,000
                  
                  
                  0.988Exercised
                  
                  
                  (217,500
                  )
                  
                  0.001
                  
                  
                  (360,000
                  )
                  
                  0.001Forfeited
                  
                  
                  (35,750
                  )
                  
                  2.000
                  
                  
                  (12,750
                  )
                  
                  2.000Balance
                      at end of year
                  
                  
                  371,250
                  
                  $
                  2.299
                  
                  
                  338,250
                  
                  $
                  2.000Options
                      exercisable at end of year
                  
                  
                  66,375
                  
                  $
                  2.000
                  
                  
                  46,001
                  
                  $
                  2.000Weighted
                      average fair value of options andwarrants
                      granted during the year
                  
                  
                  
                  
                  $
                  1.37
                  
                  
                  
                  
                  $
                  0.01
 
 
 The
            following table summarizes information about employee stock options and
            warrants
            outstanding at December 31, 2005:
 
 Options
                      and WarrantsOptions
                      and Warrants Outstanding
                  
                  ExercisableRange
                      of ExercisePrice
                  
                  Number
                      Outstanding December 31,2005
                  
                  Weighted
                      Average Remaining ContractualLife
                  
                  Weighted
                      Average ExercisePrice
                  
                  Number
                      Exercisable at December 31,2005
                  
                  Weighted
                      Average ExercisePrice$
                      2.00
                  
                  
                  302,500
                  
                  
                  3.5
                      years
                  
                  $
                  2.00
                  
                  
                  66,375
                  
                  $
                  2.003.50
                  
                  
                  49,500
                  
                  
                  4.5
                      years
                  
                  
                  3.50
                  
                  
                  -
                  
                  
                  3.503.90
                  
                  
                  19,250
                  
                  
                  4.5
                      years
                  
                  
                  3.90
                  
                  
                  -
                  
                  
                  3.90371,250
                  
                  
                  
                  
                  $
                  2.299
                  
                  
                  66,375
                  
                  $
                  2.000
 
  F-15
 
 **Health
            Systems Solutions, Inc. and Subsidiary**
 **Notes
            to Consolidated Financial Statements**
 **Years
            Ended December 31, 2005 and 2004**
 
 
 **12.
            Concentrations**
  Cash: The
            Company maintains cash balances with commercial financial institutions
            which at
            times, may exceed the FDIC insured limits of $100,000. Management has
            placed
            these funds in high quality institutions in order to minimize the
            risk.
  Accounts
            Receivable: The
            Company’s largest customer represents 60.7% and 34.1% of the Company’s accounts
            receivable at December 31, 2005 and December 31,2004 respectively.
  Revenue: The
            Company’s largest customer accounted for 45.0% and 31.7% of the Company’s
            revenue for the years ended December 31, 2005 and December 31, 2004
            respectively.
  
 **13.
            Subsequent Events**
 
 Reverse
            Stock Split: The
            Company’s Board of Directors voted unanimously to authorize and recommend that
            stockholders approve a proposal to affect a reverse split. Pursuant to
            the
            reverse split, each two of the outstanding shares of common stock for
            shareholders of record on January 18, 2006 are automatically converted
            into one
            share of common stock. The reverse split does not alter the number of
            shares of
            Common Stock authorized but simply reduces the number of shares of Common
            Stock
            issued and outstanding. Further, holders of Series C Convertible Preferred
            Stock
            will receive half the number of shares of common stock upon conversion
            of their
            preferred stock, which such holders would have been able to receive upon
            conversion of their preferred shares immediately preceding the reverse
            split.
            The Amendment of the Articles of Incorporation was filed with the Nevada
            Secretary of State on February 21, 2006. The reverse stock split is presented
            retroactive for all periods presented.
 
 F-16


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




None




**ITEM
      8A.**  **CONTROLS
      AND PROCEDURES**




**Evaluation
      of Disclosure Controls and Procedures**




Our
      management, with the participation of the our chief executive officer and chief
      financial officer, evaluated the effectiveness of our disclosure controls and
      procedures as of the end of the period covered by this report.  The term
“disclosure controls and procedures,” as defined in Rules 13a-15(e) and
      15d-15(e) under the Exchange Act, means controls and other procedures of a
      company that are designed to ensure that information required to be disclosed
      by
      a company in the reports that it files or submits under the Exchange Act is
      recorded, processed, summarized and reported, within the time periods specified
      in the SEC’s rules and forms.  Disclosure controls and procedures include,
      without limitation, controls and procedures designed to ensure that information
      required to be disclosed by a company in the reports that it files or submits
      under the Exchange Act is accumulated and communicated to the company’s
      management, including its principal executive and principal financial officers,
      as appropriate to allow timely decisions regarding required disclosure. 
Management recognizes that any controls and procedures, no matter how well
      designed and operated, can provide only reasonable assurance of achieving their
      objectives and management necessarily applies its judgment in evaluating the
      cost-benefit relationship of possible controls and procedures.




Based
      on
      the evaluation of our disclosure controls and procedures as of the end of the
      period covered by this report, our chief executive officer and chief financial
      officer concluded that, as of such date, we had material weaknesses associated
      with separation of duties due to the fact that there are only three employees
      in
      our finance department, including our CFO. Although this constitutes a material
      weakness, management has decided that, the risks associated with this weakness
      does not, at this point, justify the expense associated with retaining
      additional employees which would not be fully utilized. Management will
      periodically re-evaluate this situation.




