UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      DC 20549





FORM
      10-K


ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
      ACT OF 1934


For
      the
      fiscal year ended December 31, 2007


Commission
      file number 000-24681





HEALTH
      SYSTEMS SOLUTIONS, INC.


(Exact
      name of small business issuer as in its charter)




Nevada
            
            82-0513245(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (IRS
                Employer Identification No.)




405
      N.
      Reo Street, Suite 300, Tampa, Florida 33609


(Address
      of principal executive offices, including zip code)




(813)
      282-3303


(Registrant’s
      telephone number, including area code)




Securities
      registered under Section 12(g) of the Exchange Act: Common Stock,
      $0.001


par
      value




Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes x No
      o


Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or 15(d) of the Exchange Act. Yes x No
      o





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


Yes
x No
      o




Indicate
      by check mark if disclosure of delinquent filers in response to Item 405 of
      Registration S-B is not contained in this form, and will not be contained,
      to
      the best of the registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-K or any
      amendment to this Form 10-K. Yes x    No
      o




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.


Large
                  accelerated filer
              o
              Accelerated
                  filer
              oNon-accelerated
                  filer
              o
              Smaller
                  reporting company
              x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o No x




On
      June
      29, 2007, 1,457,377 of voting and non-voting common shares held by
      non-affiliates had an aggregate market value of $1,020,164 based on the last
      sales price at which the common stock was sold as reported by the
      OTCBB.




As
      of
      March 18, 2008, the issuer had 7,365,361 shares of common stock
      outstanding.




Documents
      Incorporated By Reference: Not Applicable.





**HEALTH
      SYSTEMS SOLUTIONS, INC.**





**FORM
      10-K**





**INDEX**





**Page****PART
                I**ITEM
                1.
            BUSINESS
            1ITEM
                1A.
            RISK
                FACTORS
            15ITEM
                1B.
            UNRESOLVED
                STAFF COMMENTS
            20ITEM
                2.
            PROPERTIES
            20ITEM
                3.
            LEGAL
                PROCEEDINGS
            21ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            21**PART
                II**ITEM
                5.
            MARKET
                FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER
                PURCHASES OF EQUITY SECURITIES
            22ITEM
                6.
            SELECTED
                FINANCIAL DATA
            24ITEM
                7.
            MANAGEMENT'S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS
            25ITEM
                7A.
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            35ITEM
                8.
            FINANCIAL
                STATEMENTS AND SUPPLEMENTARY DATA
            35ITEM
                9.
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE
            35ITEM
                9A(T).
            CONTROLS
                AND PROCEDURES
            36ITEM
                9B.
            OTHER
                INFORMATION
            37**PART
                III**ITEM
                10.
            DIRECTORS,
                EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
            38ITEM
                11.
            EXECUTIVE
                COMPENSATION
            41ITEM
                12.
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                SHAREHOLDER MATTERS
            45ITEM
                13.
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                INDEPENDENCE
            46ITEM 14.
            PRINCIPAL
                ACCOUNTING FEES AND SERVICES
            48ITEM
                15.
            EXHIBITS
                AND FINANCIAL STATEMENT SCHEDULES
            49SIGNATURES
            52


i


**FORWARD-LOOKING
      STATEMENTS**




Certain
      statements in this Annual Report on Form 10-K constitute “forward-looking
      statements” within the meaning of Section 27A of the Securities Act of 1933, as
      amended (the “Securities Act”), and Section 21E of the Securities Exchange Act
      of 1934 (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:




**·**
            the
                willingness or ability of our principal shareholder to continue financing
                our operations or access to sufficient working capital to meet our
                operating and financial needs;




**·**
            integration
                of our recent acquisitions and any future
                acquisitions;




**·**
            market
                acceptance of new product
                introductions;




**·**
            plans
                related to our capital
                expenditures;




**·**
            change
                in regulatory requirements or guidelines;




**·**
            expectations
                of future financial performance;
                and




**·**
            statements
                of our expectations, beliefs, future plans and strategies, anticipated
                developments and other matters that are not historical
                facts.




These
      statements may be made expressly in this document or may be incorporated by
      reference to other documents we have filed or will file with the
      U.S. Securities and Exchange Commission (“SEC”). You can find many of these
      statements by looking for words such as “may,” “would,” “could,” “should,”
“plan,” “believes,” “expects,” “anticipates,” “estimates,” or similar
      expressions used in this document or in documents incorporated by reference
      in
      this document.




These
      forward-looking statements are subject to numerous assumptions, risks and
      uncertainties that may cause our actual results to be materially different
      from
      any future results expressed or implied by us in those statements. Some of
      these
      risks are described in “Risk Factors” set forth in this report.




These
      risk factors should be considered in connection with any written or oral
      forward-looking statements that we or persons acting on our behalf may issue.
      Given these uncertainties, we caution investors not to unduly rely on our
      forward-looking statements. We do not undertake any obligation to review or
      confirm analysts’ expectations or estimate or to release publicly any revisions
      to any forward-looking statements to reflect events or circumstances after
      the
      date of this document or to reflect the occurrence of unanticipated events.
      Further, the information about our intentions contained in this document is
      a
      statement of our intention as of the date of this document and is based upon,
      among other things, the existing regulatory environment, industry conditions,
      market conditions and prices, the economy in general and our assumptions as
      of
      such date. We may change our intentions at any time and without notice, based
      upon any changes in such factors, in our assumptions or otherwise.




**PART
      I**




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




References
      throughout this annual report to “Health Systems Solutions ,”
“HSS,”
      “the Company,” “we,” “us” and “our” refer to Health Systems Solutions, Inc., and
      unless otherwise indicated, to our operating subsidiaries, Healthcare Quality
      Solutions, Inc., VHT Acquisition Company, CareKeeper Solutions, Inc., and HSS
      Consultancy, LLC and their subsidiaries.




We
      are a
      Nevada corporation which was incorporated on July
      31, 2001. 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.HSSglobal.com and is currently being upgraded. Information
      on our website is not a part of this report or any other report filed with
      the
      SEC.







**Overview**





We
      are a
      technology and services company dedicated to bringing innovation to the health
      care industry. Our objective is to leverage our understanding of current and
      next-generation technologies to offer value-added products and services which
      will generate improved clinical, operational and financial outcomes for our
      clients. Our portfolio of products and services extends across many segments
      of
      health care including home health care, medical staffing, acute and post-acute
      facilities, and telehealth/telemedicine. Our business is grouped into three
      segments: technology solutions, software and consulting.




Our
      fastest growing segment is Technology Solutions which consists of HSS
      Consultancy LLC, our New York-based subsidiary which offers innovative high-end
      development and post-implementation support for complex projects across a wide
      spectrum of applications. We believe that we design, develop, distribute and
      support applications that are better designed and more functional and can be
      produced more rapidly than our clients are able to produce by themselves. Our
      engineers and programmers are cross-trained and are able to apply a diverse
      set
      of disciplines to solve technical challenges. We currently perform these
      services for Philips Medical Systems, a subsidiary of Philips Electronics North
      America Corporation (“Philips”), one of the world’s largest and most
      sophisticated health care technology companies.




Our
      Software segment develops, markets, sells and supports proprietary products
      to
      health care companies and has a strong presence in the home health care market.
      These products are designed to assist health care organizations, home health
      care agencies and other related companies to manage and compete more effectively
      in the Medicare, Medicaid, private pay and managed care environments. We also
      provide medical staffing companies with software solutions that track candidate
      recruiting, scheduling and back office management. We offer several
      comprehensive proprietary software solutions including:




**·**
            HSS Advantage
                - Transactional fee-based software solution that allows clients to
                process
                patients’ clinical assessments in an electronic format, audit for errors
                and transmit submissions for
                reimbursement.




**·**
            HSS Analyzer
                – Utilizes a client’s existing data to provide management reporting and
                analytics for revenue optimization and enables the client to increase
                business efficiencies.




**·**
            VividNetTM
                and Vivid CareTM – Software for the private duty and medical
                staffing markets that offers scheduling, billing/accounts receivable,
                and
                workflow/human resources management. (VividNetTM is web-based and
                Vivid CareTM is server-based).




**·**
            VividCall –
                An integrated telephony solution used for site visit verification
                and
                broadcast messaging.




Our
      newly
      formed Consulting segment was created to leverage our proprietary software
      products and expertise in the home health care market to provide our clients
      with performance analyses and professional services to
      help
      maximize their revenue opportunities and increase the quality of patient
      care. Our
      consulting services include:




**·**
            Performance
                Advisors - A consulting service that utilizes our existing products
                and
                services and our Medicare/Medicaid expertise to help our clients
                maximize
                their revenue opportunities while increasing the quality of patient
                care.




**·**
            Professional
                Services - A service that designs, develops and implements customized
                software solutions. The offerings in this category can range from
                adding
                client-specified functionality to existing HSS software products
                to
                building applications from the ground up to meet the unique needs
                of our
                clients.




**Strategy**




We
      believe that technology will continue to play a pivotal role in the
      availability, quality and cost containment of global health care. Furthermore,
      we envision similar technological needs across various segments of health care
      including preventative health and disease management, acute and post-acute
      care
      and home health care. The utilization of technology to capture data from various
      sources, disciplines, periods of time and geographic proximities combined with
      the deployment of mobile “smart” device applications, such as GPS and
      radio-frequency tracking capabilities, coupled with more robust and powerful
      database management tools has created many possible applications that can be
      developed to improve global health care further.




2


Our
      strategy is to leverage our collective talents in software engineering and
      programming, client service and sales to identify health care companies in
      need
      of technology solutions to improve clinical outcomes, make their business more
      operationally efficient and increase their return on capital investment. We
      believe we can grow
      significantly by:




**·**
            further
                improving the quality, functionality and client experience of our
                product
                portfolio;




**·**
            diversifying
                into new health care technology markets with high-growth, high-margin
                products and services; and




**·**
            acquiring
                companies that possess products, services or intellectual property
                that
                can be accretive to our company.




Our
      strategic vision took shape in the latter half of 2007 as a new management
      team
      assumed leadership and performed an extensive evaluation of our business and
      marketplace. Management analyzed and reviewed, among other things, our company’s
      personnel, technology (including engineering capabilities, platform architecture
      and programming policies and procedures), operations (including quality
      assurance and client support), financial structure, research and development,
      and intellectual property. This evaluation resulted in a comprehensive road
      map
      that laid the course for a revised business strategy dedicated to
      industry-leading innovation, product quality and client experience.




Our
      strategic objective is to make the investments necessary to attract and retain
      personnel who possess superior technical skills, creativity and a desire to
      succeed. We believe such talent will help us advance along the product
      development curve. Successful execution of our objectives will allow us to
      strengthen our current position in the home health care market while developing
      new markets in health care technology that will allow us to leverage our skill
      sets and achieve economies of scale and scope.




The
      first
      step toward achieving this vision was the October 2007 agreement with Philips
      which transferred Philips’ Service Innovations Group to HSS. With this
      agreement, we added significantly to our portfolio of technical capabilities,
      personnel and industry experience. In addition to a material increase in
      revenues, we acquired a cohesive group of talented technologists and client
      service specialists who support products in the acute health care
      market.




In
      addition to organic growth, we are evaluating acquisition opportunities within
      a
      wide spectrum of the health care technology sector, including the acute and
      post-acute markets to build on the development and project management expertise
      we already have. Such opportunities come from multiple sources and will
      complement our existing abilities to serve clients with complex and
      sophisticated information technology, or IT, system needs. Moreover, we expect
      that our existing health care clients will benefit indirectly from this strategy
      in the form of more robust and technically sophisticated products that we will
      be able to use in answering their growing technology needs.




**Our** **Products
      and Services**




We
      sell
      services and software solutions that enable our clients to improve the clinical,
      operational and financial results of their businesses.  We deliver these
      solutions through our three business units: Technology Solutions, Software
      and
      Consulting Services.  Historically, the concentration of our offerings has
      primarily been software within the home health care sector; however, we have
      recently begun to expand our offerings to include services and have also
      expanded our reach into other segments of health care.




3


**Technology
      Solutions**




Our
      Technology Solutions segment is comprised principally of our subsidiary HSS
      Consultancy, LLC (“HSSC”). In October 2007, we entered into a consultancy
      agreement with Philips, pursuant to which Philips transferred to us the
      projects, operations and responsibilities formerly carried out by Philips’
Service Innovations Group.  The initial term of the agreement will be until
      December 31, 2009, although it can be extended by agreement of both parties
      for
      successive one-year terms. As part of the consultancy agreement, we hired over
      20 technology and consulting experts from Philips and placed them in HSSC to
      support the contract requirements. Since October 2007, we have hired additional
      personnel to join HSSC and we now offer the following services:




**·**
            developing
                and selling customized software applications to corporate operations
                support and management,




**·**
            providing
                expert and research-level software
                support,




**·**
            implementation,




**·**
            remote
                and on-site end-user, manager and executive training,
                and




**·**
            project
                rollout and deployment management.




The
      solutions we currently provide confer several substantial benefits on our
      clients, including reduced down time of high-tech hardware in the field, less
      time required to develop new software and solutions, having dedicated client
      training and support, staying in compliance with regulatory requirements, and
      enhancing risk management programs.




We
      offer
      services to clients through both stand-alone projects and ongoing agreements
      for
      extended services. We are actively pursuing new clients and additional business,
      both in the health care industry and beyond.




**Software**




Our
      software solutions include HSS Advantage, HSS Analyzer, VividCareTM, VividNetTM
and VividCall. They are designed to help our clients maximize revenue
      generation, optimize cash flow, maintain staffing efficiency, ensure appropriate
      risk management, monitor the quality of care provided and comply with regulatory
      changes and requirements.




HSS Advantage ** software
      is designed to provide the following benefits:




**·**
            It
                enables Medicare home health agencies to meet federal mandates for
                collecting data. Clients can transmit data to us using a variety
                of
                methods. Drafts are typically available for viewing on the Internet
                within
                two hours of receipt. Upon completion of the editing process, we
                transmit
                the required data to appropriate government agencies as required
                under the
                regulations.




**·**
            A
                variety of real-time reports are provided that highlight clinical,
                financial and operational issues/guidelines to ensure optimum clinical
                and
                financial results. Other reports enable a client to evaluate the
                efficacy
                of the proposed clinical interventions as they relate to the Medicare
                regulations.




**·**
            It
                provides reports that enable clients to evaluate the effectiveness
                of
                their services by benchmarking the clinical outcome of the patient
                against
                national norms, guiding the client to improved processes and best
                practices.




**·**
            It
                provides services that deliver medication teaching sheets that are
                required to be left with the patient that describe how to use the
                drug and
                any possible risks. The software compares all drugs that have been
                entered
                into the system for a patient to determine possible interactions
                between
                and among the drug, food and selected herbs.




4


HSS Analyzer
      is designed to provide the following advantages:




**·**
            It
                extracts data from software programs supplied by 12 other vendors
                including: McKesson Corporation, Cerner Corporation, Misys, Inc.,
                Carecentric, Inc. and Delta, Inc., among others.This
                data is then processed toprovide
                decision support information that enables the user to improve clinical
                and
                claims operating performance.




**·**
            Itcan interface with virtually all of the home care industry’s major billing
                and financial systems. These interfaces extract financial data from
                the
                billing system and combine this data with clinical utilization data
                to
                provide an integrated view of a home care agency’s status identifying its
                strengths and weaknesses.




**·**
            An
                additional module provides web-based benchmarking information that
                compares one agency of an office with others in our database. We
                believe
                HSS Analyzer is the most comprehensive decision-support product
                available at its price point in the home health care
                industry.




VividNetTM
      software is designed to provide the following advantages:




**·**
            It
                provides web-based software that is designed to handle all types
                of home
                care payers including Medicare, Medicaid, private pay and medical
                staffing
                agencies. VividNetTM is designed to track and manage information necessary
                for a health care company’s operations and profitability. Information is
                managed according to the natural workflow of an agency’s operations - from
                front office client intake and workforce management, through an integrated
                scheduling function, to back office accounting and reporting. The
                systems
                provide caregiver/patient scheduling, tracking of patient visits
                and
                accounts and provide for reimbursement of services for the home health
                agency.




**·**
            The
                heart of the system is a color-coded scheduling calendar, which drives
                other essential business operations such asclient
                management, human resources, billing, accounts receivable, payroll,
                general ledgerand
                management
                reports.




Vivid CareTM
      is an earlier version of the VividNetTM software. The VividNetTM software solution
      was upgraded in November of 2007 with all necessary improvements required to
      sell and implement the solution successfully. Since the upgrade was released,
      our clients have responded positively and reported a significant improvement
      in
      the product’s performance. The VividNetTM solution will continue to be updated
      with new features throughout 2008.




Development
      efforts to integrate the HSS Advantage solutions and VividNetTM solution for
      clients that desire the features of both Medicare and private duty business
      have
      been underway and successfully delivered to our Beta users. The Beta release
      will be tested throughout the first half of 2008.




With
      our
      VividCall product, we are one of a limited number of home care software
      companies in the United States that is licensed to use certain patented
      technology for home health telephony services. The patent provides for the
      use
      of 800 numbers to identify the company receiving the call, dialed number
      identification to recognize the phone that is initiating the call, and processes
      for confirming time, expense, activity and attendance reporting.




The
      VividCall system provides a real-time solution for managing a mobile workforce
      by gathering and processing information with
      little or no human involvement. Because VividCall captures timecard information
      via the telephone, significant operational efficiencies can be gained throughout
      the entire home care organization. VividCall eliminates paper timecards and
      additional staff time required for manual data entry of time and attendance.
      Schedules are verified in VividNet automatically and prepared for billing and
      payroll processing without any additional staff intervention. An added feature
      of VividCall is improved communication with staff via an intelligent voice
      messaging system, allowing dissemination of information to specific employees
      or
      the entire workforce. The benefits of VividCall include savings on labor
      involvement required to edit and process timecards, billing and payroll
      information; elimination of paper time cards and ensure accuracy of payroll
      information; reduced fraud and abuse by electronically verifying scheduled
      visits; the monitoring of no-shows and cancellations from designated office
      computer, in real-time; and improved communication and workforce management
      with
      VividCall voice messaging.


5


In
      addition to the software services we deliver, we also provide support services
      relating to effective implementation and ongoing use on a fee basis. We offer
      training and education services either on the client’s site or over the web. We
      also offer consulting services relating to the effective use of the available
      decision support and operations analysis information for a nominal increase
      in
      transaction fees or
      on a
      daily fee basis.




Our
      current strategy is to integrate our products into an enterprise suite. An
      enterprise package that includes all our solutions would create efficiencies
      and
      simplification that is currently unavailable in a stand-alone environment.
      We
      also anticipate that existing and new clients will subscribe to more of our
      products and services once they are integrated.




**Consulting
      Services**




Our
      Performance Advisors Group provides analysis of performance and generates
      client-oriented work projects for performance improvements in clinical, quality
      and financial management. The purpose of engaging the Performance Advisors
      group
      is to gain an outside perspective of the client’s home health business and to
      identify areas in which process improvement can be implemented to realize
      specific outcomes. In an engagement, this group partners with clients to define
      an episode management project including goals, deliverables and timelines.
      Our
      consultant is an advisor, industry and clinical expert and an advanced data
      analysis resource assigned to the client’s project work group.




This
      group identifies opportunities to improve performance using proprietary decision
      support tools and advanced data analysis to review client’s information system
      clinical and financial databases. Goals are set by applying industry norms
      or
      standards and evidence based plans for patient care.




Project
      examples vary and include:




**·**
            reduction
                in Low Utilization Payment Adjustment (LUPA) episodes with the
                implementation of an evidence-based care planning process validated
                by
                financial and quality outcome
                analysis;




**·**
            sustainable
                process to improve OASIS assessment accuracy (*e.g.*,
                clinician training focused on specific measures, using our proprietary
                software to identify probable OASIS assessment
                error);




**·**
            sustainable
                improvement in outcome quality scores published in Home Health Compare
                and
                preparation for performance based payment (*e.g.*,
                reduction in assessment error and improved accuracy in the data required
                for outcome based quality improvement
                plans);




**·**
            implementation
                of improved resource utilization in therapy episodes and implementation
                of
                discipline resource utilization in selected, high value
                episodes;




**·**
            pro
                forma analysis of episodes caused by the PPS reimbursement rule changes
                and fiscal intermediary policy;




**·**
            revenue
                optimization when episode analysis results in opportunities to make
                valid
                corrections in closed and filed claims;
                and




**·**
            due
                diligence analysis for clients considering an investment or business
                acquisition.




Our
      Professional Services group was created in early 2008 when we came to the
      realization that large clients can no longer rely on out-of-the-box solutions
      to
      operate their business successfully. Our Professional Services group will
      utilize our current suite of products and build high value additions,
      customizing the products to specific client demands. Our customers have been
      receptive to discussing our solutions and we plan to aggressively contact all
      of
      our large clients to discuss their needs.




6


**Corporate
      Developments**





The
      principal events that have occurred since January 2007 are as
      follows:




**·**
            In
                2007, we completed the integration of operations of two acquisitions
                made
                in the previous year. Vanta Health Technologies, LLC, ("Vanta"),
                which was
                acquired in April 2006, and CareKeeper Software, Inc. (“CareKeeper”),
                which was acquired in May 2006.




**·**
            August
                2007, Stanford International Bank, Ltd., our principal shareholder
                (“SIBL”), entered into a series of agreements with us pursuant to which
                SIBL agreed to invest up to an additional $7,850,000 through the
                purchase
                of $2,850,000 of Series D Convertible Preferred Stock and $5,000,000
                of
                Convertible Debentures. As of December 31, 2007, SIBL had purchased
                $1,675,000 of Series D Convertible Preferred Stock and no Convertible
                Debentures, leaving an additional $6,175,000 of available
                funding.




**·**
            Effective
                September 1, 2007, Stan Vashovsky became Chairman of the Board and
                Chief
                Executive Officer following the retirement in August 2007 of our
                former
                Chief Executive Officer, B.M. Milvain. Also on September 1, 2007,
                Michael
                G. Levine became our Chief Financial Officer and Executive Vice President.
                Management immediately commenced an internal evaluation and strategic
                review of our business strategy and
                operations.




**·**
            Effective
                October 1, 2007,we
                entered into a consultancy agreement with Philips, pursuant to which
                Philips transferred to us the projects, operations and responsibilities
                formerly carried out by Philips’ Service Innovations Group.




**·**
            In
                November 2007, Performance Advisors division signed its first deal
                which
                established us as a consulting services business in addition to a
                software
                provider. We began receiving revenue under this agreement in 2008.




We
      consider 2007 a transformational year for HSS as a new management team was
      put
      in place to enhance and expand our product and services portfolio and develop
      new markets. Upon the arrival in September 2007 of Messrs. Vashovsky and Levine
      as CEO and CFO, respectively, management performed an internal evaluation and
      strategic review. The following analyses were performed:




**·**
            documented
                and evaluated processes and
                procedures;




**·**
            visited
                and interviewed clients to ascertain client service and product quality
                perceptions and sought input to improve our client
                relationships;




**·**
            initiated
                an employee survey to poll workers on various employment
                issues;




**·**
            performed
                profitability analyses and identified opportunities to improve working
                capital;




**·**
            reviewed
                each employee on a number of performance
                criteria;




**·**
            analyzed
                and benchmarked the existing product portfolio; and




**·**
            evaluated
                engineering, quality assurance, deployment and client support
                processes.




Based on
        this
        internal review, management initiated the following improvements to our business
        model:




**·**
            We
                overhauled the VividNetTM product to increase the quality and functionality
                of the software to higher acceptance levels established by management.
                Sales of the product were temporarily suspended while management
                invested
                significant resources to make programming improvements. The product
                was
                re-launched in November 2007 to extremely positive client
                feedback.




**·**
            We
                reallocated employees in the organization to better utilize their
                talents
                and focus on higher-margin, higher-growth products and
                services.




**·**
            We
                implemented a cost savings program to reduce spending and improve
                return
                on investment.




7


**·**
            In
                order to help our clients meet regulatory requirements, we allocated
                additional resources to product development to ensure that all of
                our
                software products were among the first to be compliantunder the Medicare Home Health Prospective Payment System.




**·**
            We
                overhauled all client support processes to ensure that all client
                service
                representatives were cross trained and able to provide the highest
                level
                of service.




**·**
            We
                instituted a new product launch policy that included mechanisms for
                ensuring successful product
                launches.




We
      believe that these recent developments will enable us to compete successfully
      in
      a rapidly evolving and extremely competitive industry. We believe that we have
      developed a broad base of products and services in the home health industry.
      We
      intend to leverage that knowledge combined with our products and services to
      target other areas of the health care industry and any other industry that
      can
      benefit from systems and solutions that streamline operations and improve
      operational and clinical outcomes.




**Health
      Care** **Industry
      Background**




The
      health care system is the largest industry
      in the United States.




**·**
            According
                to the Centers for Medicare and Medicaid Services (“CMS”), in 2006,
                aggregate health carespending
                in the United States reached $2.1 trillion. The total is projected
                to
                reach $2.9 trillion in2009
                and $4 trillion by 2016, by which point national health care spending
                is
                projected to be 20% of gross domestic product, or
                GDP.




**·**
            In
                2005, private funds (including out-of-pocket payment and private
                insurance) accounted for 54.6% of the total, while federal programs
                (primarily Medicare and Medicaid) accounted for 32.4%, with state
                and
                local governments funding the remaining
                13.0%.




**·**
            In
                2007, Medicare enrollment was approximately 43 million. It is projected
                to
                reach 77 million enrollees by 2031 when the youngest of the baby
                boom
                generation are enrolled. The $432 billion in 2007 Medicare outlays
                represent 16% of the total US federal budget for the year. According
                to
                the Congressional Budget Office, as a budget category, Medicare outlays
                are exceeded only by Social Security (21%) and Defense
                (19%).




**·**
            According
                to a study done by Datamonitor, health care providers in the United
                States
                and Canada will spend up to $39.5 billion on IT in 2008, with annual
                growth averaging 7.4% over the ensuing three years. An industry report
                by
                the Gartner Group projects that the worldwide health care IT market
                exceeds $113 billion and will continue to grow at approximately 6.6%
                through 2009.




According
      to researchers, disparities in the quality of health care also continue to
      drive
      interest in health care IT spending.  In a survey done by Information
      Technology Management Web, it was shown that the health care industry as a
      whole
      lags the average annual IT spend per employee in US industry by more than half
      ($6,918 vs. $3,047 in 2005).  Studies show that hospitals with more robust
      IT infrastructures often tend to have better patient outcomes than peers with
      weaker ones.  Given the directive from CMS to tie payments for medical care
      to patient outcomes (also known as “pay for performance”), the demand for
      sophisticated and robust IT solutions will continue to grow in coming
      years .




A
      recent
      survey by the Health Care Information Management Systems Society revealed that
      upgrading clinical information systems, implementing technology to reduce
      medical errors and implementing an electronic medical record system were most
      frequently identified as top IT priorities for participating health care
      organizations.




The
      2008
      US pre sidential
      campaign has underscored the importance of health care as a national priority,
      including the containment of costs, improving quality and access, empowering
      individuals and securing confidential patient information.  We expect that
      any meaningful reforms in the coming years will trigger additional spending
      on
      health care IT in order to ensure compliance with new legislation and/or
      regulatory developments. We believe that certain sectors of health care such
      as
      home health are in greater need of automation than others.




8


Home
      health is one of the fastest growing segments in the United States health care
      industry, growing at approximately 8% per year and projected to double in size
      every nine years, according to a recent National Health Expenditure study by
      CMS. Factors that we believe have contributed and will contribute to the need
      for improved home health services include:




**·**
            recognition
                that home health services can be a cost-effective alternative to
                more
                expensive institutional care;




**·**
            aging
                demographics, which is a function of both a large cohort of older
                Americans that will be incurring greater health care costs, as well
                as the
                fact that life expectancies are improving for all ages, meaning that
                today’s elderly will be expected to outlive their
                parents;




**·**
            changing
                family structures in which more aging people will be living alone
                and may
                be in need of assistance;




**·**
            increasing
                consumer and physician awareness and interest in home health services;




**·**
            the
                psychological benefits of recuperating from an illness or accident
                or
                receiving care for a chronic condition in one’s own home;
                and




**·**
            medical
                and technological advances that allow more health care procedures
                and
                monitoring to be provided at home.




We
      believe home health agencies are consolidating and expanding their service
      delivery to encompass more opportunities. We believe that in the process of
      consolidation, home care management will require solutions that reach across
      these heretofore independent venues and need help to streamline their
      operations, standardize the delivery of care, maximize the reimbursement under
      the regulations, improve the quality of care delivered, and minimize compliance
      and other risks. By providing IT services and solutions, we help reduce the
      IT
      burdens of our clients, enabling them to focus on their core businesses and
      react quickly to dynamic market conditions.




Medicare
      is the largest single payer in the home care market, making it a target for
      all
      industry segments – medical devices, distributors, recruiters, trade
      associations and technology. Technology on a large scale was driven into the
      home care market with the introduction of the Balanced Budget Act of 1997.
      In
      that act, certain targeted health care providers (home care and long term care)
      were given deadlines by which they must begin to electronically submit their
      forms (OASIS and MDS, respectively) to their financial intermediary for
      payment.




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 very
      success of a home health 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.
      Reimbursement levels are 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, and an error in
      collecting the data on the final assessment can result in the rejection of
      an
      entire claim, or an audit survey by a regulatory agency that could result in
      fraud and abuse charges.




Telemedicine
      and telehealth represents an approach to health care IT that focuses on using
      medical information exchanged electronically from one site to another to improve
      patients' health status. It can include remote patient monitoring, specialist
      consultations (such as radiology) and consumer medical information. “Telehealth”
can include both clinical and non-clinical services (such as video conferencing
      technology) within the broader framework of Health care IT. Recent studies
      of
      telemedicine programs have consistently demonstrated a pronounced improvement
      in
      both patient outcomes and overall cost savings. This preponderance of data
      has
      already prompted 18 states to begin reimbursing for services provided via
      telemedicine.




9


In
      response to these, and other issues, Medicare started a home health
      pay-for-performance (“P4P”) demonstration in January 2008. The project provides
      medical groups with incentive payments based upon performance against quality
      benchmarks. The program uses evidence-based measures to assess the performance
      of over 35,000 physicians in 225 medical groups caring for more than 6.2 million
      commercial HMO enrollees. The program's data is collected and analyzed by the
      National Committee for Quality Assurance (“NCQA”), a Washington non-profit
      dedicated to improving health care quality. CMS has announced it plans to
      introduce P4P into the home health industry in 2008 or 2009. The
      P4P
      initiatives by CMS for home health care will further increase home care’s
      dependence on information technology services such as those delivered by us.
      We
      are investigating approaches that will enable us to assist home care providers
      operate effectively under the P4P regulations if and when they become
      effective.




As
      the
      baby boomers entering the health care system begin to have a greater financial
      impact on the cost of health care, we believe that a number of things will
      happen that may affect our business:




**·**
            there
                will be public and political pressure to rationalize and consolidate
                many
                of the myriad post-acute health care delivery venues currently protected
                under Medicare and Medicaid
                regulations;




**·**
            there
                will be consolidation within post-acute verticals such as home care,
                nursing homes, rehabilitation facilities and hospices, as well as
                consolidation or elimination of some of the types of
                providers;




**·**
            consolidation
                of providers will be preceded by an evolving introduction of data
                standards that enable ready exchange of patient data and measurement
                of
                performance;




**·**
            ongoing
                changes will make obsolete proprietary, closed system designs and
                require
                flexible, open source approaches; and




**·**
            there
                will be increased need to devise automated patient plans of care
                to manage
                details of specific disease states that can be updated electronically.




For
      all
      of the reasons noted above, health care organizations are under increased
      pressure to reduce medical errors and increase operational efficiencies. Our
      software and services are designed to help clients achieve these objectives.
      Government regulation is also requiring changes within the health care industry.
      We believe that these changes may increase demand for health care information
      technology software and services such as ours. We believe that most providers
      of
      services in post-acute health care do not have the resources to invest in or
      manage the technology required to meet this new environment. We believe the
      opportunity exists to consolidate information technology vendors in the
      post-acute arena in advance of the rationalization of the health care providers
      themselves.




We
      believe that a growing common ground in technology solutions is emerging among
      care providers in different settings, including home health care, nursing homes,
      skilled nursing facilities and acute-care facilities. Cost containment is a
      top
      priority for all care providers, public and private alike, and the consensus
      among industry experts is that technology investments that improve efficiency
      can not only help minimize costs, but improve clinical outcomes, as well. We
      plan to focus on technology solutions that can be deployed to do both, all
      across the care spectrum, from acute to home health care.




**Our
      Client** **s**




We
      sell
      our products and services to companies in the health care industry.
      During 2007, we
      had approximately 323 clients in 44 states using one or more of our products
      or
      services. In 2007,
      our two largest clients were Philips and Amedisys Inc, accounting for 19% and
      17%, respectively, of our company’s total 2007 revenues. No other clients
      accounted for revenues greater than 10% of total 2007 revenues.




Our
      2007
      revenues from Philips were generated only in the fourth quarter of 2007 and
      represented approximately 49% of revenues for that quarter. We believe that
      Philips will continue to be a substantial client for our company based on
      projects under contract through at least December 31, 2009.


10


Amedisys’
      revenue as a percentage of total company revenue decreased to 17% in 2007 from
      35% in 2006 as a result of Amedisys’ decision to distribute laptop computers to
      their full time nursing staff which greatly reduced their need for our
      verification services. As a result of the changes, management believes that
      Amedisys will become a smaller percentage of overall revenues unless we are
      able
      to deliver new products and services that are desired by Amedisys. We continue
      to enjoy a collaborative relationship with Amedisys and intend to pursue
      additional business with Amedisys.




Management
      believes it is important not to be solely tied to any one client. Although
      Philips will continue to make up a large percentage of revenues in 2008,
      management is working diligently to avoid client concentration risk by adding
      other large accounts to diversify our revenue sources.