**Changes
      in Internal Controls**




There
      has
      been no change in our internal control over financial reporting identified
      in
      connection with the quarterly evaluation that occurred during our last fiscal
      quarter that has materially affected, or is reasonably likely to materially
      affect, our internal control over financial reporting.




**ITEM
      8B.**  **OTHER
      INFORMATION**




None.


31


**PART
      III**




**ITEM
                9.**
            
            **DIRECTORS
                AND EXECUTIVE OFFICERS OF REGISTRANT; COMPLIANCE WITH SECTION 16(a)
                OF THE
                EXCHANGE ACT**




**Directors
      and Officers**




Article
      V
      of our articles of incorporation permits our board of directors to fix the
      number of directors at not less than one nor more than nine. Each of our
      directors serves until our next annual meeting of shareholders and until his
      successor is duly elected and qualified. Vacancies on the Board due to
      resignation or removal may be filled by the remaining director or directors,
      even though less than a quorum, for the unexpired term of such vacant
      position.




**Name**
              **Age**
              **Position**B.
                  M. Milvain
              69
              President
                  and DirectorSteven
                  Katz
              58
              DirectorBatsheva
                  Schreiber
              59
              DirectorSusan
                  Baxter Gibson
              48
              Vice
                  President and Chief Financial
                  Officer




B.
      M.
      Milvain is our Chief Executive Officer and President. Mr. Milvain has been
      a
      senior officer of HQS, PAL and its predecessor company, Provider Solutions
      Corp.
      since 1993. From August 1988 until November 1992 Mr. Milvain was Chief Operating
      Officer of LPA, Inc., a subsidiary of NYNEX Corporation, and a supplier of
      on-line transaction processing software for electronic payment services. From
      March 1988 until September 1997, Mr. Milvain was also a consultant to the
      Chairman of the Board of BancTec, Inc., a global provider of solutions for
      automation capture, processing and archiving of paper and electronic forms.
      From
      1985 to 1988 he was Vice
      President of Marketing at Systeme Corporation, an innovator and developer of
      wide area network and PC technology for b ranch
      automation products for retail banking applications. From 1982 to 1984 Mr.
      Milvain was President of George K. Baum Leasing, Inc. From 1972 to 1982 he
      was
      co-founder of Unimark, Inc., a computer leasing and used computer dealer. Prior
      positions were with Marsh & McLennan Companies (1969 to 1972), Waddell &
Reed (1966 to 1969) and IBM (1960 to 1966). Mr. Milvain graduated with a Bachelors of
      Business Administration degree from the University of Oklahoma in
      1960.




Steven
      Katz is President of Steven Katz & Associates, Inc., a health care and
      technology-based management consulting firm specializing in strategic planning,
      corporate development, new product planning, technology licensing, and
      structuring and securing various forms of financing. Mr. Katz has been President
      of Steven Katz & Associates, Inc. since 1982. From January 2000 to October
      2001, Mr. Katz was also President and Chief Operating Officer of Senesco
      Technologies, Inc., an American Stock Exchange company engaged in the
      identification and development of proprietary gene technology with application
      to human, animal and plant systems. From 1983 to 1984 he was a co-founder and
      Executive Vice President of S.K.Y. Polymers, Inc., a bio-materials company.
      Prior to this, Mr. Katz was Vice President and General Manager of a non-banking
      division of Citicorp. From 1976 to 1981 he held various senior management
      positions at National Patent Development Corporation, including President of
      three subsidiaries. Prior positions were with Revlon, Inc. (1975) and Price
      Waterhouse & Co. (1969 to 1974). Mr. Katz received a Bachelors of Business
      Administration degree in Accounting from the City College of New York in 1969.
      He is presently a member of the Board of Directors of Biophan Technologies,
      Inc.
      and USA Technologies, Inc. and several private companies.




32


Batsheva
      Schreiber is President and CEO of CareManagers Inc., a health care advocacy
      and
      consulting company focusing on supporting individuals and their families in
      all
      aspects of services during changes in health status. Ms. Schreiber has been
      President and CEO of CareManagers Inc. since 1998. From 1996 to 1997, Ms.
      Schreiber was Director of Operations at Master Care, a case management company
      that focused on efficiency and quality care in the workers compensation and
      group health areas. From 1994 to 1996 Ms. Schreiber was a co-founder and
      principal of Revival Home Health Care, a certified home care company serving
      the
      Metropolitan New York City area. Other home care experience includes senior
      positions at Olsten KQC (1992 to 1994) and Nursefinders (1988 to 1992). From
      1970 to 1988, Ms. Schreiber established and developed various medical programs
      and services at Ohel Children’s Home & Family Services in New York City.
      Prior experience includes medical/surgical nursing and in-patient psychiatry
      (1966 to 1970) at Maimonides Medical Center in New York. Ms. Schreiber is a
      Registered Nurse in New York and New Jersey and has her BSN from the University
      of the State of New York. She is active in various community programs and is
      a
      member of several company Boards of Directors.




Susan
      Baxter Gibson is our Vice President and Chief Financial Officer. She served
      as a
      Branch Manager of Advanced Home Care, a home health, infusion and durable
      medical provider, from January 2001 through September 2003. From February 1999
      to January 2001, she was a financial consultant with Dixon Odom P.L.C. From
      February 1998 to January 1999, Ms. Gibson was Chief Financial Officer of Baptist
      Hospital Home Care, a subsidiary of the Wake Forest University Medical Center.
      While she was there she also served as Interim Agency Director. From June 1992
      to February 1998, Mrs. Gibson was the Chief Financial Officer/Vice President
      Finance at the Visiting Nurse Association of the Treasure Coast. Susan's
      experience includes budgeting, creating internal policies and procedures, home
      health care financial and operational management and strategic planning. Prior
      to serving at the Visiting Nurse Association of the Treasure Coast, she was
      with
      Greenwich International and Edwards & Curtis, certified public accountants.
      Mrs. Gibson holds a Bachelor of Business Administration in Accounting (1992)
      and
      a Masters of Business Administration degree from the University of Central
      Florida (1997). She is a certified public accountant (North
      Carolina).




**Committees
      of the Board of Directors**




*Audit
      Committee*




The
      Audit
      Committee, which currently consists of Steven Katz and Batsheva Schreiber,
      reviews the professional services provided by our independent auditors, the
      independence of our auditors from our management, our annual financial
      statements and our system of internal accounting controls. Mr. Katz is
      considered by us to be a “financial expert.” The Audit Committee also reviews
      other matters with respect to our accounting, auditing and financial reporting
      practices and procedures as it may find appropriate or may be brought to its
      attention. The Company’s board of directors has adopted a written Charter of the
      Audit Committee. Ms. Schreiber, a member of the Audit Committee, is deemed
      independent, as defined in the National Association of Securities Dealers’
listing standards. The Audit Committee met on four occasions during the year
      ended December 31, 2005.




*Compensation
      Committee*




We
      do not
      have a formal compensation committee. The board of directors, acting as a
      compensation committee, periodically meets to discuss and deliberate on issues
      surrounding the terms and conditions of executive officer compensation,
      including base salaries, bonuses, awards of stock options and reimbursement
      of
      certain business related costs and expenses.




*Nominating
      Committee*




We
      do not
      have a formal nominating committee. The board of directors, acting as a
      nominating committee, recommends candidates who will be nominated as
      management’s slate of directors at each annual meeting of shareholders.




33


In
      May
      2004, the Board adopted a general policy setting forth qualifications of
      directors, procedures for identification and evaluation of candidates for
      nomination, and procedures for recommendation of candidates by shareholders.
      A
      candidate for director should meet the following criteria:




·
            Must,
                above all, be of proven integrity with a record of substantial
                achievement;




·
            Musthave demonstrated ability and sound judgment that usually will be
                based on
                broad experience;




·
            Must
                be able and willing to devote the required amount of time to our
                affairs,
                including attendance at Board and committee meetings and the annual
                shareholders’ meeting;




·
            Must
                possess a judiciousandsomewhat critical temperament that will enable objective appraisal
                of
                management’s plans and programs; and




·
            Must
                be committed to our company building sound, long-term
                growth.




Other
      than the foregoing, the Board does not believe there is any single set of
      qualities or skills that an individual must possess to be an effective director
      or that it is appropriate to establish any specific, minimum qualifications
      for
      a candidate for election as a director. Rather, the Committee will consider
      each
      candidate in light of the strengths of the other members of the board of
      directors and the needs of the Board and our company at the time of the
      election. The board of directors will also consider candidates for directors
      nominated by shareholders.




**Compliance
      with Section 16(a) of the Exchange Act**




Based
      solely upon a review of Forms 3 and 4 and amendments thereto furnished to us
      under Rule 16a-3(d) of the Exchange Act, each of B.M. Milvain, Steven Katz,
      Batsheva Schreiber, Susan Baxter-Gibson and Stanford International Bank, Ltd.
      failed to file on a timely basis, as disclosed in the aforementioned Form,
      reports required by Section 16(a) of the Exchange Act during the fiscal year
      ended December 31, 2005. Each of the reporting persons described above failed
      to
      timely file the initial statement of beneficial ownership on Form 3 and one
      statement of change of beneficial ownership on Form 4. Each reporting person
      has
      since filed the appropriate forms and is now current.




**Code
      of Ethics**




During
      the year ended December 31, 2003, we adopted a Code of Ethics. The code applies
      to our officers and directors. The code provides written standards that are
      designed to deter wrongdoing and promote: (1) honest and ethical conduct; (2)
      full, fair, accurate, timely and understandable disclosure; (3) compliance
      with
      applicable laws and regulations; (4) prompt reporting of internal violations
      of
      the code; and (5) accountability for the adherence to the code.




**ITEM
      10.**  **EXECUTIVE
      COMPENSATION**




**Summary
      Compensation Table**




The
      following table shows, for the year ended December 31, 2003, December 2004
      and
      December 31, 2005, the cash and other compensation paid to our President, Chief
      Executive Officer and each other executive officer whose annual compensation
      was
      $100,000 or more.