**Sales
      and Marketing**




Our
      products and services are sold primarily through a direct sales force that
      focuses on current accounts for expanded portfolio sales and potential clients
      identified through leads and prospects identified through marketing campaigns,
      tradeshows and daily business interactions. Historically, we have focused on
      providers of home health services; however, more recently we have begun to
      market our products and services to health care providers of a variety of sizes
      and specialties.




In
      2008,
      marketing will focus on direct mail campaigns, account penetration activities,
      tradeshows, a newly revamped and interactive web site and a strong branding
      campaign that showcases our vision, products, services and people.




Several
      new opportunities have been presented to us as a result of our new Professional
      Services Group that will utilize our current suite of products and build high
      value additions, customizing the products to specific client demands. We are
      confident in a growing market of large clients that can no longer rely on out
      of
      the box solutions to successfully operate their business.




**Product
      Development**




We
      seek
      to maintain technological competitiveness and respond to market trends and
      our
      clients’ evolving needs. We are also creating new functionality for our existing
      software. We have reduced our reliance on outside vendors that have historically
      aided our internal personnel in software development. We have also involved
      clients in our software design process, enabling them in some cases to have
      direct and regular access to the development staff, including its senior
      leadership.




The
      system architecture lends itself to rapid delivery of improved software and
      product functionality. The majority of our systems are designed as "thin-client"
      (clients need only a browser to access the services) minimizing the information
      technology infrastructure required at the client site.




The
      current HSS Advantage system architecture is based on the widely accepted
      J2EE architecture that ensures "openness" and "scalability.” The VividNetTM
system architecture is based on the Microsoft .net platform that also ensures
      openness and scalability. Both approaches provide scalable architectures and
      lend themselves to integration of databases and communications. The designs
      and
      the centralized hosting approach facilitates managing and delivering changes
      and
      enhancements to the software and service. Our management and technology teams
      constantly evaluate our systems architecture and have been working on a product
      road map for the next generation of products.




In
      2007,
      we introduced our hand-held data collection tool into beta testing at two client
      sites. Through the second quarter of 2008 we expect to add additional features
      to this device as our beta users continue to offer feedback as to its success.
      This product is expected to increase retention of our clients who use the
      HSS Advantage product, since many of our clients are looking for a data
      input device that the clinician can use in the patient’s home. Development of
      the underlying software will be produced with existing staff.




The
      VividNetTM software solution was updated in November of 2007 with all necessary
      improvements required to successfully sell and implement the solution. Since
      the
      update, there has been an increase in client satisfaction. The VividNetTM
solution will continue to be updated with new value added features throughout
      2008.




11


Research
      and development costs include amounts expensed and capitalized during the
      relevant periods. For the years ended December 31, 2007, we expensed $1,481,743
      and capitalized $991,523 compared with the year ended December 31, 2006, the
      Company expensed $1,230,207 and capitalized $1,003,254.




**Operations**




Our
      client service department provides a variety of operational support to clients.
      Client service includes a verification service that ensures the accuracy of
      automated optical character recognition translation of hand-written patient
      assessment information to digital data, assistance with client data
      communications, copy data to/from our website, transmitting client's patient
      data to appropriate state Departments of Health, acquiring client reports from
      CMS, posting these reports to our website for access by the client and producing
      client benchmark reports from our national database.




The
      systems infrastructure department manages and supports the computer and
      communications infrastructure used by our clients including hosting services,
      web services administration, communications administration, application
      administration, database administration, systems administration and LAN
      administration.




Our
      products and services are critical to our clients’ operations. As a result, our
      infrastructure requires a high level of service availability. To minimize the
      risk to our clients, we have servers that support client activities installed
      in
      two very secure facilities in Tampa, Florida and Sterling, Virginia, both of
      which are managed by Qwest Communications International Inc. at its Qwest
      CyberCenters. These two facilities provide redundant power and air conditioning,
      redundant Internet connections and redundant telecommunications. This department
      also provides the full continuum of service functions for all clients utilizing
      our products and services. These functions include implementation, training
      and
      client support.




**Encryption
      and Security from Hackers**




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 128 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 asserted.




**Competition**




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




**·**
            vendor
                and product reputation;




**·**
            reliability
                of service;




**·**
            availability
                of products on preferred computer and communications
                platforms;




**·**
            scalability;




**·**
            integration
                with other applications;




**·**
            functionality
                and features;




**·**
            ease-of-use;




12


**·**
            quality
                of support,documentation
                and training;




**·**
            product
                quality and performance;




**·**
            product
                innovation;




**·**
            price;
                and




**·**
            effectiveness
                of our marketing and sales efforts.




Some
      of
      our competitors in the home health care market are McKesson Corporation, Cerner
      Corporation, Misys PLC, Patient Care Technologies, Inc. and Delta Health
      Technologies, among others, as well as our clients’ own internal IT departments.
      Some of our competitors have significantly economies of scale in terms of
      financial, technical, research and development and marketing resources. As
      a
      result, they may be able to dedicate greater resources to development,
      promotion, sales and support of their products than our company. We believe
      that
      establishing a strong reputation for quality, client service and innovation
      will
      help us compete in the marketplace. We have dedicated significant efforts
      towards improving our reputation in these areas and have received positive
      feedback from our clients as to the improvement in the stability and
      functionality of our products.




**Governmental
      Regulation**




The
      health care industry is subject to changing political, economic and regulatory
      influences that may affect the procurement practices and operation of health
      care providers. Many federal and state legislators have announced that they
      intend to propose programs to reform the United States health care system at
      both the federal and state level. These programs may c ontain
      proposals to increase governmental involvement in health care, lower
      reimbursement rates, revise regulatory requirements and otherwise change the
      environment in which providers operate. Health care 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 health care and claims data though HIPAA affects all aspects
      of
      all health care providers' operations, the greatest impact will be in the
      information technology area. We have taken various steps to comply with HIPAA.
      There will continue to be changes related to HIPAA compliance. 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.




**Employees**




As
      of
      December 31, 2007, we had 89
      full
      time employees, including:




**·**
            6
                in sales;




**·**
            7
                in product management;




**·**
            6
                in training and implementation;




**·**
            33
                in operations and client service;




**·**
            22
                in software development;




**·**
            3
                in hardware support; and




**·**
            12
                in administrative and finance
                positions.




13


The
      geographic distribution of our employees is as follows:




**·**
            50
                in Tampa, Florida;




**·**
            22
                in New York, New York;




**·**
            7
                in Atlanta, Georgia; and




**·**
            10
                working remotely throughout the United
                States.




Our
      employees are not represented by a labor union, nor governed by any collective
      bargaining agreements. We
      believe the relationships with our employees are good.




In
      addition to Messrs. Vashovsky and Levine joining the management team as CEO
      and
      CFO, respectively, several new personnel have joined our company or have taken
      new roles. Below is a list of our senior management team:




**·**
            Anatoliy
                Ryaboy – Senior Vice President, Technology and
                Operations;




**·**
            Wanda
                Sebald – Senior Vice President,
                Sales;




**·**
            Tom
                Lillis – Senior Vice President, Performance
                Advisors;




**·**
            Chip
                Tarrant – Controller;




**·**
            Alex
                Krasov – Director of Desktop Development;
                and




**·**
            David
                Rutgoes – Director of Handheld Product
                Development.




We believe
        that our relationships with these professionals are good.




**Available
      Information**




We
      file
      annual reports, quarterly reports, proxy statements and other documents with
      the
      SEC under 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.




14





**ITEM
                1A.**
            **RISK
                FACTORS******




**Risks
      Related To Our Business**




***We
      have a history of losses and if these losses continue it will materially
      negatively impact the value of our company.***




We
      have
      incurred significant net losses since our inception. These losses have increased
      significantly since our acquisitions. For the year ended December 31, 2007,
      we
      incurred net losses of $9,724,775. Our continued operating losses have
      contributed to the deterioration of our cash position and the decline of our
      working capital. We expect that cash on hand, together with funds available
      to
      us under our agreement with our principal shareholder SIBL, will permit us
      to
      fund our operations for the next year. However, the funding by SIBL is subject
      to the discretion of SIBL and a number of conditions. If SIBL does not make
      funds available to us, we will require additional external funding. 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 not be able to operate our business.




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




We
      are
      substantially dependent on the efforts of members of key management, such as
      our
      Chief Executive Officer Stan Vashovsky. All of the members of key management
      and
      personnel (including Mr. Vashovsky) have the ability to 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. 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. 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. If we
      are
      unable to retain or hire qualified employees, our business may fail and you
      may
      lose your investment.




***We
      depend upon two clients for a significant amount of business. The loss of
      business from these clients will result in increased loss from
      operations.***




In
      2007,
      our two largest clients were Philips and Amedisys Inc. and they accounted for
      19% and 17%, respectively, of our company’s total 2007 revenues.  Our
      2007
      revenues from Philips occurred in the fourth quarter of 2007 and represented
      approximately 49% of revenues for that quarter. We rely on the revenue from
      these clients for our operations. Both clients have the right to terminate
      their
      relationship with us under certain circumstances .
      In the
      third quarter of 2006, Amedisys notified us that it would be substituting our
      verification services with an internal solution. As a result, revenue from
      this
      client has steadily declined and we anticipate that revenue will continue to
      decrease significantly through 2008. If we lose our two largest customers and
      do
      not replace these revenues, it will have a negative impact on our results of
      operations and cash flow.




***We
      have made, and may continue to make, acquisitions which pose integration and
      other risks that could harm our business.***




We
      have
      in the past made acquisitions and we intend to continue to expand our business through the
      acquisition of companies, technologies, products and services. We will only
      achieve the benefits that are expected to result from these acquisitions if
      we
      can successfully integrate administrative, finance, operations, sales and
      marketing from these organizations, and implement appropriate systems and
      controls. The success of the acquisitions and integration into our operations
      will involve a number of risks, including:




**·**
            difficulty
                integrating acquired technologies, products, services, operations
                and
                personnel with the existing businesses and the potential inability
                to
                achieve expected operating efficiencies;




15


**·**
            diversion
                of management’s attention in connection with both negotiating the
                acquisitions and integrating the business;




**·**
            the
                potential inability to successfully pursue or realize some or all
                of the
                anticipated revenue opportunities associated with the acquisition;




**·**
            inability
                to retain and motivate management and key personnel of the acquired
                businesses;




**·**
            exposure
                to unforeseen liabilities of acquired
                companies;




**·**
            the
                need to incur additional debt or use cash; and




**·**
            the
                impact on our internal controls and compliance with the regulatory
                requirements under the Sarbanes-Oxley Act of 2002.




As
      a
      result of these and other potential problems and risks, businesses we acquire
      may not produce the revenues, earnings or business synergies that we
      anticipated, and acquired products, services or technologies may not perform
      as
      we expected. As a result, we may incur higher costs and realize lower revenues
      than we had anticipated. If we fail to integrate the acquired businesses
      successfully and/or fail to realize the intended benefits of the acquisition,
      our results of operations could be materially and adversely affected. Failure
      to
      manage effectively our growth through acquisitions could adversely affect our
      prospects, business, results of operations and financial condition.




***We
      have been, and continue to be, involved in litigation matters that are expensive
      and time consuming to defend. One such litigation matter is ongoing and may
      continue to be a drain on our resources.***




During
      the year ended December 31, 2007, we were involved in two separate litigation
      matters. One of these matters is still ongoing; we settled the other. In both
      cases, the costs of defending the litigation was expensive, in terms of the
      legal fees as well as the time and energy management had to expend to defend
      the
      matters. We continue to be involved in one such litigation matter. Some or
      all
      of the amount we will be required to pay to defend or to satisfy a judgment
      or
      settlement of any or all of these proceedings may not be covered by
      insurance.




***If
      we are not able to generate sufficient operating cash flows or obtain external
      financing, our ability to fund capital expenditures or fulfill our obligations
      or execute expansion plans may be limited.***




Our
      capital expenditures, together with ongoing operating expenses and obligations
      to service our debts, will be a substantial drain on our cash flow and may
      decrease our cash balances. We regularly assess the capital markets for external
      financing opportunities, including debt and equity. Additional debt or equity
      financing may not be available when needed or, if available, may not be
      available on satisfactory terms. Our inability to obtain needed debt and/or
      equity financing or to generate sufficient cash from operations may require
      us
      to abandon projects or curtail capital expenditures. If we curtail capital
      expenditures or abandon projects, we could be materially adversely
      affected.




***Our
      software may not operate properly, which could damage our reputation and impair
      our sales.***




Software
      development is time consuming, expensive and complex. Unforeseen difficulties
      can arise. We may encounter technical obstacles, and it is possible that we
      could discover additional problems that prevent our software from operating
      properly. If our software contains errors or does not function consistent with
      software specifications or client expectations, clients could assert liability
      claims against us and/or attempt to cancel their contracts with us. These risks
      are generally more significant for newer software, until it has been used for
      enough time in enough client locations for us to have addressed issues that
      are
      discovered through use in disparate circumstances and environments. Due to
      our
      development efforts, we generally have significant software that could be
      considered relatively new and therefore more vulnerable to these risks,
      including at present our medication management and ambulatory software, among
      other things. It is also possible that future releases of our software, which
      would typically include additional features, may be delayed or may require
      additional work to address issues that may be discovered as the software comes
      into use in our client base. If we fail to deliver software with the features
      and functionality promised to our clients, we could be subject to significant
      contractual damages, face serious harm to our reputation and our results of
      operations could be negatively impacted.




16


***Our
      software development efforts may be inefficient or ineffective, which could
      adversely affect our results of operations.***




We
      strive
      to develop new software and improve our existing software to add new features
      and functionality. We schedule and prioritize these development efforts
      according to a variety of factors, including our perceptions of market trends,
      client requirements and resource availability. Our software is complex and
      requires a significant investment of time and resources to develop, test and
      introduce into use. Sometimes this takes longer than we expect or we encounter
      unanticipated difficulties that require us to re-direct or scale-back our
      efforts. In some cases, we change our plans in response to changes in client
      requirements, market demands, resource availability, regulatory requirements
      or
      other factors. All of this can result in acceleration of some initiatives and
      delay of others. These factors place significant demands upon our software
      development organization and require complex planning and decision making.
      If we
      make the wrong choices or do not manage our development efforts well, we may
      fail to produce software that responds appropriately to our clients' needs
      or we
      may fail to meet client expectations regarding new or enhanced features and
      functionality.




***We
      may experience implementation delays that could harm our reputation and violate
      contractual commitments.***




Some
      of
      our software is complex and requires a lengthy and expensive implementation
      process. Each client's situation is different, and unanticipated difficulties
      and delays may arise as a result of failures by us or the client to meet our
      respective implementation responsibilities or other factors. Implementation
      delays could motivate clients to delay payments or attempt to cancel their
      contracts with us or seek other remedies from us. Any inability or perceived
      inability to implement our software consistent with a client's schedule could
      harm our reputation and be a competitive disadvantage for us as we pursue new
      business. Our ability to improve sales depends upon many factors, including
      completion of implementation and successful use of our new software releases
      in
      live environments for clients who achieve success and are willing to become
      reference sites for us. Implementation also requires our clients to make a
      substantial commitment of their own time and resources and to make significant
      organizational and process changes and, if our clients are unable to fulfill
      their implementation responsibilities in a timely fashion, our projects may
      be
      delayed or become less profitable.




***A
      loss or material deterioration of our service availability could result in
      significant damage to our clients and may result in clients initiating legal
      proceedings against us.***




We
      have
      installed our computing and communications control equipment at two different
      Qwest CyberCenter facilities. It is possible that a catastrophic event could
      damage either of these sites rendering our services unavailable for an extended
      period. Should this occur, we could be subject to lawsuits by our clients,
      which
      would be expensive and time-consuming to defend.




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




Ensuring
      our services are compliant with changes in Medicare’s “Conditions of
      Participation,” the provisions of HIPAA and other regulatory requirements, is
      challenging and expensive. 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 clients and/or the slowing
      down of sales cycles, any and all of which would decrease our
      revenue.




17


***If
      we are unable to respond in an effective and timely manner to technological
      change, our products may become obsolete, we will lose clients and our revenue
      will decrease, any or all of which would greatly reduce the value of our
      company.***




The
      market for management information tools is characterized by rapid technological
      change, frequent new product introductions and enhancements, uncertain product
      life cycles, changes in client demands and evolving industry standards and
      government regulation. 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 client requirements. If we experience material delays
      in introducing new products and enhancements, our prospects for growth will
      be
      impaired and our reputation with our clients may be damaged.




***Competition
      in the health care information systems industry is intense and if we are unable
      to compete we will lose significant clients or be unable to attract clients
      and
      our revenue could decrease.***




The
      market for health care information systems is intensely competitive, rapidly
      changing and undergoing consolidation. Our competitors in the field include: McKesson
      Corporation, Misys Healthcare Systems, and Cerner Corporation ,
      among
      others. These competitors have substantially greater resources and more
      experience than us. We anticipate increased competition in the future as new
      companies enter the market in response to recent regulations as well
      as new initiatives .
      If we
      are unable to compete we will lose significant clients or be unable to attract
      clients and our revenue could decrease.




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




Maintaining
      the security of computers, computer networks and patient data is an issue of
      critical importance for our clients. Our clients may be exposed to claims by
      federal health care regulators if they use our Internet based services and
      we do
      not protect sensitive patient data from penetration by Internet hackers. A
      compromise in the privacy of patient data could result in clients pursuing
      claims against us which would be expensive and time-consuming to defend.




***We
      may not be able to adequately protect our intellectual property rights.***




Protecting
      our intellectual property rights and combating unlicensed use of our software
      is
      difficult. We rely upon a combination of service agreements, confidentiality
      procedures, employee and client nondisclosure agreements and technical measures
      to maintain the confidentiality and trade secrecy of our proprietary
      information. We also rely on patent, trademark and copyright laws to protect
      our
      intellectual property. Litigating claims of infringement on our intellectual
      property could be expensive and have a negative impact on our financial results.




***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;





18




**·**
            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.




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
      depend upon software and a patent that we license from, and products provided
      by, third parties and the loss of these licenses or an increase in cost of
      these
      licenses may require us to suspend our operations until we obtain replacements
      and redesign our products.***




We
      rely
      upon certain software and a patent licensed from third parties. The loss of
      or
      inability to retain the use of any such intellectual property could result
      in
      shipment delays or reductions until equivalent intellectual property could
      be
      developed, identified, licensed and integrated.




***Potential
      changes in standards applicable to our software could require us to incur
      substantial additional development costs.***




Integration
      and interoperability of the software and systems provided by various vendors
      are
      important issues in the health care industry. Market forces, regulatory
      authorities and industry organizations are causing the emergence of standards
      for software features and performance that are applicable to us, and conforming
      to these standards is expected to consume a substantial and increasing portion
      of our development resources. Health care delivery and ultimately the
      functionality demands of the electronic health record is now expanding to
      support community health, public health, public policy and population health
      initiatives. In addition, interoperability and health information exchange
      features that support emerging and enabling technologies are becoming
      increasingly important to our clients and require large scale product
      enhancements and redesign.




**Risks
      Related to our Stock**




***Our
      shares of common stock are thinly traded 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 our common stock has been limited and we expect to have only a
      limited trading market for our common stock 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 a rule adopted by the SEC “penny stock” rules which
      may make it more difficult for you to sell 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 solicit to sell such securities to persons
      other than established clients and accredited investors. 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,
      our stock may trade infrequently. Because it may be difficult to find quotations
      for certain penny stocks, it may be difficult to accurately price our stock.
      It
      may also diminish the number of broker-dealers that may be willing to make
      a
      market in our common stock and may affect the level of news coverage we receive.
      This may affect the ability of purchasers of our stock to sell their shares
      in
      the secondary market.


19


***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.***





As
      of
      December 31, 2007, our principal shareholder, SIBL, beneficially owned over
      82%
      of our common stock and has the right to acquire additional securities
      convertible and exercisable into additional shares of 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. SIBL is able to
      control the election of the board of directors through its ownership of a
      majority of our common stock. In addition, SIBL 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
      intend to issue additional shares of stock or securities convertible into our
      stock. This action will dilute the interests of our common shareholders and
      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. As of
      December 31, 2007, 5,462,500 shares of the preferred stock are issued and
      outstanding. Moreover, we have designated an additional 587,500 shares of Series
      D Convertible Preferred Stock to sell to SIBL and have created a convertible
      debenture which we have also designated as to be sold to SIBL. Those securities,
      if issued, will dilute the interests of our common stock. These instruments
      also
      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 applicable 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.




**ITEM****1B.**
            **UNRESOLVED
                STAFF COMMENTS.**




None.




**ITEM
                2****.**
            **PROPERT****IES**




We
      currently rent approximately 19,853 square feet of executive office space
      located in Tampa, Florida. We rent this space for $31,318 per month and the
      lease expires August 31, 2013. We are currently trying to sublet approximately
      6,236 square feet of our Tampa office space.




We
      also
      rent approximately 1,699 square feet of executive office space located in
      Dunwoody, Georgia. Rent for this space is $2,117 per month and the lease expires
      June 30, 2008. We do not anticipate renewing the Dunwoody lease upon
      expiration.




We
      currently occupy free of charge approximately 5,000 square feet of office space
      in New York City that is leased by Philips for our use. The lease on the New
      York office space expires in November 2008 and will not be renewed by Philips.
      As a result, we are actively pursuing new office space for our New York
      employees. Per our agreement with Philips, we will increase our consultancy
      fee
      by an amount equal to the total rental cost of a lease for a new premises of
      like kind, taking into account square footage, location and prevailing market
      conditions together with additional associated costs, including broker’s fees,
      moving fees and legal fees incurred in obtaining such new premises.




We
      believe that once we relocate the New York office and after we sublet the excess
      Tampa space we will have adequate office space to conduct our operations and
      administration.




In
      addition to office space, we have a three-year agreement that commenced on
      January 1, 2008, with Qwest for space and services in two of their CyberCenter
      facilities. Qwest maintains our servers in Tampa, Florida and Sterling,
      Virginia, that process and store data, and support Internet connections for
      our
      clients. Qwest CyberCenters are specifically designed to provide
      state-of-the-art hosting for mission critical web-sites and enterprise
      applications. In addition, Qwest facilitates telephonic connections with our
      clients’ field staff for several of our applications and bills us on usage.
      Qwest CyberCenter facilities provide a secure, reliable and scalable foundation
      that is more cost effective than constructing and maintaining our own Internet
      data center. Our minimum commitment to Qwest for space and service is $10,000
      per month.




20


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




On
      September 13, 2007, Briggs Medical Service Company, a Delaware corporation
      ("Briggs Medical"), served us with a summons and complaint filed in the United
      States District Court for the Middle District of Florida, Tampa Division. The
      amended complaint alleges that we (a) infringed various copyrighted medical
      forms which Briggs Medical alleges that it owns, (b) breached a 2003
      Co-Development Agreement and associated "Statement of Work" between Briggs
      Corporation, an Iowa corporation, and Healthcare Quality Solutions, Inc., (the
      "Agreement"), and (c) tortiously interfered with actual and prospective
      business relations between Briggs Medical and thousands of Briggs Medical's
      clients by inducing them to use other medical forms which Briggs Medical
      allege infringe its alleged copyrights. Briggs Medical seeks the following
      relief in the amended complaint: (a) judicial findings of infringement, breach
      and tortious interference, (b) an award of an indeterminate amount of lost
      profits and other special, consequential and punitive damages, together
      with prejudgment interest, attorneys fees and costs and (c) an injunction
      prohibiting the defendant and others acting in concert with the defendant
      from infringing Briggs Medical's alleged copyrights.  On November 7, 2007,
      we moved to dismiss the breach of contract claim for failure to state a claim
      upon which relief can be granted.  In response, Briggs amended their
      complaint. We have responded and, at this time, the case is scheduled for trial.




There
      are
      currently no other material 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.




21


**PART
      II**




**ITEM
                5****.**
            **MARKET
                FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS****AND
                ISSUER PURCHASES OF EQUITY
                SECURITIES**




**Market
      for Our Common Stock**




Our
      common stock is currently trading on the OTC Bulletin Board under the symbol
      “HSSO.OB.” The following table sets forth the range of high and low intra-day
      bid prices for our common stock for the periods indicated.




**2006**
            
            **High**
            
            **Low**Quarter
                ended March 31, 2006
            
            $
            0.60
            
            $
            0.25Quarter
                ended June 30, 2006
            
            $
            1.25
            
            $
            0.35Quarter
                ended September 30, 2006
            
            $
            1.20
            
            $
            0.75Quarter
                ended December 31, 2006
            
            $
            1.01
            
            $
            0.55**2007**
            
            
            **High**
            
            
            **Low**Quarter
                ended March 31, 2007
            
            $
            1.01
            
            $
            0.80Quarter
                ended June 30, 2007
            
            $
            0.95
            
            $
            0.70Quarter
                ended September 30, 2007
            
            $
            6.00
            
            $
            0.35Quarter
                ended December 31, 2007
            
            $
            3.90
            
            $
            2.00




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




In
      addition, trading of our common stock is covered by an SEC rule that imposes
      additional sales practice requirements on broker-dealers who solicit clients
      to
      buy such securities to persons other than established clients and accredited
      investors. The rule may affect the ability of broker-dealers to solicit clients
      to buy our securities, and also may affect the ability of purchasers of our
      stock to sell their shares in the secondary market if there is no liquidity.
      It
      may also cause fewer broker-dealers to be willing to make a market in our common
      stock, and it may affect the level of news coverage we receive.




As
      of
      December 31, 2007, there were 77
      holders of record of our common stock.




**Dividends**




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.




**Recent
      Sales of Unregistered Securities**




We
      entered into a Preferred Stock Purchase Agreement dated as of October 31, 2005,
      with SIBL, our principal shareholder, to acquire 4,625,000 shares of our Series
      C Preferred Stock, together with five-year warrants to purchase 1,387,500 shares
      of our common stock at an exercise price of $0.002 per share. We agreed to
      issue
      to SIBL our Series C Convertible Preferred Stock at a price of $2.00 per share
      together with warrants to purchase 3/10 of a share of common stock for each
      share of Series C Preferred Stock purchased. Each share of Series C 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 preferred share. Throughout 2007, we sold 1,575,000 shares
      of Series C Preferred Stock to SIBL for $3.15 million to fund working capital
      needs. At December 31, 2007, we had sold all the shares available under this
      agreement. The sale of the convertible preferred stock and warrants was made
      in
      reliance upon the exemption from registration provided by Section 4(2) of the
      Securities Act or Regulation D promulgated thereunder.


22


On
      August
      17, 2007, we entered into a Preferred Stock Purchase Agreement with SIBL whereby
      SIBL agreed to acquire up to 1,425,000 shares of our Series D Preferred Stock,
      together with five-year warrants to purchase 427,500 shares of our common stock
      at an exercise price of $0.001 per share. Each share of Series D Preferred
      Stock
      is initially convertible into one-half share of our common stock. SIBL agreed
      to
      pay $2.00 per share of preferred stock acquired and the warrants were issued
      for
      no additional consideration. The proceeds from the sale of the Series D
      Preferred Stock are to be used for working capital, subject to SIBL’s approval
      of each funding request in its sole discretion; provided, however, that SIBL
      will not have discretion to reject requests by us for sales of up to an
      aggregate of 250,000 shares of preferred stock provided we are in compliance
      with the agreement. In 2007, we sold 837,500 shares of our Series D Preferred
      Stock for $1,675,000 to fund working capital needs. At December 31, 2007,
      we had 587,500 shares of Series D Preferred Stock available for sale. The sale
      of the convertible preferred stock and warrants was made in reliance upon the
      exemption from registration provided by Section 4(2) of the Securities Act
      or
      Regulation D promulgated thereunder.




In
      2007,
      we issued 1,042,500 shares of common stock upon the exercising of warrants
      that
      were granted in connection with preferred stock sales. We received $2,085 for
      the exercise of the warrants. These were issued in a transaction exempt from
      registration under the Securities Act in reliance on Section 4(2) of that Act.




Previously,
      our Board of Directors and shareholders authorized our 2003
      Management and Director Equity Incentive Compensation Plan ( the
      “Plan”) and authorized the issuance of 500,000 shares under the Plan. In 2007,
      we amended the Plan to increase the number of shares of common stock which
      may
      be issued under the Plan from 500,000 shares to 3,210,000 shares. Effective
      September 1, 2007, we granted options to purchase 2,542,500 shares of our
      common stock at a price of $1.00 per share. In October 2007, we issued
      options to purchase an additional 340,000 shares of our common stock at a price
      of $2.55 per share. The sales and issuances of these securities were deemed
      to
      be exempt from registration under the Securities Act by virtue of Rule 701
      promulgated under Section 3(b) of the Securities Act as transactions pursuant
      to
      compensation benefits plans and contracts relating to compensation. .




In
      addition, effective August 17, 2007, we entered into a Convertible Debenture
      Purchase Agreement with SIBL ,
      whereby SIBL agreed
      to acquire up to $5,000,000 of our convertible debentures. The debentures will
      be purchased incrementally at such time as requests are made by us and subject
      to various conditions. The proceeds from the sale of the debenture(s) are to
      be
      used for working capital and/or acquisitions, in any case subject to the
      approval of SIBL. Each debenture that will be issued will be due four years
      from
      the date of issuance and will be convertible at any time at the option of SIBL into
      shares of preferred stock, in the aggregate 1,250,000 shares, subject to
      adjustments. As of December 31, 2007, we had not sold any debentures to SIBL
      in
      connection with this agreement. In consideration for entering into this
      agreement and making these funds available upon request, SIBL was issued
      five-year warrants to purchase 1,250,000 shares of our common stock at an
      exercise price of $1.00 per share. The sale of the convertible debentures and
      warrants was made in reliance upon the exemption from registration provided
      by
      Section 4(2) of the Securities Act or Regulation D promulgated
      thereunder.




23


**ITEM
                6.**
            **SELECTED
                FINANCIAL DATA**




The
      financial data set forth below as
      of
      December 31, 200 7
      and for
      the year ended December 31, 2007 and December 31, 2006 is derived
      from our financial statements audited by Sherb & Co., LLP, independent
      public accountants, included elsewhere in this annual report. The
      financial information presents our results of operations as if the acquisitions
      of VantaHealth Technologies, LLC and Carekeeper Software, Inc. had occurred
      at
      the beginning of each period presented for purposes of pro-forma statement
      of
      operations data. They should not be considered indicative of the results that
      would have been achieved had the acquisitions actually occurred when assumed.
      The acquisitions of Vanta and Carekeeper have been accounted for under the
      purchase method of accounting. The
      financial data set forth below should be read in conjunction with the financial
      statements and notes thereto included elsewhere in this Prospectus and
“Management’s Discussion and Analysis of Financial Condition and Results of
      Operations.” All statistical data set forth herein is unaudited.




**Year
                Ended December 31,****2007**
            
            **2006**Net
                sales
            
            $
            7,220,671
            
            $
            6,576,991Cost
                of sales
            
            
            5,791,095
            
            
            3,838,965Gross
                profit(loss)
            
            
            1,429,576
            
            
            2,738,026Operating
                expenses
            
            
            10,406,656
            
            
            5,193,850Net
                loss
            
            
            (8,977,080
            )
            
            (2,455,824
            )Deemed
                preferred stock dividend
            
            
            747,694
            
            
            498,229Net
                loss applicable to common shareholders
            
            $
            (9,724,774
            )
            $
            (2,954,053
            )Net
                loss per common share:Basicand
                diluted
            
            $
            (1.43
            )
            $
            (.50
            )Weighted
                average number of common shares outstanding:Basicand
                diluted
            
            
            6,816,886
            
            
            5,947,526





**Year
                Ended December 31,****200****7**
            
            **200****6**Working
                capital deficit
            
            $
            (1,099,823
            )
            $
            (902,092
            )Total
                assets
            
            $
            3,069,199
            
            $
            5,839,202Total
                liabilities
            
            $
            3,396,966
            
            $
            2,490,911Shareholders'
                equity(deficiency)
            
            $
            (327,767
            )
            $
            3,348,291


24


**ITEM
                7.**
            **MANAGEMENT'S
                DISCUSSION AND ANALYSIS****OF
                FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS**




We
      are a
      technology and services company dedicated to bringing innovation to the health
      care industry. Our objective is to leverage our understanding of current and
      next-generation technologies to offer value-added products and services which
      will generate improved clinical, operational and financial outcomes for our
      clients. Our portfolio of products and services extends across many segments
      of
      health care including home health care, medical staffing, acute and post-acute
      facilities, and telehealth/telemedicine. Our business is currently grouped
      into
      three segments: Technology Solutions, Software and Consulting. We only began
      receiving revenue from Performance Advisors, our Consulting segment, in early
      2008. As a result, our financial statements and the following discussion only
      describe two operating segments: Technology Solutions and Software.




We
      currently derive our revenues from:




**·**
            fees
                to provide software and training;




**·**
            per
                transaction charges applied to processing patient clinical assessments
                made by our clients during a month;




**·**
            per
                clinical episode completed during care
                delivery;




**·**
            monthly
                hosting service charges based on the size of data storage
                utilized;




**·**
            one-time
                sales of software licenses;




**·**
            software
                maintenance on licensed software;
                and




**·**
            consulting
                fees relating to education of clients on best practice processes
                that will
                contribute to their clinical, financial and operational success under
                existing regulations.




During
      the year ended December 31, 2007, we had approximately 323 clients in 44 states
      using one or more of our services.