34






Annual
                Compensation
            
            Long
                Term CompensationName
                and Principal Position
            
            Year
            
            Salary
              (US$)
            
            Bonus
              (US$)
            
            Other
              Compensation
              (US$)
            
            Restricted
              Stock
                Awards
              (US$)
            
            Securities
              Underlying
              Options
            
            All
                Other
              Compensation
              (US$)B.
                M. Milvain, President and Chief Executive Officer(2)
            
            
            2005
              2004
              2003
            
            
            150,000
              150,000
              150,000
            
            
            0
              0
              0
            
            
            0
              0
              0
            
            
            0
              $150.00(1)
              0
            
            
            0
              75,000
              0
            
            
            0
              0
              0Susan
                Baxter Gibson Chief Financial Officer
            
            
            2005
              2004
              2003
            
            
            104,670
              100,000
              27,693
            
            
            0
              0
              0
            
            
            0
              0
              0
            
            
            0
              0
              0
            
            
            0
              30,000
              0
            
            
            0
              0
              0





(1)
            Effective
                July 6, 2004, we granted B.M. Milvain 75,000 shares of our Common
                Stock
                under a restricted stock agreement. If, on any date prior to June
                1, 2010,
                we file audited financial statements with the SEC for a calendar
                year that
                sets forth both, $10,000,000 or more of revenues and $2,000,000 or
                more in
                operating income, Mr. Milvain shall receive these
                shares.




(2)
            Appointed
                to serve as president effective October 24,
                2002.




**Stock
      Options Granted in 2005**




The
      following table summarizes options to purchase shares of our Common Stock that
      we granted during the twelve months ended December 31, 2005 to each of the
      executive officers identified in the summary compensation table above.




**Name**
            **Number
                of Securities Underlying Options Granted**
            **Percent
                of Total Options Granted to Employees in 2005**
            **Exercise
                Price(s) ($/Share)**
            **Expiration
                Date**Brian
                M. Milvain
            0
            0
            0
            0Susan
                Baxter Gibson
            0
            0
            0
            0




35


**A** **ggregated
      Option Exercises in Last Fiscal Year-End Option Value
      Table**




**Name**
            **Shares
                Acquired on Exercise**
            **Value
                Realized ($)**
            **Number
                of Unexercised Securities Underlying Options at Fiscal Year End
                Exercisable/Unexercisable**
            **Value
                of Unexercised In-the-Money Options at Fiscal Year End
                Exercisable/Unexercisable**Brian
                M. Milvain
            0
            N/A
            37,500/37,500
            0/0Susan
                Baxter Gibson
            0
            N/A
            15,000/15,000
            0/0







**Long
      Term Incentive Plans - Awards in Last Fiscal Year**




The
      following table summarizes long term incentive awards that were made during
      the
      twelve months ended December 31, 2005 to each of the executive officers
      identified in the summary compensation table above.




Name
            Number
              Of
                Shares,
              Units
                or
              Other
                Rights
              (#)
            Performance
              Or
                Other
              Period
                Until
              Maturation
              Or
                Payout
            Estimated
                Future Payouts Under
              Non-Stock
                Price-Based PlansThreshold
              ($
                or #)
            Target
              ($
                or #)
            Maximum
              ($
                or #)Brian
                M. Milvain
            0Susan
                Baxter Gibson
            0
            -
            -
            -
            -




**2003
      Management and Director Equity Incentive and Compensation
      Plan**




In
      May
      2003 we adopted the 2003 Management and Director Equity Incentive and
      Compensation Plan. The purpose of the Plan is to advance our interests and
      those
      of our shareholders by providing a means of attracting and retaining key
      employees, directors and consultants. In order to serve this purpose, we believe
      this Plan encourages and enables key employees, directors and consultants to
      participate in our future prosperity and growth by providing them with
      incentives and compensation based on our performance, development and financial
      success. Participants in the Plan may include our officers, directors, other
      key
      employees and consultants who have responsibilities affecting our management,
      development or financial success.




We
      initially reserved an aggregate of 3,300,000 shares of Common Stock for issuance
      under the Plan, but subsequently reduced the number of shares to 1,000,000
      and
      reduced to 500,000 due to the reverse stock split on February 21, 2006. Our
      board of directors (or at their discretion a committee of our board members)
      administers the Plan including, without limitation, the selection of recipients
      of awards under the Plan, the granting of stock options, restricted share or
      performance shares, the determination of the terms and conditions of any such
      awards, the interpretation of the Plan and any other action they deem
      appropriate in connection with the administration of the Plan.




On
      March
      28, 2005, our Board of Directors unanimously voted to authorize that incentive
      stock options to purchase an aggregate of 49,500 shares of our Common Stock
      be
      granted employees under the 2003 Management and Director Equity Incentive and
      Compensation Plan (the “Plan”). Such options shall have an exercise price of
      $3.50 per share and shall vest to the extent of 25% of the respective aggregate
      granted for each twelve continuous months of employment subsequent to January
      1,
      2005, with the unexercised portion of such respective options to expire June
      1,
      2010 or should the employee leave the employ of the Company. Further, on March
      28, 2005, 71,500 previously issued options were cancelled.




36


On
      May 9,
      2005, our Board of Directors unanimously voted to authorize that incentive
      stock
      options to purchase an aggregate of 9,250 shares of our Common Stock be granted
      employees under the 2003 Management and Director Equity Incentive and
      Compensation Plan (“the Plan”). Such options shall have an exercise price of
      $3.90 per share and shall vest to the extent of 25% of the respective aggregate
      granted for each twelve continuous months of employment subsequent to January
      1,
      2005, with the unexercised portion of such respective options to expire June
      1,
      2010, or should the employee leave the employ of the Company. Further, on May
      9,
      2005, the Board of Directors unanimously voted under the Plan to grant
      non-qualified stock options to purchase an aggregate of 10,000 shares of Common
      Stock to our two outside directors. Such options shall have an exercise price
      of
      $3.90 per share and shall vest to the extent of 25% of the respective aggregate
      granted for each twelve continuous months of board membership subsequent to
      May
      9, 2005, with the unexercised portion of such respective options to expire
      June
      1, 2010 or should the director leave the Board of Directors of the
      Company.




As
      of
      December 31, 2005, 371,250 stock options were issued leaving an unissued stock
      option balance of 128,750.




**Director
      Compensation**




All
      directors, other than our officers, receive an annual fee of $5,000. We do
      not
      pay fees for attending meetings to directors that are not executive officers
      of
      the board of directors or of committees; however, we may adopt a policy of
      making such payments in the future. We will reimburse out-of-pocket expenses
      incurred by directors in attending Board and committee meetings.




**Employment
      and Consulting Agreements**




We
      have
      no employment contracts with any of our officers or directors and maintain
      no
      retirement, fringe benefit or similar plans for the benefit of our officers
      or
      directors. We may, however, enter into employment contracts with our officers
      and key employees, adopt various benefit plans and begin paying compensation
      to
      our officers and directors as we deem appropriate to attract and retain the
      services of such persons.




**Limitation
      of Liability**




Pursuant
      to the Nevada Revised Statutes, we have the power to indemnify any person made
      a
      party to any lawsuit by reason of being our director or officer, or serving
      at
      our request as a director, officer, employee or agent of another corporation,
      partnership, joint venture, trust or other enterprise against expenses
      (including attorneys' fees), judgments, fines and amounts paid in settlement
      actually and reasonably incurred by him in connection with such action, suit
      or
      proceeding if he acted in good faith and in a manner he reasonably believed
      to
      be in or not opposed to the best interests of the corporation, and, with respect
      to any criminal action or proceeding, had no reasonable cause to believe his
      conduct was unlawful.




Insofar
      as indemnification for liabilities arising under the Securities Act may be
      permitted to directors, officers and controlling persons of our company pursuant
      to the foregoing provisions, or otherwise, we have been informed that in the
      opinion of the SEC such indemnification is against public policy as expressed
      in
      the Securities Act and is, therefore, unenforceable.




Our
      bylaws provide that we shall indemnify our directors and officers to the fullest
      extent permitted by Nevada law.




37


**ITEM
      11.**  **SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
      MATTERS**




As
      of
      December 31, 2005, there were 5,615,905 shares of our Common Stock issued and
      outstanding. The following table sets forth, as of the close of business on
      December 31, 2005, (1) the name and number of shares of each person known by
      us
      to be the beneficial owner of more than 5% of the class of stock; and (2) the
      number of shares of these securities owned by each director and all officers
      and
      directors as a group, together with their respective percentage holdings of
      such
      shares. Beneficial ownership is determined in accordance with the rules of
      the
      SEC, and generally includes voting or investment power with respect to
      securities, and includes any securities, which the person has the right to
      acquire within 60 days of the date of the filing of this report. Unless
      otherwise indicated, the address for each person is 405 N. Reo Street, Suite
      300, Tampa, Florida 33609.




**Shares**
              
              **Percent
                  of****Name**
              
              **Beneficially
                  Owned**
              
              **Shares
                  Outstanding**Stanford
                  Venture CapitalHoldings,
                  Inc. (1)
              
              
              4,597,839
              
              
              82.0
              %B.
                  M. Milvain
              
              
              144,441(2
              )
              
              2.6
              %Steven
                  Katz
              
              
              0
              
              
              0
              %Batsheva
                  Schreiber
              
              
              0
              
              
              0
              %Susan
                  Baxter Gibson
              
              
              15,000(3
              )
              
              *All
                  executive officers andDirectors
                  as a group(4
                  persons)
              
              
              159,441
              
              
              2.6
              %


____________


*  Less
      than
      1%


(1)
            Beneficial
                shareholder is R. Allen Stanford. Business address is 5050 Westheimer
                Road, Houston, Texas 77056.


(2)
            Includes
                75,000 shares of Common Stock subject to a restricted stock agreement
                and
                37,500 shares of Common Stock underlying options exercisable at $2.00
                per
                share


(3)
            Includes
                15,000 shares of Common Stock underlying options exercisable at $2.00
                per
                share.