**Results
      of Operations**




Overview




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,****2007**
              
              **2006**Net
                  sales
              
              
              100
              %
              
              100
              %Cost
                  of sales
              
              
              80
              %
              
              58
              %Gross
                  profit
              
              
              20
              %
              
              42
              %Operating
                  expenses:Selling
                  and marketing
              
              
              30
              %
              
              26
              %Research
                  and development
              
              
              21
              %
              
              19
              %General
                  and administration
              
              
              47
              %
              
              31
              %Depreciation
                  and amortization
              
              
              2
              %
              
              2
              %Impairment
              
              
              43
              %
              
              —Interest
              
              
              1
              %
              
              1
              %Total
                  operating expenses
              
              
              144
              %
              
              79
              %Deemed
                  preferred stock dividend
              
              
              10
              %
              
              8
              %Net
                  loss
              
              
              (134
              )%
              
              (45
              )%


25




Year
      Ended December 31, 2007 Compared to Year Ended December 31, 2006




**For
                the Year Ended**
              **December
                31,****2007**
            
            **2006**
            
            **Change**
            
            **%****Recurring
                Revenue**Clinical
                assessment
            
            $
            3,098,084
            
            $
            4,599,669
            
            $
            (1,501,585
            )
            
            (33
            )%Technology
                solutions
            
            
            1,361,719
            
            
            —
            
            
            1,361,719
            
            
            —Hosting
            
            
            139,227
            
            
            98,605
            
            
            40,622
            
            
            41
            %IVR
            
            
            447,047
            
            
            248,940
            
            
            198,107
            
            
            80
            %Software
                maintenance
            
            
            1,460,979
            
            
            774,015
            
            
            686,964
            
            
            89
            %Other
            
            
            23,663
            
            
            23,255
            
            
            407
            
            
            2
            %Total
                recurring revenue
            
            $
            6,530,719
            
            $
            5,744,484
            
            $
            786,235
            
            
            14
            %**Non**********-
                Recurring Revenue**Licensed
                software sales
            
            
            256,565
            
            
            186,706
            
            
            69,859
            
            
            37
            %Training
                and implementation
            
            
            418,827
            
            
            580,835
            
            
            (162,007
            )
            
            (28
            )%Other
            
            
            14,559
            
            
            64,966
            
            
            (50,407
            )
            
            (78
            )%Total
                non-recurring revenue
            
            $
            689,952
            
            $
            832,507
            
            $
            (142,555
            )
            
            (17
            )%Total
                revenue
            
            $
            7,220,671
            
            $
            6,576,991
            
            $
            643,680
            
            
            10
            %




The
      increase in total revenue is attributable to increased revenue from the Philip’s
      contract resulting in technology solutions revenue, software maintenance
      revenue, IVR and hosting. These increases were somewhat offset by a decrease
      in
      clinical assessment revenue. Seventy-nine percent or $1,188,878 of the net
      decline in clinical assessments was from our largest client in 2006, Amedisys,
      reducing the use of our services and replacing them with an internal solution.
      In 2007, we lost 17 clients which resulted in $397,338 in lost revenue. This
      decline was partially offset by adding four new clients that accounted for
      $80,873 in increased revenue. Sales from existing clients, excluding Amedisys,
      in total were flat.




Commencing
      on October 1, 2007, we began work on a 27 month contract to provide technology
      solutions to Philips. The technology solutions revenue for the year 2007, which
      results solely from this contract, was earned entirely in the fourth quarter
      of
      2007. Hosting revenue increased as a result of new clients in 2007 as well
      as
      greater revenue earned from existing clients. IVR revenue also increased as
      a
      result of greater revenue earned from existing clients. The increase in software
      maintenance revenue is attributable to the acquisitions of CareKeeper and Vanta
      in April and May of 2006 or 12 equivalent months in 2007 compared with
      approximately eight equivalent months in 2006.




With
      respect to non-recurring revenue, licensed software sales of the
      HSS Analyzer increased $111,837 or 105% in 2007 to $218,338 compared with
      sales in 2006 of $106,501. VividNetTM non-recurring revenue decreased $41,978 or
      52% from $80,205 in 2006 to $38,227 in 2007. Training and implementation revenue
      decreased $162,007 or 28% to $418,827 in 2007 from $580,835 in 2006. The
      decrease was attributable to decreases in sales of the HSS Advantage
      product by $182,003 or 39% to $282,648 in 2007 from $464,651 in 2006. One
      client, Intrepid, accounted for $192,836 of the net decrease in
      HSS Advantage training and implementation. VividNetTM training and
      implementation decreased $47,981 or 48% to $52,042 in 2007 from $106,501 in
      2006. The decrease in VividNetTM sales was the result of the loss of several
      clients. The decreases in training and implementation from HSS Advantage
      and VividNetTM were partially offset by an increase of $67,976 in fees from
      HSS Analyzer training and implementation. HSS Analyzer training and
      implementation revenue grew from $16,161 in 2006 to $84,138 in 2007, an increase
      of 421%. Other non-recurring revenue decreased by 78% or $50,407. This primarily
      resulted from a decrease in royalty revenue.




Cost
      of
      sales increased by 51% or $1,952,130. As a percentage of revenue, cost of sales
      represented 80% in 2007 compared with 58% in 2006.. The increase was primarily
      for amortization of capitalized development costs which increased by $730,710
      or
      66% to $1,833,314 in 2007 compared with $1,102,604 in 2006. Labor costs
      increased $932,482 or 47% to $2,906,993 in 2007 from $1,974,511 in 2006.
      Consulting costs increased $273,046 in 2007 to $439,035 from $165,989 in 2006.
      These increases are attributable to the establishment of our options in the
      technology solutions segment in the fourth quarter of 2007, and twelve months
      of
      costs for CareKeeper and Vanta compared with seven and half and nine months
      of
      costs in 2006 for the respective acquisitions.




26





Operating
      expenses increased by $5,212,807 or 100%. In 2007, we recorded a charge to
      capitalized software after an evaluation of our software platforms and products
      and determined that our products were impaired. This impairment of software
      development costs was $3,104,467 or 30% of total operating expenses in 2007
      compared with zero expense for impairment for 2006. In addition, labor,
      severance, legal and rent increased $841,376, $303,400, $600,789 and $182,421,
      respectively.




Selling
      and marketing expenses increased $460,793 or 26% to $2,200,680 in 2007 from
      $1,739,887 in 2006. Labor and consulting accounted for $410,533 or 95% of the
      increase. Travel and communication expenses increased $32,715 or 23% and $31,930
      or 199%, respectively, in 2007 compared with 2006. The increases were partly
      attributable to a full year of expenses for CareKeeper and Vanta compared with
      seven and half and nine months of operations in 2006 for the respective
      acquisitions. The increases were offset by decreases in commissions and
      advertising $23,031 or 25% and $11,425 or 4%, respectively.




Research
      and development costs increased $251,536 or 20% to $1,481,743 in 2007 from
      $1,230,207 in 2006. Labor and consulting increased $237,331 which was 94% of
      the
      increase.




General
      and administrative expenses increased $1,340,983 or 66% to $3,378,851 in 2007
      from $2,037,868 in 2006. The increase was primarily due to legal expenses
      totaling $717,595 in 2007, a 514% increase from 2006. We had two significant
      legal matters that were being litigated in 2007, Xpanxion and Briggs Medical.
      Xpanxion was settled in December 2007 and will not result in additional legal
      fees. The Briggs Medical case is ongoing and may continue to require significant
      expense. In addition, labor costs and consulting fees increased $483,200 or
      55%.
      Labor and consulting increase was partly due to a full year of expenses for
      CareKeeper and Vanta in 2007 compared to partial years of expenses in 2006.
      Occupancy costs increased $193,696 or 98% to $390,973 in 2007 from $197,277
      in
      2006. This expense is due to additional office space leased in September 2006
      for the corporate office in Tampa, Florida. It also reflects an increase in
      common area maintenance expense of $13,015 or 157% in 2007 compared with 2006.
      Travel costs increased $91,186 or 121% to $166,249 in 2007 compared with $75,062
      in 2006. The increase in travel expenses is due to managers traveling to and
      between company offices in Tampa, Florida; Atlanta, Georgia; and New York,
      New
      York. We intend to close our corporate office in Atlanta when our lease
      expires.




**Liquidity
      and Capital Resources**




Since
      November 2005, we have funded operations primarily through the issuance of
      convertible preferred stock that has provided us with aggregate net proceeds
      of
      $10,925,000.




27




**For
                the Year Ended December 31,****2007**
            
            **2006**
            
            **Change**
            ****
            **%**Cash
                on hand
            
            $
            1,218,620
            
            $
            558,764
            
            $
            659,856
            
            
            118
            %Current
                assets
            
            $
            2,256,438
            
            $
            1,588,821
            
            $
            667,617
            
            
            42
            %Current
                liabilities
            
            $
            3,356,261
            
            $
            2,490,912
            
            $
            865,349
            
            
            38
            %Working
                capital
            
            $
            (1,099,823
            )
            $
            (902,091
            )
            $
            (197,732
            )
            
            22
            %Cash
                (used) in operations
            
            $
            (2,486,572
            )
            $
            (1,918,638
            )
            $
            (567,933
            )
            
            30
            %Investing
            
            $
            (1,334,048
            )
            $
            (2,247,824
            )
            $
            913,776
            
            
            (41
            )%Financing
            
            $
            4,480,476
            
            $
            4,386,296
            
            $
            94,179
            
            
            42
            %Net
                change in cash position
            
            $
            659,856
            
            $
            219,834
            
            $
            440,022
            
            
            200
            %




The
      decrease in working capital resulted primarily from accrued expenses for the
      earnout payable to the selling shareholders of CareKeeper.




The
      increase in net cash used in operating activities was primarily due to operating
      costs increasing, excluding the impact of non-cash charges, of $3,104,064 and
      depreciation and amortization of $1,999,461. The increase was offset by accrued
      expenses of $1,063,987 primarily for the amounts due to the selling shareholders
      of CareKeeper in the amount of $288,196 and severance costs in the amount of
      $304,509. Payroll payable, including vacation time, benefits and bonuses,
      increased by $337,884. Accrued rent and consulting increased by $47,046 and
      $94,203, respectively.




The
      decrease in net cash used in investing activities was primarily due to the
      cash
      paid for the acquisitions of CareKeeper and Vanta in 2006. We did not complete
      an acquisition in 2007. However, we are actively pursuing acquisition
      opportunities and hope to identify viable acquisition candidates in the near
      term.




The
      increase in net cash provided financing activities was primarily related to
      sales of convertible preferred stock for $4,825,000 in 2007 compared with
      $4,650,000 in sales of convertible preferred stock in 2006. This was offset
      by
      the increase in the loan repayment in 2007 compared with 2006.




Days
      sales outstanding as of December 31, 2007 and 2006, were 45 days and
      51 days, respectively. This reflects a slight improvement that can be
      attributed to a collections program put in place in November 2007. The program
      is a proactive approach in contacting clients when the receivable balance ages
      beyond the due date.




We
      entered into an agreement with SIBL to sell up to 1,425,000 shares of $2.00
      Series D Convertible Preferred Stock that can be used to meet working capital
      needs. As of December 31, 2007, SIBL had purchased 837,500 shares for
      $1,675,000, and the proceeds were used to fund working capital. SIBL has agreed
      to purchase an additional 587,500 shares for $1,175,000 if we require additional
      cash to fund operations. We anticipate using this facility in 2008 to fund
      working capital shortfalls. We also have a $5,000,000 convertible debenture
      agreement with SIBL that can be drawn on for working capital or acquisitions.




We
      believe that the funds available from these facilities will be sufficient to
      fund our working capital requirements for the next twelve months; however,
      funding by SIBL under both of these facilities is subject to a number of
      conditions and there can be no assurance that we will be able to meet these
      conditions. Moreover, if we decide to effect a strategic acquisition, we may
      require additional capital and there is no assurance that we will be able to
      find other sources of capital at all, or on terms acceptable to us.




28


**Significant
      Accounting Policies**





Basis
      of
      Presentation and Consolidation




The
      accompanying consolidated financial statements which present our results of
      operations for the years ended December 31, 2007 and 2006 have been prepared
      using accounting principals generally accepted in the United States of America
      (“US GAAP”). All material intercompany transactions and accounts have been
      eliminated in consolidation.




Allowance
      for Doubtful Accounts




The
      allowance for doubtful accounts is based on our assessment of the collectability
      of client accounts and the aging of the accounts receivable. If there is a
      deterioration of a major client’s credit worthiness or actual defaults are
      higher than our historical experience, our estimate of the recoverability of
      amounts due it 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 payments 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 our 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
      collectability of amounts and at which time we may need to provide additional
      allowances in excess of that currently provided.




Cash
      and
      Cash Equivalents




We
      consider all highly liquid short-term investments, with a remaining maturity
      of
      three months or less when purchased, to be cash equivalents.




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. We use
      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 **




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 and consulting fees directly associated with the
      development of our software. Capitalizable personnel costs and consulting fees
      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 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, we write off the amount that the
      unamortized software development costs exceed net realizable value.




29


Goodwill
      and Other Intangibles **




Goodwill
      represents the excess of costs over fair value of assets of businesses acquired.
      We 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,
      we 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 our 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”, we review 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, we 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,
      we
      will recognize an impairment loss to adjust to the fair value of the asset.
      On
      December 31, 2007 we determined the future sales of our solutions net of the
      cost of those sales would not be sufficient to recover any amount of the
      unamortized costs. As a result, we recorded an impairment to software
      development costs of $3,104,064.




Concentration
      of Credit Risk **




Concentrations
      of credit risk with respect to trade receivables are limited to clients
      dispersed across the United States of America. All trade receivables are
      concentrated in the health care segment of the economy; accordingly we are
      exposed to business and economic risk. Although we do not currently foresee
      a
      concentrated credit risk associated with these trade receivables, repayment
      is
      dependent upon the financial stability of the health care industry.




Income
      Taxes **




We
      use
      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 **




We
      follow
      the provisions of the SEC Staff Accounting Bulletin No. 104. We recognize
      revenue when persuasive evidence of an arrangement exists, the product or
      service has been delivered, fees are fixed or determinable, collection is
      reasonably assured and all other significant obligations have been fulfilled.
      The corporate strategy is to provide services on a recurring transaction pricing
      basis. We believe this is a value-based model that more directly relates to
      our
      clients’ recognition of revenue. The transaction pricing model differs from the
      typical licensed software model in that the implementation of transaction-priced
      services does not result in large up front software license fee revenues but
      results in a gradual recognition of revenue earned on a transaction by
      transaction basis over time. This is a similar model to that used by the mobile
      phone industry. The benefit occurs in the future years where leverage is
      obtained as a client grows and continues to pay transaction fees year over
      year,
      whereas under the licensed sale model the only revenue realized in the future
      years are support and maintenance fees.




30


Within
      the consulting group, we recognize revenue using the percentage of completion
      following ARB 45 and SOP 81-1. Management believes that its estimates of costs
      to complete and the extent of progress toward completion of a project are
      reasonably dependable. We prepare a budget for each project that estimates
      total
      labor hours for programming, quality assurance, testing, implementation,
      training and service to complete all the obligations to deliver a project.
      We
      recognize the product revenue as the labor hours expended over the total labor
      hours budgeted times the total fixed fee.




Our
      revenue is classified into two categories: recurring and non-recurring. We
      generate recurring revenue from several sources, including the processing of
      clinical assessments which, as 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, the processing of data related to
      Medicare clinical episodes completed during care delivery, the provision of
      outsourcing services, such as software hosting and other business services,
      and
      the sale of maintenance and support for our proprietary software products.
      Recurring services revenue is typically billed and recognized monthly over
      the
      contract term, typically two to three years. Recurring software maintenance
      revenue is typically based on one-year renewable contracts. Software maintenance
      and support revenues are recognized ratably over the contract period. We record
      cash payments received in advance or at the beginning of a contract as deferred
      revenue. We generate non-recurring revenue from the licensing of our software.
      Under SOP 97-2, software license revenue is recognized upon the execution of
      a
      license agreement, upon delivery of the software, when fees are fixed or
      determinable, when collectability is probable and when all other significant
      obligations have been fulfilled. For software license agreements in which client
      acceptance is a significant condition of earning the license fees, revenue
      is
      not recognized until acceptance occurs. For software license agreements that
      require significant customizations or modifications of the software, revenue
      is
      recognized as the customization services are performed. For multiple element
      arrangements, such as software license, consulting services, outsourcing
      services and maintenance, and where vendor-specific objective evidence (“VSOE”)
      of fair value exists for all undelivered elements, we account for the delivered
      elements in accordance with the “residual method.” Under the residual method,
      the total fair value of the undelivered elements, as indicated by VSOE, is
      deferred and subsequently recognized in accordance with the relevant sections
      of
      SOP 97-2. Also, the difference between the total arrangement fee and the amount
      deferred for the undelivered elements is recognized as revenue related to the
      delivered elements. For arrangements in which VSOE does not exist for each
      undelivered element, including specified upgrades, revenue for the delivered
      element is deferred and not recognized until VSOE is available for the
      undelivered element or delivery of each element has occurred. When multiple
      products are sold within a discounted arrangement, a proportionate amount of
      the
      discount is applied to each product based on each product’s fair value or
      relative list price. We also generate non-recurring revenue from implementation
      fees, consulting, training and client support services and this non-recurring
      revenue is charged to clients on a fee basis usually based upon time spent.




We
      recognize software licensing fees and implementation fees in the month that
      the
      client 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. 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.