*Securities
      Authorized for Issuance under Equity Compensation Plans*




The
      table
      below provides information pertaining to all compensation plans under which
      equity securities of our company are authorized for issuance as of December
      31,
      2005:




Number
                  of securitiesNumber
                  of securities
              
              
              
              remaining
                  available forto
                  be issued upon
              
              Weighted-average
              
              future
                  issuance underexercise
                  of
              
              exercise
                  price of
              
              equity
                  compensationoutstanding
                  options,
              
              outstanding
                  options,
              
              plans
                  (excluding securitieswarrants
                  and rights
              
              warrants
                  and rights
              
              reflected
                  in 1st columnEquity
                  compensation plansapproved
                  by security holders
              
              
              371,250
              
              $
              2.30
              
              
              128,750Equity
                  compensation plans notapproved
                  by security holders
              
              
              None
              
              
              N/A
              
              
              N/ATotal
              
              
              371,250
              
              $
              2.30
              
              
              128,750




38


**ITEM
      12.**  **CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS**




**Transactions
      with Stanford**




Stanford
      International Bank Limited (“Stanford”), is the owner of a majority of our
      issued and outstanding Common Stock and all of our issued and outstanding
      Preferred Stock.





On
      October 22, 2002, we consummated an agreement and plan of merger with PAL.
      Pursuant to the merger agreement, PAL was merged into our wholly-owned
      subsidiary, HQS. At the closing of the merger on October 24, 2002, the issued
      and outstanding units of PAL were surrendered in exchange for an aggregate
      of
      1,071,429 shares of our Common Stock and the separate corporate existence of
      PAL
      terminated. An additional 237,399 shares were issued to Deluxe Investment
      Company as consideration for $474.80. Stanford, the majority interest holder
      of
      PAL, received 957,921 shares of the Common Stock issued pursuant to the merger
      agreement. On the closing date of the merger agreement, the existing directors
      and officers of the Company resigned and new officers and directors were
      designated in accordance with the merger agreement.




Pursuant
      to a securities purchase agreement dated October 22, 2002, Stanford made an
      aggregate cash investment of $2,200,000 in our company, in several tranches.
      For
      its aggregate investment, Stanford received 1,880,341 shares of Series A
      Preferred Stock (subject to anti-dilution provisions), convertible into 940,171
      shares of our Common Stock and warrants to purchase an aggregate of 940,171
      shares of Common Stock. Each share of Series A Preferred Stock had ten votes,
      voting together with our Common Stock on all matters submitted for a vote.
      Each
      warrant had an exercise price of $1.17 per share. The warrants were immediately
      exercisable and expire five years after their initial dates of issuance.
      Stanford assigned its rights to an aggregate of half of the warrants to several
      of its employees.




Pursuant
      to a securities purchase agreement dated April 30, 2003, Stanford made an
      aggregate investment of $2,000,000 in our company, in several tranches. The
      investment was in the form of Series B Convertible Preferred Stock of our
      company, convertible into 6,250,000 shares of our Common Stock. The shares
      of
      Series B Preferred Stock were issued and sold in various tranches on eight
      monthly closing dates, commencing on May 19, 2003.




As
      additional consideration under the April 30, 2003 securities purchase agreement,
      we agreed to reprice the exercise price of the 940,171 warrants previously
      issued to Stanford and its assignees pursuant to the securities purchase
      agreement dated October 15, 2002. Pursuant to an Instrument of Warrant
      Repricing, the exercise price of the warrants was reduced from $1.17 per share
      to $0.001 per share. The warrants were exercised on May 12, 2003 and the warrant
      holders received an aggregate of 940,171 shares of Common Stock.




On
      July
      6, 2004, Stanford exercised its right to convert all of the outstanding Series
      A
      Preferred Stock and Series B Preferred Stock into shares of Common
      Stock.




We
      granted to Stanford and its affiliates certain registration rights under certain
      registration rights agreements with respect to the shares of Common Stock it
      owns and the shares of Common Stock underlying the Series A and Series B
      Preferred Stock. No later than December 31, 2004, we were required to file
      a
      Registration Statement under the Securities Act registering the re-sale of
      the
      shares of Common Stock owned and shares of Common Stock underlying the Series
      A
      and Series B preferred stock and warrants. Stanford has waived its registration
      rights.




On
      July
      6, 2004, HQS entered into a $1,600,000 loan and security agreement with
      Stanford. Under this agreement, interest accrues at the rate of 8% per annum
      and
      principal matures and becomes payable three years from the date of the loan.
      The
      loan is secured by a security interest in all of the assets of the Company
      and
      HQS and a corporate guaranty that has been executed in favor of Stanford. As
      of
      September 30, 2004, Stanford had advanced us $900,000 (including $400,000
      advanced on June 30, 2004 to satisfy a $400,000 assumed liability owed to the
      Internal Revenue Service by our predecessor).




39


As
      of
      March 15, 2005, we had borrowed $1,050,000 and the balance of $550,000 was
      available to us. Previously, certain draws under the loan and security agreement
      were subject to our achieving adjusted consolidated EBITDA; however, Stanford
      subsequently waived the requirement.




Additionally,
      as consideration for entering into the loan and security agreement, Stanford
      received warrants to purchase an aggregate of 720,000 shares of our Common
      Stock. The exercise price of the warrants is $0.001 per share and the warrants
      expire on June 30, 2009. Stanford has assigned warrants to purchase 360,000
      shares to four of its employees pursuant to a warrant assignment agreement.
      We
      registered the shares of Common Stock underlying the warrants pursuant to a
      registration rights agreement. The warrants issued to the employees were
      exercised on August 12, 2004 and the warrants issued to Stanford were exercised
      on September 8, 2004 .