Advertising
      Costs **




We
      expense all advertising costs as incurred. Advertising costs for the year ended
      December 31, 2007 were $297,367 and for the year ended December 31, 2006 were
      $277,772, and are included in selling and marketing expense in the accompanying
      consolidated statement of operations.


31


Research
      and Development Costs **




We
      expense 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, 2007 were $1,481,743 and for the year ended December 31,
      2006
      were $1,230,207.




Computation
      of Net Income (Loss) Per Share **




We
      present 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, 2007, we had shares of convertible preferred
      stock convertible into 2,731,250 shares of common stock and warrants and stock
      options to purchase 1,250,000 and 2,771,842 shares of common stock,
      respectively.




Financial
      Instruments




The
      carrying amounts of financial instruments, including cash, accounts receivable,
      prepaid expenses, client deposits and deferred revenue approximate fair value
      as
      of December 31, 2007, due to the relatively short maturity of the instruments.
      The capital lease obligation approximates fair value based upon debt terms
      available to us 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.




Stock
      Based Compensation **




Effective
      January 1, 2006, we began recording compensation expense associated with
      stock-based awards and other forms of equity compensation in accordance with
      FASB Statement No. 123-R, Share-Based Payment (“SFAS 123R”) as interpreted by
      SEC Staff Accounting Bulletin No. 107. The Company adopted the modified
      prospective transition method provided under SFAS 123R, and consequently has
      not
      retroactively adjusted results from prior periods. Under this transition method,
      compensation cost associated with stock-based awards recognized in the fourth
      quarter of 2006 includes 1) quarterly amortization related to the remaining
      unvested portion of stock-based awards granted prior to January 1, 2006, based
      on the grant-date fair value estimated in accordance with the original
      provisions of FASB No. 123, Accounting for Stock-Based Compensation (“SFAS
      123”); and 2) quarterly amortization related to stock-based awards granted
      subsequent to January 1, 2006, based on the grant-date fair value estimated
      in
      accordance with the provisions of SFAS 123R. Prior to January 1, 2006, the
      Company accounted for stock-based awards using the “disclosure only” alternative
      described in SFAS 123 and FASB Statement No. 148, Accounting for Stock-Based
      Compensation.




Recent
      Accounting Pronouncements






32




In
      September, 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157, Fair Value Measurements. This Statement defines fair value, establishes
      a
      framework for measuring fair value in US GAAP, and expands disclosures about
      fair value measurements. The definition of fair value retains the exchange
      price
      notion in earlier definitions of fair value. The exchange price is the price
      in
      an orderly transaction between market participants to sell the asset or transfer
      the liability in the market in which the reporting entity would transact for
      the
      asset or liability. Fair value is a market-based measurement, not an
      entity-specific measurement. Therefore, a fair value measurement should be
      determined based on the assumptions that market would use in pricing the asset
      or liability. This Statement expands disclosures about the use of fair value
      to
      measure assets and liabilities in interim and annual periods subsequent to
      initial recognition. The disclosures focus on the inputs used to measure the
      fair value and the effect of the measurements on earnings. This Statement is
      effective for financial statements issued for fiscal years beginning after
      November 15, 2007. We do not expect the adoption of SFAS 157 to materially
      affect the Company’s financial position or results of operations.








33


In
      December 2007, the FASB issued FASB Statement No. 141 (revised 2007), Business
      Combinations. This Statement replaces FASB Statement No. 141, Business
      Combinations. This Statement retains the fundamental requirements in
      Statement 141 that the acquisition method of accounting (which Statement
      141 called the purchase method) be used for all business combinations and for
      an
      acquirer to be identified for each business combination. This Statement defines
      the acquirer as the entity that obtains control of one or more businesses in
      the
      business combination and establishes the acquisition date as the date that
      the
      acquirer achieves control. This Statement’s scope is broader than that of
      Statement 141, which applied only to business combinations in which control
      was
      obtained by transferring consideration. By applying the same method of
      accounting—the acquisition method—to all transactions and other events in which
      one entity obtains control over one or more other businesses, this Statement
      improves the comparability of the information about business combinations
      provided in financial reports.




This
      Statement requires an acquirer to recognize the assets acquired, the liabilities
      assumed, and any non-controlling interest in the acquiree at the acquisition
      date, measured at their fair values as of that date, with limited exceptions
      specified in the Statement. That replaces Statement 141’s cost-allocation
      process, which required the cost of an acquisition to be allocated to the
      individual assets acquired and liabilities assumed based on their estimated
      fair
      values.




This
      Statement applies to all transactions or other events in which an entity (the
      acquirer) obtains control of one or more businesses (the acquirer), including
      those sometimes referred to as “true mergers” or “mergers of equals” and
      combinations achieved without the transfer of consideration, for example, by
      contract alone or through the lapse of minority veto rights. This Statement
      applies to all business entities, including mutual entities that previously
      used
      the pooling-of-interests method of accounting for some business combinations.
      It
      does not apply to: (a) the formation of a joint venture, (b) the acquisition
      of
      an asset or a group of assets that does not constitute a business, (c) a
      combination between entities or businesses under common control, (d) a
      combination between not-for-profit organizations or the acquisition of a
      for-profit business by a not-for-profit organization.




This
      Statement applies prospectively to business combinations for which the
      acquisition date is on or after the beginning of the first annual reporting
      period beginning on or after December 15, 2008. An entity may not apply it
      before that date. Management believes this Statement will have no impact on
      our
      financial statements once adopted.




In
      December 2007, the FASB issued FASB Statement No. 160 – Non-controlling
      Interests in Consolidated Financial Statements – an amendment of ARB No.
      51. This Statement applies to all entities that prepare consolidated financial
      statements, except not-for-profit organizations, but will affect only those
      entities that have an outstanding non-controlling interest in one or more
      subsidiaries or that deconsolidate a subsidiary. Not-for-profit organizations
      should continue to apply the guidance in Accounting Research Bulletin No. 51,
      Consolidated Financial Statements, before the amendments made by this Statement,
      and any other applicable standards, until the Board issues interpretative
      guidance.




This
      Statement amends ARB 51 to establish accounting and reporting standards for
      the
      non-controlling interest in a subsidiary and for the deconsolidation of a
      subsidiary. It clarifies that a non-controlling interest in a subsidiary is
      an
      ownership interest in the consolidated entity that should be reported as equity
      in the consolidated financial statements. Before this Statement was issued,
      limited guidance existed for reporting non-controlling interests. As a result,
      considerable diversity in practice existed. So-called minority interests were
      reported in the consolidated statement of financial position as liabilities
      or
      in the mezzanine section between liabilities and equity. This Statement improves
      comparability by eliminating that diversity.




34


A
        non-controlling interest, sometimes called a minority interest, is the portion
        of equity in a subsidiary not attributable, directly or indirectly, to a
        parent.
        The objective of this Statement is to improve the relevance, comparability,
        and
        transparency of the financial information that a reporting entity provides
        in
        its consolidated financial statements by establishing accounting and reporting
        standards that require: (a) the ownership interests in subsidiaries held
        by
        parties other than he parent be clearly identified, labeled, and presented
        in
        the consolidated statement of financial position within equity, but separate
        from the parent’s equity, (b) the amount of consolidated net income attributable
        to the parent and to the non-controlling interest be clearly identified and
        presented on the face of the consolidated statement of income, (c) changes
        in a
        parent’s ownership interest while the parent retains its controlling financial
        interest in its subsidiary be accounted for consistently. A parent’s ownership
        interest in a subsidiary changes if the parent purchases additional ownership
        interests in its subsidiary or if the parent sells some of its ownership
        interests in its subsidiary. It also changes if the subsidiary reacquires
        some
        of its ownership interests or the subsidiary issues additional ownership
        interests. All of those transactions are economically similar, and this
        Statement requires that they be accounted for similarly, as equity transactions,
        (d) when a subsidiary is deconsolidated, any retained non-controlling equity
        investment in the former subsidiary be initially measured at fair value.
        The
        gain or loss on the deconsolidation of the subsidiary is measured using the
        fair
        value of any non-controlling equity investment rather than the carrying amount
        of that retained investment, (e) entities provide sufficient disclosures
        that
        clearly identify and distinguish between the interests of the parent and
        the
        interests of the non-controlling owners.




This
      Statement is effective for fiscal years, and interim periods within those fiscal
      years, beginning on or after December 15, 2008 (that is, January 1, 2009, for
      entities with calendar year-ends). Earlier adoption is prohibited. This
      Statement shall be applied prospectively as of the beginning of the fiscal
      year
      in which this Statement is initially applied, except for the presentation and
      disclosure requirements. The presentation and disclosure requirements shall
      be
      applied retrospectively for all periods presented. Management believes this
      Statement will have no impact on the financial statements of the Company once
      adopted. 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.




**ITEM
                7A.**
            **QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK**




We
      are
      subject to interest rate risk primarily associated with our borrowings to fund
      our strategy and to ensure liquidity for any future transactions. Interest
      rate
      risk is the risk that changes in interest rates could adversely affect earnings
      and cash flows. Specific interest rate risks may include the risk of increasing
      interest rates on short-term debt and the risk of increasing interest rates
      for
      planned new fixed rate long-term financings.




**ITEM****8.**
            **FINANCIAL
                STATEMENTS****AND SUPPLEMENTARY DATA**




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




**ITEM****9.**
            **CHANG****E****S
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE**




None.




35





**ITEM****9A(T).**
            **CONTROLS
                AND PROCEDURES**




**Evaluation
      of Disclosure Controls and Procedures and Internal Control over Financial
      Reporting**




Management
      is responsible for establishing and maintaining adequate disclosure controls
      and
      procedures and internal control over financial reporting. Disclosure controls
      and procedures are designed to provide reasonable assurance that information
      required to be disclosed in our reports filed or submitted under the Securities
      Exchange Act of 1934, such as this Annual Report on Form 10-K, is recorded,
      processed, summarized and reported within the time periods specified in the
      SEC’s rules and forms. Disclosure controls and procedures are also designed to
      provide reasonable assurance that such information is accumulated and
      communicated to our management, including our Chief Executive Officer and Chief
      Financial Officer, as appropriate, to allow timely decisions regarding required
      disclosure.




Internal
      control over financial reporting is a process designed by and supervised by
      our
      Chief Executive Officer and Chief Financial Officer, and effected by our
      management and other personnel, to provide reasonable assurance regarding the
      reliability of financial reporting and the preparation of financial statements
      for external purposes in accordance with generally accepted accounting
      principles and includes those policies and procedures that:




**·**
            pertain
                to the maintenance of records that in reasonable detail accurately
                and
                fairly reflect the transactions and dispositions of our assets;




**·**
            provide
                reasonable assurance that transactions are recorded as necessary
                to permit
                preparation of financial statements in accordance with generally
                accepted
                accounting principles, and that our receipts and expenditures are
                being
                made only in accordance with authorizations of management or our
                Board of
                Directors; and




**·**
            provide
                reasonable assurance regarding prevention or timely detection of
                unauthorized acquisition, use or disposition of our assets that could
                have
                a material adverse effect on our financial statements.




**Limitations
      on the Effectiveness of Controls**




Management,
      including our Chief Executive Officer and Chief Financial Officer, do not expect
      that our disclosure controls and procedures or our internal control over
      financial reporting will prevent all errors or all fraud. A control system,
      no
      matter how well conceived and operated, can provide only reasonable, not
      absolute, assurance that the objectives of the control system are met. Further,
      the design of a control system must reflect the fact that there are resource
      constraints, and the benefits of controls must be considered relative to their
      costs. Because of the inherent limitations in all control systems, no evaluation
      of controls can provide absolute assurance that all control issues and instances
      of fraud, if any, within HSS have been detected. These inherent limitations
      include the realities that judgments in decision-making can be faulty, and
      that
      breakdowns can occur because of simple error or mistake. Additionally, controls
      can be circumvented by the individual acts of some persons, by collusion of
      two
      or more people, or by management’s override of the control. The design of any
      system of controls also is based in part upon certain assumptions about the
      likelihood of future events, and there can be no assurance that any design
      will
      succeed in achieving its stated goals under all potential future conditions;
      over time, controls may become inadequate because of changes in conditions,
      or
      the degree of compliance with the policies or procedures may deteriorate.
      Because of the inherent limitations in a cost-effective control system,
      misstatements due to error or fraud may occur and not be detected.




**Scope
      of the Assessments**




The
      assessment by our Chief Executive Officer and our Chief Financial Officer of
      our
      disclosure controls and procedures and the assessment by our management of
      our
      internal control over financial reporting included a review of procedures and
      discussions with other employees in our organization. In the course of the
      assessments, management sought to identify data errors, control problems or
      acts
      of fraud and to confirm that appropriate corrective actions, including process
      improvements, were being undertaken. Assessments of our disclosure controls
      and
      procedures are done on a periodic basis so that the conclusions can be reported
      in this report. Our internal control over financial reporting is also assessed
      on an ongoing basis by management and other personnel in our accounting
      department. We consider the results of these various assessment activities
      as we
      monitor our disclosure controls and procedures and internal control over
      financial reporting and when deciding to make modifications as necessary.
      Management’s intent in this regard is that the disclosure controls and
      procedures and the internal control over financial reporting will be maintained
      and updated (including improvements and corrections) as conditions
      warrant.




36


**Evaluation
      of the Effectiveness of Disclosure Controls and Procedures**




Based
      upon the evaluation, our Chief Executive Officer and Chief Financial Officer
      have concluded that, as of December 31, 2007, our disclosure controls and
      procedures were effective.




**Management’s
      Report on Internal Controls Over Financial Reporting**




Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting to provide reasonable assurance regarding
      the
      reliability of our financial reporting and the preparation of financial
      statements for external purposes in accordance with US GAAP. Based upon the
      assessments, our management has concluded that as of December 31, 2007 our
      internal control over financial reporting was effective.




**Changes
      in Internal Control Over Financial Reporting**




In
      our
      annual report filed for the year ended December 31, 2006 our management reported
      that we had a material weakness associated with the inadequacy of our accounting
      software to handle consolidation of multiple entities requiring us to extract
      data into spreadsheets for manual intervention. As of December 31, 2007, we
      upgraded our accounting system, however we did not remediate the consolidation
      of financial statements within the core accounting system. We continue to
      utilize spreadsheets and databases to consolidate, report and analyze financial
      information and related transactions. Management believes that the procedures
      in-place mitigate the deficiencies inherent in our accounting software
      package.




We
      made
      no other significant changes in the control environment over financial reporting
      during the year ended December 31, 2007 that has materially affected, or is
      likely to materially affect, our internal control over financial reporting.




This
      annual report does not include an attestation report of our registered public
      accounting firm regarding internal control over financial reporting. 
Management's report was not subject to attestation by our registered public
      accounting firm pursuant to temporary rules of the SEC that permit us to provide
      only management's report in this annual report.




**ITEM****9B.**
            **OTHER
                INFORMATION**




None.




37


**PART
      III**




**ITEM****10.**
            **DIRECTORS,
                EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE******




**Directors
      and Officers**




Our
      executive officers and directors and their ages as of the date of this report
      are as follows:




**Name**
            
            **Age**
            
            **Position**Stan
                Vashovsky
            
            35
            
            Chairman
                of the Board of Directors and Chief Executive OfficerMichael
                G. Levine
            
            40
            
            Chief
                Financial Officer and Executive Vice PresidentSteven
                Katz
            
            60
            
            DirectorBatsheva
                Schreiber
            
            61
            
            DirectorWayne
                LeRoux
            
            65
            
            DirectorRandall
                J. Frapart
            
            49
            
            Director




Stan
      Vashovsky has been Chairman of the Board of Directors and Chief Executive
      Officer since September 2007. **** Mr.
      Vashovsky began his career as the founder of Medcare Corporation, a medical
      instrument business, in 1991 and Medcare Software Company, a provider of health
      care maintenance management software, in 1992. In 2001, Philips Electronics
      North America Corporation (“Philips”) acquired both companies and Mr. Vashovsky
      remained as President of the newly formed Philips Medcare. From January 2003
      through June 2007, Mr. Vashovsky led Philips’ Services Innovations Group which
      was responsible for developing technologies to supporting Philips Medical Systems Services
      Group.




Michael
      G. Levine has been our Chief Financial Officer and Executive Vice President
      since September 2007. Prior to joining HSS, from August 2000 to July 2007, Mr.
      Levine worked at IDT Telecom, the principal subsidiary of IDT Corporation,
      a
      NYSE-listed telecommunications and technology company where he was Executive
      Vice President and responsible for the finance, business development and mergers
      and acquisitions functions. Prior to IDT, Mr. Levine was a First Vice President
      at HSBC Bank USA where he headed the proprietary mergers and acquisitions group.
      Mr. Levine previously had the same position at Republic New York Corporation,
      which was acquired by HSBC in December 1999, and was also head of investor
      relations for Republic at the time of the acquisition. Mr. Levine has also
      worked for TIAA-CREF as a securities analyst and PaineWebber as an analyst
      in
      their investment banking division. Mr. Levine holds a B.S. from the State
      University of New York at Buffalo and has an MBA from the Wharton School at
      the
      University of Pennsylvania.