On
      November 8, 2005, we entered into a Preferred Stock Purchase Agreement with
      Stanford pursuant to which Stanford purchased 725,000 shares of our Series
      C
      Convertible Preferred Stock at a price of $2.00 per share and received warrants
      to purchase 217,500 shares of Common Stock exercisable at $0.001 per share.
      The
      proceeds were used to satisfy in full the principal balance of our credit line
      with Stanford, which was terminated, and to provide an additional $200,000
      in
      working capital for general corporate purposes through December 31, 2005.
      Stanford also agreed to purchase 200,000 additional shares of Preferred Stock
      and to receive, in connection therewith, an aggregate of 60,000 warrants, to
      the
      extent requested by us on two weeks notice. Each share of Preferred Stock is
      convertible into one half share of our Common Stock and is entitled to one
      half
      vote per share. Stanford has the right at any time within two years of the
      initial closing to purchase an additional 3,700,000 shares of preferred stock
      at
      $2.00 per share and to receive in connection therewith an aggregate of 1,110,000
      warrants exercisable at $0.001 per share.






The
      exercise price of the warrants is $0.001 per share, and the warrants expire
      five
      years from the date of issuance. Stanford has assigned half of all warrants
      issuable under the Agreement, including 108,750 of the 217,500 warrants issued
      so far, to five of its employees pursuant to a warrant assignment agreement.




We
      are
      obligated to register the shares of Common Stock issuable upon conversion of
      the
      Preferred Stock or exercise of the warrants pursuant to a registration rights
      agreement within 90 days after the date of demand by the security holders.
      If we
      do not timely file a required registration statement, we must issue upon default
      and each month thereafter that the registration statement is not filed, warrants
      to purchase a number of shares of Common Stock equal to the number of shares
      of
      Preferred Stock sold.




**Other
      Related Transactions**





Provider
      Solutions Corp., one of our predecessor companies, engaged Steven Katz,
      currently one of our directors, for management advisory services on an
      arms-length basis. This arrangement was confirmed from September 2002 to March
      31, 2003 by HQS, our wholly-owned subsidiary. Mr. Katz was paid a fee of $10,000
      per month, plus expenses during the period that he provided these
      services.




We
      have
      adopted a policy whereby all transactions between us and one or more of our
      affiliates must be approved in advance by a majority of our disinterested
      directors.




40


**ITEM
      13.**  **EXHIBITS**




**Exhibit No.**   **Description
      of Document**




2.1
            Agreement
                and Plan of Merger dated as of October 16, 2002 among the Company,
                certain
                principal shareholders of the Company, HQS and PAL
                (1)




3.0
            Certificate
                of Incorporation and Change of Domicile (filed on Definitive Proxy
                Statement with the Securities and Exchange Commission on August 23,
                2001)




3.1
            Certificate
                of Amendment to the Company's Articles of Incorporation (effectuating
                the
                Reverse Stock Split) (1)




3.2
            Certificate
                of Amendment to the Company's Articles of Incorporation (designation
                of
                Series A Preferred Stock) (1)




3.3
            Certificate
                of Amendment to the Company's Articles of Incorporation (name change)
                (2)




3.4
            Certificate
                of Designation of Series B Preferred Stock
                (3)




3.5
            Certificate
                of Amendment to the Company’s Articles of Incorporation (increasing the
                authorized number of shares of Common Stock and Preferred Stock)
                (4)




3.6
            Certificate
                of Amendment to the Company's Articles of Incorporation (effectuating
                the
                Reverse Stock Split) (7)




3.7
            Bylaws
                (9)




4.1
            2003
                Management and Director Equity Incentive Compensation Plan
                (4)




10.1
            Securities
                Purchase Agreement dated as of October 16, 2002, by and among the
                Company,
                certain principal shareholders of the Company and Stanford
                (1)




10.2
            Form
                of Warrant Agreement and Warrant Assignment Form
                (1)




10.3
            Registration
                Rights Agreement dated as of October 22, 2002 among the Company,
                Stanford,
                Daniel Boger, Ronald Stein, Osvaldo Pi, William Fusselmann and Deluxe
                Investment Company (1)




10.4
            Equity
                Financing Commitment Letter dated October 22, 2002 from Stanford
                to the
                Company (1)




10.5
            March
                25, 2004 Amendment to Registration Rights Agreement, dated October
                22,
                2002, as amended (6)




10.6
            Securities
                Purchase Agreement (Series B Preferred Stock) dated as of April 30,
                2003,
                among the Company and Stanford Venture Capital Holdings, Inc.
                (3)




10.7
            Instrument
                of Warrant Repricing dated April 30, 2003
                (3)




10.8
            Registration
                Rights Agreement dated as of April 30, 2003 among the Company and
                Stanford
                Venture Capital Holdings, Inc. (3)




10.9
            March
                25, 2004 Amendment to Registration Rights Agreement, dated April
                30, 2003,
                as amended (6)