Steven
      Katz has been a director of the company since April 2003. Since 1982, he has
      been 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). 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 Gamma Can International,
      Inc., USA Technologies, Inc. and several private companies.




Batsheva
      Schreiber has been a director of the company since April 2003. Since 1998,
      she
      has been the 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). 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 the
      Board of
      Directors of
      United Way .




38




Wayne
      LeRoux has been a director of the company since June 2006. He was most recently
      Executive Vice President for Chase Paymentech Solutions, LLC (an electronic
      payments front-end processing system that processed over 13 billion transactions
      in 2005), from March 1998 through April 2006. Mr. LeRoux’s primary
      responsibility was as General Manager for Chase Paymentech’s proprietary
      front-end network. Prior to that, beginning in October 1992, Mr. LeRoux was
      retired. From October 1987 through October 1992, Mr. LeRoux was President and
      Chairman of TransNet (another payment processing company that was ultimately
      acquired by Paymentech). From 1978 until 1992, Mr. LeRoux was President of
      LeRoux, Pitts and Associates (a software company specializing in electronic
      payments that was purchased by NYNEX in 1990). Prior to his positions with
      TransNet and LeRoux, Pitts and Associates, Mr. LeRoux held a variety of
      positions with IBM Canada. Mr. LeRoux holds a diploma of technology from British
      Columbia Institute of Technology in Vancouver, British Columbia.




Randall
      J. Frapart has been a director of the company since June 2006. Since March
      2008,
      Mr. Frapart has been Executive Vice President, Chief Financial Officer and
      Chief
      Operating Officer of Plumgood Food, an online grocery and prepared food company.
      Prior to that, from January 2006 to December 2007, Mr. Frapart was Executive
      Vice President and Chief Financial Officer of ForeFront Holdings, Inc. (a
      company that manufactures, designs, assembles and distributes golf bags and
      golf
      accessories for sale to on-course golf pro shops and off-course golf specialty
      shops, sporting goods stores, corporate premium clients, golf event sponsoring
      organizations, and mass merchandisers, mainly in the United States and Canada).
      From September 2002 until December 2005, Mr. Frapart served as Senior Vice
      President and Chief Financial Officer of HyperFeed Technologies, Inc. (a
      publicly traded provider of software which provides ticker plant and smart
      order
      routing technologies and managed services to exchanges, hedge funds and other
      financial institutions). Mr. Frapart served as Chief Financial Officer and
      later
      as Chief Executive Officer of Cyvent Technologies (a software and consulting
      company serving large health insurers) from April 1995 to July 2001. Mr. Frapart
      began his career at KPMG, where he held various positions in the Information,
      Communication and Entertainment Assurance practice for over 12 years. Mr.
      Frapart received a B.S.B.A. in Accounting from Washington University in 1980
      and
      an MBA in Business Management from the University of Texas in 1982.




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




Section
      16(a) of the Exchange Act requires our directors and executive officers, and
      persons who own more than ten percent of our common stock, to file with the
      SEC
      initial reports of ownership and report of changes in ownership of our common
      stock. Officers, directors and greater than ten percent shareholders are
      required by the SEC's regulations to furnish us with copies of all Section
      16(a)
      forms they file.




To
      our
      knowledge, based solely upon a review of Forms 3, 4 and 5, and amendments
      thereto furnished to us under Rule 16a-3(d) of the Exchange Act, each of Wayne
      LeRoux, Randall J. Frapart, Stan Vashovsky and Michael Levine (“Officers and
      Directors”) and SIBL failed to file on a timely basis reports required by
      Section 16(a) of the Exchange Act during the fiscal year ended December 31,
      2007. Messrs. Vashovsky and Levine failed to timely file their initial statement
      of beneficial ownership. Messrs. LeRoux and Frapart each failed to file a
      statement of change in beneficial ownership timely on Form 4. SIBL failed to
      timely file various statements of change in beneficial ownership on Form 4.
      Each
      reporting person has since filed the appropriate forms and is now
      current.




39




**Code
      of Ethics**




During
      the year ended December 31 ,
      2003,
      we adopted a Code of Ethics applicable to our directors and officers. In March
      2008, we amended and expanded our Code of Ethics to apply to our employees
      in
      addition to our directors and officers. As amended, the code provides written
      standards that are designed to deter wrongdoing and promote:




**·**
            honest
                and ethical conduct;




**·**
            full,
                fair, accurate, timely and understandable
                disclosure;




**·**
            compliance
                with applicable laws and
                regulations;




**·**
            promptreporting of internal violations of the code; and




**·**
            accountabilityfor the adherence to the code.




The
      code
      is filed as Exhibit 14.1 to this annual report and will be publicly available
      on
      the Company’s website at www.HSSglobal.com. We will provide any person, without
      charge, upon request, a copy of the Code. Please address such requests to us
      in
      writing.




**Board
      Meetings**




There
      were four Board meetings in 2007. These meetings
      were attended by all of the serving board members.




**Committees
      of the Board of Directors**




Audit
      Committee




Our
      Audit
      Committee currently consists of Steven Katz, Wayne LeRoux and Randall Frapart
      which reviews:




**·**
            theprofessionalservices provided by our independent
                auditors;




**·**
            the
                independence of our auditors from our
                management;




**·**
            our
                annual financial statements and our system of internal accounting
                controls; and




**·**
            such
                other matters with respect to our accounting, auditing and financial
                reporting practices and procedures as it determines to be appropriate
                or
                may be brought to its attention.




Mr.
      Katz
      is considered by us to be a “financial expert” and is the Chairman of this
      Committee. Mr. Katz,
      Mr. LeRoux and Mr. Frapart are deemed to be “independent,” as defined in the
      listing standards of The Nasdaq Stock Market .
      The
      Audit Committee met on four occasions during the year ended December 31, 200 7.




Nominating
      Committee




We
      do not
      have a formal nominating committee. Our full Board of Directors serves in this
      capacity and a majority of our Directors are “independent” as defined in the
      listing standards of The Nasdaq Stock Market. **** The
      Board
      nominates persons to serve as management’s slate of directors in connection with
      their election.




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:




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




40




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




**·**
            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;




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




**·**
            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 and the
      needs of the Board and our company at the time of the election. The Board will
      also consider candidates for directors nominated by shareholders.




Compensation
      Committee




Our
      compensation committee currently consists of Batsheva Schreiber, Steven Katz
      and
      Wayne LeRoux. Ms. Schreiber, Mr. Katz and Mr. LeRoux are deemed to be
“independent” as defined in the listing standards of The Nasdaq Stock Market.
      During 2007, our compensation committee did not meet.




**ITEM
                1****1.**
            **EXECUTIVE
                COMPENSATION**




**Overview**




Our
      primary objectives with respect to executive compensation are to attract and
      retain the best possible executive talent, to link annual cash compensation
      and
      long-term stock-based compensation to achievement of measurable corporate goals
      and individual performance, and to align executives' incentives with shareholder
      value creation. To achieve these objectives, we have implemented and maintain
      compensation plans that tie a substantial portion of executives' overall
      compensation to our financial performance and common stock price. Overall,
      the
      total compensation opportunity is intended to create an executive compete most
      vigorously for executive and technical talent.




**Elements
      of Executive Compensation**




Our
      executive compensation consists of base salary, annual cash incentive, stock
      option plan participation and customary broad-based employee benefits.
      Consistent with our pay for performance philosophy, the Compensation Committee
      believes that we can better motivate executive officers to enhance shareholder
      return if a relatively large portion of their compensation is "at risk" – that
      is, contingent upon the achievement of performance objectives and overall strong
      company performance. The mix of base salary, annual cash bonus opportunity
      based
      on achievement of objectives and anticipated long-term stock-based compensation
      incentive (in the form of stock options) varies depending on the officer's
      position level, but is always heavily weighted toward annual bonus and long-term
      stock-based compensation, as we believe that best aligns our executive officers'
      interests with that of our shareholders. The Compensation Committee believes
      that the compensation of executives who set the overall strategy for the
      business and have the greatest ability to execute that strategy should be
      largely performance-based.




Base
      Salary




Base
      salaries for our executives are established based on the scope of their
      responsibilities, taking into account market compensation paid by comparable
      companies for equivalent positions. Base salaries are reviewed on an annual
      basis and any increases are similar in scope to our overall corporate salary
      increase. Our philosophy is to target executive base salaries near the median
      range of salaries for executives in equivalent positions at comparable
      companies. We believe targeting executive salaries at the median relative to
      comparable companies reflects our best efforts to ensure we are neither
      overpaying nor underpaying our executives.




41




Annual
      Cash Incentive




Our
      executive cash incentive compensation plan provides for a cash bonus award,
      payable once per year, that is dependent, in part, upon attaining stated
      corporate objectives for the prior fiscal year. The goal of our executive cash
      incentive compensation plan is to reward executives in a manner that is
      commensurate with the level of achievement of certain financial and strategic
      goals that we believe, if attained, result in greater long-term shareholder
      value. The Compensation Committee approves these financial and strategic goals
      on an annual basis. These financial and strategic goals typically have a
      one-year time horizon. During 2007, the relevant performance goals were based
      primarily on revenues and EBITDA and these will continue to be the relevant
      performance metrics in 2008. The Compensation Committee and management use
      these
      factors because they are easy to measure and compare to comparable companies
      and
      because they are reflective of success and growth in our business and the
      creation of long-term shareholder value.




Stock
      Options




We
      believe that stock ownership is an important factor in aligning corporate and
      individual goals. Therefore, we utilize stock options to encourage long-term
      performance, with excellent corporate performance (as manifested in our common
      stock price) and extended officer tenure producing potentially significant
      value. Upon joining HSS, executive officers receive an initial stock option
      grant. This grant is based on relevant industry comparisons and is intended
      to
      be commensurate with the experience level and scope of responsibilities of
      the
      incoming executive officer.




Other
      Benefits




Executive
      officers are eligible to participate in all of our employee benefit plans,
      such
      as medical, dental, group life, disability, and accidental death and
      dismemberment insurance and our 401(k) plan.




**Summary
      Compensation**




The
      following table presents a summary of the compensation paid to our Chief
      Executive Officer, our Chief Financial Officer and former Chief Executive
      Officer during the year ended December 31, 2007. Except as listed below, there
      are no bonuses, other compensation, restricted stock awards or stock
      options/SARS or any other compensation paid to the named executive officers.




**Summary
      Compensation Table**




Name &
              Principal Position
            
            Year
            
            Salary
            
            Bonus
            
            Stock
              Awards
            
            Option
              Awards(1)
            
            Non-Equity
              Incentive Plan
              Compensation
            
            Nonqualified
              Deferred
              Compensation
              Earnings
            
            All Other
              Compensation
            
            TotalStan
                Vashovsky(2)
            
            
            2007
            
            $
            98,748
            
            
            —
            
            
            —
            
            $
            1,826,660
            
            
            —
            
            
            —
            
            $
            4,000
            
            $
            1,929,408Chief
                Executive Officer
            
            
            2006
            
            
            N/AMichael
                G. Levine(2)
            
            
            2007
            
            $
            95,004
            
            
            —
            
            
            —
            
            $
            617,700
            
            
            —
            
            
            —
            
            $
            2,400
            
            $
            715,104Chief
                Financial Officer
            
            
            2006
            
            
            N/AB.M.
                Milvain(3)
            
            
            2007
            
            $
            135,737
            
            
            —
            
            
            —
            
            $
            1,828
            
            
            —
            
            
            —
            
            
            —
            
            $
            135,737Former
                President and Chief Executive Officer
            
            
            2006
            
            $
            179,168
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            180,996







(1)
            Represents
                the total “fair market value” of options granted during the year ended
                December 31, 2007, calculated using the Black-Scholes option pricing
                model
                and related assumptions as disclosed in Note 11,*Stock
                Based Compensation and Warrants,*to
                our consolidated financial statements for the year ended December
                31,
                2007, as contained herein.


(2)
            Messrs.
                Vashovsky and Levine joined our company effective September 1,
                2007.


(3)
            Mr.
                Milvain retired from our company effective August 31,
                2007.





42


The
        following table sets forth information concerning each unexercised stock
        option
        held by each of our named executive officers at December 31, 2007.
 
 **Outstanding
        Equity Awards at Fiscal Year End**
  Option
                  Awards
              
              Stock
                  AwardsName
              
              Number of
                Securities
                Underlying
                Unexercised
                Options (#)
                Exercisable/
                Unexercisable
              
              Equity
                Incentive Plan
                Awards:
                Number of
                Securities
                Underlying
                Unexercised,
                Unearned
                Options (#)
              
              Option
                Exercise
                Price
                ($/Sh)
              
              Option
                Expiration
                Date
              
              Number
                of
                Shares
                That
                Have
                Not
                Vested
                (#)
              
              Market
                Value of
                Shares
                That Have
                not
                Vested($)*
              
              Equity
                Incentive
                Plan
                Awards:
                Number of
                Unearned
                Shares that
                Have Not
                Vested(#)
              
              Equity
                Incentive
                Plan
                Awards:
                Market or
                Payout
                Value of
                Unearned
                Shares That
                Have Not
                Vested($)Stan
                    Vashovsky
              
              
              1,900,000
              
              
              1,900,000
              
              $
              1.00
              
              08-31-2017
              
              
              N/A
              
              
              N/A
              
              
              N/A
              
              
              N/AMichael
                    G. Levine
              
              
              642,500
              
              
              642,500
              
              $
              1.00
              
              08-31-2017
              
              
              N/A
              
              
              N/A
              
              
              N/A
              
              
              N/A
  **Potential
        Payments Upon Termination of Change in Control**
 
 Both
        Mr.
        Vashovsky and Mr. Levine have entered into an employment agreement with us
        which
        provides that they are entitled to certain payments if they are terminated
        by us
        for a reason other than Cause (as defined below) or they terminate their
        employment for Good Reason (as defined below). In the event that the executive's
        employment is terminated by us during the term other than for Cause or is
        terminated by the executive for Good Reason we are required to pay to the
        executive the following amounts:
 
 ·
              the
                  portion of the executive's base salary accrued but unpaid through
                  the date
                  of such termination;
 
 ·
              any
                  other amounts to which the executive is entitled by law or pursuant
                  to the
                  terms of any compensation or benefit plan or arrangement in which
                  he
                  participated prior to the date of termination; and
 
 ·
              the
                  executive's base salary as in effect on the date of executive's
                  termination for a period of 12 months from notice of termination
                  hereunder
                  payable in installments consistent with our normal payroll schedule,
                  subject to applicable withholding and other taxes.
 
 "Cause"
        shall mean any of the following:
 
 ·
              executive’s
                  willful failure or refusal, after notice thereof, to perform specific
                  directives of the Board when such directives are lawful and consistent
                  with the executive’s duties and responsibilities described in this
                  Agreement;
 
 ·
              dishonesty
                  of the executive affecting us;
 
 ·
              habitual
                  abuse of drugs or alcohol;
 
 ·
              conviction
                  of executive of, or a plea by executive of
                  misrepresentation;
 
 ·
              any
                  gross or willful conduct of the executive resulting in loss to
                  us or
                  damage to our reputation;
  43
  ·
              theft
                  from HSS;
  ·
              commission
                  or participation by executive in any other injurious act or omission
                  wantonly, willfully, recklessly or in a manner which is grossly
                  negligent
                  against us; or
 
 ·
              violation
                  by the executive, after notice thereof, or our business policies
                  and
                  guidelines as may be in effect from time to time.
 
 The
        executive shall have "Good Reason" to terminate his employment during the
        term
        of his Agreement only if:
 
 **·**
              we
                  fail to pay or provide any amount or benefit that we are obligated
                  to pay
                  or provide under the agreement and the failure is not remedied
                  within 30
                  days after we receive written notice from the executive of such
                  failure;
 
 **·**
              we
                  limit the executive's duties or responsibilities or power or authority
                  in
                  any material respect, and the situation is not remedied within
                  30 days
                  after we receive written notice from the executive of the situation;
 
 **·**
              he
                  is removed from, or not elected or re-elected to, his position
                  and we do
                  not have Cause for doing so;
 
 **·**
              we
                  force executive to relocate outside of the New York metropolitan
                  area, and
                  the situation is not remedied within 30 days after we receive written
                  notice from the executive of the situation;
                  or
 
 **·**
              a
                  Change in Control occurs. A “Change in Control” shall mean (a) a
                  reorganization, merger, consolidation or other transaction, in
                  each case,
                  with respect to which persons who were the shareholders of the
                  company
                  immediately prior to such transaction do not, immediately thereafter,
                  own
                  more than 50% of the combined voting power of the company’s then
                  outstanding voting securities, in substantially the same proportions
                  as
                  their ownership immediately prior to such transaction, (b) a liquidation
                  or dissolution or (c) the sale of all or substantially all of our
                  assets.
 