10.10
            Loan
                and Security Agreement dated July 6,
                2004(8)




10.11
            Warrant
                Purchase Agreement dated July 6,
                2004(8)




10.12
            Amended
                and Restated Investor Relations Agreement with American Capital Ventures,
                Inc., dated August 5, 2004 (9)




10.13
            Registration
                Rights Agreement dated July 6,
                2004(8)




10.14
            Warrant
                Assignment Agreement dated July 6,
                2004(8)




41


10.15
            Escrow
                Agreement with Deluxe Investment Company
                (9)




10.16
            Deluxe
                Investment Company Purchase Agreement
                (9)




10.17
            First
                Amendment to Loan and Security Agreement
                (9)




10.18
            Qwest
                Hosting Services Agreement (9)




14.0
            Code
                of Ethics (6)




16.1
            Letter
                from Rogoff & Company (former independent accountant)
                (5)




31.1
            Rule
                13a-14(a)/15d-4(a) Certification of Principal Executive
                Officer




31.2
            Rule
                13a-14(a)/15d-4(a) Certification of Principal Financial
                Officer




32.1
            Section
                1350 Certification of Principal Executive
                Officer




32.2
            Section
                1350 Certification of Principal Financial
                Officer






(1)
            Previously
                filed on Form 8-K Current Report with the Securities and Exchange
                Commission on November 1, 2002.


(2)
            Previously
                filed on the Company's Definitive Information Statement with the
                Securities and Exchange Commission on November 15,
                2002.


(3)
            Previously
                filed on Form 8-K Current Report with the Securities and Exchange
                Commission on May 15, 2003.


(4)
            Previously
                filed within the Company’s Definitive Information Statement filed with the
                Securities and Exchange Commission on June 3,
                2003.


(5)
            Previously
                filed on Form 8-K/A Current Report with the Securities and Exchange
                Commission on February 17, 2004.


(6)
            Previously
                filed on the Company’s Form 10-KSB Annual Report for the year ended
                December 31, 2003.


(7)
            Previously
                filed on the Company's Definitive Information Statement with the
                Securities and Exchange Commission on June 17,
                2004.


(8)
            Previously
                filed on Form 8-K Current Report with the Securities and Exchange
                Commission on July 6, 2004.


(9)
            Previously
                filed on Form SB-2 with the Securities and Exchange Commission on
                July 8,
                2004.





**ITEM
          14.** **PRINCIPAL
          ACCOUNTANT FEES AND SERVICES**




**Year
      Ended December 31, 2005**




Audit
      Fees: The aggregate fees, including expenses, billed by our principal accountant
      in connection with the audit of our consolidated financial statements for the
      most recent fiscal year and for the review of our financial information included
      in our Annual Report on Form 10-KSB; and our quarterly reports on Form 10-QSB
      during the fiscal year ended December 31, 2005 was $27,500.




Audit
      Related Fees: The aggregate fees, including expenses, billed by our principal
      accountant for services reasonably related to the audit for the year ended
      December 31, 2005 were $15,000.




Tax
      Fees:
      The aggregate fees, including expenses, billed by our principal accountant
      for
      services reasonably related to the preparation of our tax return for the year
      ended December 31, 2005 were $5,000 **.**




All
      Other
      Fees: The aggregate fees, including expenses, billed for all other services
      rendered to us by our principal accountant during year 2005 was $11,100 for
      expenses related to our Form SB-2 registration statement.




42


**Year
      Ended December 13, 2004**




Audit
      Fees: The aggregate fees, including expenses, billed by our principal accountant
      in connection with the audit of our consolidated financial statements for the
      fiscal year ended December 31, 2004 and for the review of our financial
      information included in our Annual Report on Form 10-KSB; and our quarterly
      reports on Form 10-QSB during the fiscal year ended December 31, 2004 was
      $26,000.




Audit
      Related Fees: The aggregate fees, including expenses, billed by our principal
      accountant for services reasonably related to the audit for the year ended
      December 31, 2004 were $17,000.




Tax
      Fees:
      The aggregate fees, including expenses, billed by our principal accountant
      for
      services reasonably related to the preparation of our tax return for the year
      ended December 31, 2004 were $5,000 **.**




**** All
      Other
      Fees: The aggregate fees, including expenses, billed for all other services
      rendered to us by our principal accountant during year 2004 was $18,900 for
      expenses related to our Form SB-2 registration statement.




Our
      board
      of directors has considered whether the provisions of the services covered
      above
      under the captions “Financial Information Systems Design and Implementation
      Fees” and “All Other Fees” is compatible with maintaining the auditor’s
      independence.


43


**SIGNATURES**




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




Dated
              March 29,
              2006HEALTH
              SYSTEMS
              SOLUTIONS, INC.By:
            /s/ B.
              M.
              MilvainB.
              M. Milvain, President and Chief Executive
              Officer(Principal
              Executive Officer)




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities and on March 29, 2006.




SIGNATURE
              
              TITLE/s/
                  B. M. Milvain
              
              Principal
                  Executive Officer, President and DirectorB.
                  M. Milvain/s/
                  Susan Baxter Gibson
              
              Principal
                  Financial OfficerSusan
                  Baxter Gibson/s/
                  Steven Katz
              
              DirectorSteven
                  Katz/s/
                  Batsheva Schreiber
              
              DirectorBatsheva
                Schreiber




44