 **Director
        Compensation**
 
 Effective
        June 30, 2006, all of our directors, other than those who are also officers,
        receive an annual fee equal to $10,000 **.** We do
        not pay fees to directors for their attendance at meetings. The following
        Director Compensation Table summarizes the compensation of our non-employee
        directors for services rendered to us during the year ended December 31,
        2007:
 
 **Director
        Compensation Table**
  Name
              
              Fees
                Earned or
                Paid in
                Cash
              
              Stock
                Awards
              
              Option
                Awards
              
              Non-Equity
                Incentive Plan
                Compensation $
              
              Change in
                Pension value
                and
                Nonqualified
                Deferred
                Compensation
                Earnings $
              
              All Other
                Compensation
              
              Total $Steven
                  Katz
              
              $
              10,000
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              $
              10,000Batsheva
                  Schreiber
              
              $
              10,000
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              $
              10,000Wayne
                  LeRoux
              
              $
              10,000
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              $
              10,000Randall
                  J. Frapart
              
              $
              10,000
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              $
              10,000
  In
        addition to the fees listed above, we reimburse directors for their travel expenses should they incur any attending meetings
        of
        the Board or its committees. The directors do not receive any other compensation
        or personal benefits.
  44
  **ITEM
                  12.**
                **SECURITY
                    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                    SHAREHOLDER MATTERS**
 
 **Security
        Ownership**
 
 As
        of
        December 31, 2007, there were 7,365,361 shares of our common stock, 4,625,000
        shares of Series C Convertible Preferred Stock and 837,500 shares of Series
        D
        Convertible Preferred Stock issued and outstanding. The Series C Convertible
        Preferred Stock and Series D Convertible Preferred Stock are convertible
        into
        shares of common stock and vote, with the common stock, on an “as if” converted
        basis.
 
 The
        following table sets forth information as of the close of business on December
        31, 2007, including (1) the name and number of voting stock 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.
  **Names
                  and Addresses****1**
              
              **Shares**
                **Beneficially**
                **Owned**
              
              **Percent
                  of**
                **Shares**
                **Outstanding****Directors
                  and Named Executive Officers**Stan
                  Vashovsky2
              
              
              —
              
              
              —Michael
                  G. Levine2
              
              
              —
              
              
              —Steven
                  Katz3
              
              
              5,625
              
              
              *Batsheva
                  Schreiber4
              
              
              5,625
              
              
              *Wayne
                  LeRoux
              
              
              —
              
              
              —Randall
                  J. Frapart
              
              
              —
              
              
              —All
                  executive officers and Directors as a Group (6 persons)
              
              
              11,250
              
              
              ***Beneficial
                  Owners of More than 5%**Stanford
                  International Bank, Ltd.5
              
              
              8,752,839
              
              
              81.6
              %
  *
          Less
          than 1%.
 
 1 Unless
          otherwise indicated, the address for each person is 405 N Reo Street, Suite
          300,
          Tampa, FL 33609.
 
 2 Does not
          include any shares of common stock issuable in connection with stock options,
          none of which are currently exercisable.
  3 Includes
          5,625 stock options exercisable within 60 days. Mr. Katz’s business address is
          Brian Ridge Plaza, 440 South Main Street, Milltown, NJ 08850.
  4 Includes
          5,625 stock options exercisable within 60 days. Ms. Schreiber’s business address
          is 110 North Ninth Avenue, Highland Park, NJ 08904.
  5 SIBL’s
          business address is 5050 Westheimer Road, Houston, TX 77056. The beneficial
          owner of those shares is R. Allen Stanford. This amount includes 2,731,250
          shares of common stock issuable upon conversion of currently exercisable
          shares
          of preferred stock and 625,000 shares of common stock issuable upon exercise
          of
          warrants held by SIBL. The preferred stock may be voted, along with the
          common
          stock, with each share of preferred stock entitled to one-half vote.
  45
  **O** **ther
        Shareholder Matters**
 
 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,
        2007:
  **Plan
                  Category**
              
              **Number of**
                **securities to be**
                **issued upon**
                **exercise of**
                **outstanding**
                **options,**
                **warrants and**
                **rights**
              
              **Weighted-**
                **average exercise**
                **price of**
                **outstanding**
                **options,**
                **warrants and**
                **rights**
              
              **Number of securities**
                **remaining available**
                **for future issuance**
                **under equity**
                **compensation plans**
                **(excluding securities**
                **reflected in 1****st**
                **column)**Equity
                  compensation plans approved by security holders
              
              
              2,771,842
              
              $
              1.06
              
              
              436,908
  **ITEM 13.**
                  **CERTAIN
                      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                      INDEPENDENCE**
 
 **Transactions
        with** **SIBL**
 
 SIBL is the
        owner of a majority of our issued and outstanding common stock and all of
        our
        issued and outstanding preferred stock.
 
 We
        entered into a Preferred Stock Purchase Agreement dated as of October 31,
        2005
        with SIBL to
        acquire 4,625,000 shares of our Series C Preferred Stock, together with
        five-year warrants to purchase 1,387,500 shares of our Common Stock at an
        exercise price of $0.002. We agreed to issue to SIBL our Series C Convertible
        Preferred Stock at a price of $2.00 per share together with warrants to purchase
        3/10 of a share of common stock for each share of Series C Preferred Stock
        purchased. Each share of Series C 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 preferred
        share.
 
 On
        November 8, 2005, we sold to SIBL, pursuant to the Preferred Stock Purchase
        agreement, 725,000 shares of our Series C Convertible Preferred Stock at
        a price
        of $2.00 per share, along with warrants to purchase 217,500 shares of common
        stock exercisable at $0.002 per share. Throughout the year ended December
        31,
        2006, we sold $4,650,000 under this agreement resulting in the issuance of
        2,325,000 shares of Series C Convertible Preferred Stock. During
        the year ended December
        31, 2007, we sold $3,150,000 under this agreement resulting in the issuance
        of
        1,575,000 shares. At December 31, 2007, we had $0 available to draw down
        under
        the agreement.
 
 On
        August
        17, 2007, we entered into a Preferred Stock Purchase Agreement with SIBL whereby SIBL agreed
        to acquire 1,425,000 shares of our Series D Preferred Stock, together with
        five-year warrants to purchase 427,500 shares of our common stock at an exercise
        price of $0.001 per share. Each share of Series D Preferred Stock is convertible
        into one-half share of our common stock. SIBL agreed
        to pay $2.00 per share of preferred stock acquired, and the warrants were
        issued
        for no additional consideration. The proceeds from the sale of the Series
        D
        Preferred Stock pursuant to this agreement are to be used for working capital,
        subject to SIBL ’s
        approval of each funding in its sole discretion; provided, however, that SIBL will not
        have discretion to reject requests by us for sales of up to an aggregate
        of
        250,000 shares of preferred stock provided we are in compliance with the
        agreement. In addition, under this agreement, SIBL has an option to buy all
        of
        the Series D Preferred Stock and accompanying warrants covered by this agreement
        at a price of $2.00 per share of preferred stock. In 2007 we sold 837,500
        shares
        of Series D Preferred Stock to SIBL. At December 31, 2007, we had $1,175,000
        available to draw down under this agreement.
 
 46
  Effective
        August 17, 2007, we also entered into a Convertible Debenture Purchase Agreement
        with SIBL ,
        pursuant to which SIBL agreed
        to acquire up to $5,000,000 of our convertible debentures. The debentures
        will
        be purchased incrementally at such time as requests are made by us and subject
        to various conditions. The proceeds from the sale of the debenture(s) are
        to be
        used for working capital and/or acquisitions, in any case subject to the
        approval of SIBL. Each debenture that will be issued will be due four years
        from
        the date of issuance and will be convertible at any time at the option of SIBL into
        shares of preferred stock, in the aggregate 1,250,000 shares, subject to
        adjustments. As of December 31, 2007, we had not sold any debentures to SIBL
        in
        connection with this agreement. In consideration for entering into this
        agreement and making these funds available upon request, SIBL was issued
        five-year warrants to purchase 1,250,000 shares of our common stock at an
        exercise price of $1.00 per share.
 
 Pursuant
        to a registration rights agreement dated August 17, 2007, we were obligated
        to
        register the shares of common stock issuable upon conversion of the Series
        C and
        D Convertible Preferred Stock and the debentures and the exercise of the
        warrants pursuant to a registration statement filed by November 15, 2007.
        If we
        did not timely file the required registration statement, we were required
        to
        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 Series C and D Convertible Preferred Stock sold. Effective
        December 13, 2007, SIBL agreed to extend the date by which we must file our
        registration statement to July 31, 2008 and to not impose a penalty.
 
 **Other
        Related Transactions**
 
 We
        have
        adopted a policy whereby all transactions between us and any of our affiliates
        must be approved in advance by a majority of our disinterested directors.
 
 **Director
        Independence**
 
 Our
        securities are currently listed for trading on the OTC Bulletin Board. There
        is
        no requirement that a majority of the members of our Board of Directors be
        independent. Nonetheless, our Board of Directors, in the exercise of reasonable
        business judgment, has determined that a majority of our directors qualify
        as
“independent” directors pursuant to SEC rules and regulations and the
        independence standards of the listing requirements of The Nasdaq Stock Market.
        Under these standards, a director is not considered independent if he or
        she has
        certain specified relationships with the company or any other relationships
        that, in the opinion of the Board, would interfere with his or her exercise
        of
        independent judgment as a director. Our independent directors are: Steven
        Katz,
        Batsheva Schreiber, Wayne LeRoux and Randall Frapart.
 
  47
  **ITEM
                    14.**
                  **PRINCIPAL
                      ACCOUNTING FEES AND
                      SERVICES**
 
 The
        following table summarizes the aggregate fees billed and expected to be billed
        to us by Sherb & Co. for fiscal years ended December 31, 2007 and 2006:
 
 **Principal
        Accountant Fees and Services**
  **2007**
              
              **2006**Audit
                  Fees1
              
              $
              37,000
              
              $
              31,000Tax
                  Fees2
              
              
              5,000
              
              
              5,000All
                  Other Fees3
              
              
              23,500
              
              
              96,750**Total**
              
              $
              65,500
              
              $
              132,750
 
 1
              Includes
                  the aggregate fees billed by our auditors for professional services
                  rendered for the audit of our annual financial statements included
                  in our
                  Form 10-K and for the reviews of the financial statements included
                  in our
                  Quarterly Reports on Form 10-Q during those fiscal
                  years.
 2
              Includes
                  the aggregate fees billed by our auditors for taxation compliance,
                  tax
                  advice and tax planning.
 3
              Includes
                  the aggregate fees billed by our auditors for products and services
                  provided by our principal accountant, other than the services covered
                  above.
 
 **Audit
        Committee Pre-Approval Policies and Procedures**
 
 The
        Audit
        Committee on an annual basis reviews audit and non-audit services performed
        by
        the independent auditors. All audit and non-audit services must be approved
        in
        advance by the Audit Committee, which considers, among other things, the
        possible effect of the performance of such services on the auditors’
independence.
 
 48
  **ITEM
                    15.**
                  **EXHIBITS
                      AND FINANCIAL STATEMENT
                      SCHEDULES**
  **Exhibit**
                **No.**
              
              **Description**
              
              **Method
                  of Filing**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
              
              Previously
                  filed with our Form 8-K Current Report on filed November 1,
                  2002.3.0
              
              Certificate
                  of Incorporation and Change of Domicile
              
              Previously
                  filed on Definitive Proxy Statement filed on August 23,
                  2001.3.1
              
              Certificate
                  of Amendment to the Company's Articles of Incorporation effectuating
                  the
                  Reverse Stock Split.
              
              Previously
                  filed with our Form 8-K Current Report filed on November 1,
                  2002.3.2
              
              Certificate
                  of Amendment to the Company's Articles of Incorporation (designation
                  of
                  Series A Preferred Stock).
              
              Previously
                  filed with our Form 8-K Current Report filed on November 1,
                  2002.3.3
              
              Certificate
                  of Amendment to the Company's Articles of Incorporation (Name
                  change).
              
              Previously
                  filed with our Definitive Information Statement filed on November
                  15,
                  2002.3.4
              
              Certificate
                  of Designation of Series B Preferred Stock
              
              Previously
                  filed with our Form 8-K Current Report filed on May 15,
                  2003.3.5
              
              Certificate
                  of Amendment to the Company’s Articles of Incorporation (increasing the
                  authorized number of shares of common stock and Preferred Stock).
              
              Previously
                  filed with our Definitive Information Statement filed on June 3,
                  2003.3.6
              
              Certificate
                  of Amendment to the Company's Articles of Incorporation (effectuating
                  the
                  Reverse Stock Split).
              
              Previously
                  filed with our Definitive Information Statement filed on June 17,
                  2004.3.7
              
              Bylaws
              
              Previously
                  filed with our Form SB-2 filed on July 8, 2004.4.1
              
              2003
                  Management and Director Equity Incentive Compensation
                  Plan.
              
              Previously
                  filed with our Definitive Information Statement filed on June 3,
                  2003.4.2
              
              2003
                  Management and Director Equity Incentive Compensation Plan, as
                  amended.
              
              Filed
                  herewith.10.1
              
              Securities
                  Purchase Agreement, dated as of October 16, 2002, by and among
                  the
                  Company, certain principal shareholders of the Company and
                  SIBL
              
              Previously
                  filed with our Form 8-K Current Report filed on November 1,
                  2002.10.2
              
              Form
                  of Warrant Agreement and Warrant Assignment Form
              
              Previously
                  filed with our Form 8-K Current Report filed on November 1,
                  2002.10.3
              
              Registration
                  Rights Agreement, dated as of October 22, 2002, among the Company,
                  SIBL,
                  Daniel Boger, Ronald Stein, Osvaldo Pi, William Fusselmann and
                  Deluxe
                  Investment Company
              
              Previously
                  filed with our Form 8-K Current Report filed on November 1,
                  2002.10.4
              
              Equity
                  Financing Commitment Letter, dated October 22, 2002, from SIBL
                  to the
                  Company
              
              Previously
                  filed with our Form 8-K Current Report filed on November 1,
                  2002.
  49
  **Exhibit**
                **No.**
              
              **Description**
              
              **Method
                  of Filing**10.5
              
              March
                  25, 2004 Amendment to Registration Rights Agreement, dated October
                  22,
                  2002, as amended
              
              Previously
                  filed with our Company’s Form 10-KSB Annual Report for the year ended
                  December 31, 2003.10.6
              
              Securities
                  Purchase Agreement (Series B Preferred Stock), dated as of April
                  30, 2003,
                  among the Company and SIBL Venture Capital Holdings, Inc.
              
              Previously
                  filed with our Form 8-K Current Report filed on May 15,
                  2003.10.7
              
              Instrument
                  of Warrant Repricing dated April 30, 2003
              
              Previously
                  filed with our Form 8-K Current Report filed on May 15,
                  2003.10.8
              
              Registration
                  Rights Agreement, dated as of April 30, 2003, among the Company
                  and SIBL
                  Venture Capital Holdings, Inc.
              
              Previously
                  filed with our Form 8-K Current Report filed on May 15,
                  2003.10.9
              
              March
                  25, 2004 Amendment to Registration Rights Agreement, dated April
                  30, 2003,
                  as amended
              
              Previously
                  filed with our Company’s Form 10-KSB Annual Report for the year ended
                  December 31, 2003.10.10
              
              Loan
                  and Security Agreement, dated July 6, 2004
              
              Previously
                  filed with our Form 8-K Current Report filed on July 6,
                  2004.10.11
              
              Warrant
                  Purchase Agreement, dated July 6, 2004
              
              Previously
                  filed with our Form 8-K Current Report filed on July 6,
                  2004.10.12
              
              Amended
                  and Restated Investor Relations Agreement with American Capital
                  Ventures,
                  Inc., dated August 5, 2004
              
              Previously
                  filed with our Form SB-2 filed on July 8, 2004.10.13
              
              Registration
                  Rights Agreement, dated July 6, 2004
              
              Previously
                  filed with our Form 8-K Current Report filed on July 6,
                  2004.10.14
              
              Warrant
                  Assignment Agreement, dated July 6, 2004
              
              Previously
                  filed with our Form 8-K Current Report filed on July 6,
                  2004.10.15
              
              Escrow
                  Agreement with Deluxe Investment Company
              
              Previously
                  filed with our Form SB-2 filed on July 8, 2004.10.16
              
              Deluxe
                  Investment Company Purchase Agreement
              
              Previously
                  filed with our Form 8-K/A Current Report filed on February 17,
                  2004.10.17
              
              First
                  Amendment to Loan and Security Agreement
              
              Previously
                  filed with our Form SB-2 filed on July 8, 2004.10.18
              
              Qwest
                  Hosting Services Agreement
              
              Previously
                  filed with our Form SB-2 filed on July 8, 2004.10.19
              
              Employment
                  Agreement with Stan Vashovsky
              
              Previously
                  filed with our Form 8-k filed on August 2, 200710.20
              
              Employment
                  Agreement with Michael G. Levine
              
              Previously
                  filed with our Form 8-k filed on August 20, 200714.0
              
              Code
                  of Ethics and Business Conduct
              
              Filed
                  herewith31.1
              
              Rule
                  13a-14(a)/15d-4(a) Certification of Principal Executive
                  Officer
              
              Filed
                  herewith31.2
              
              Rule
                  13a-14(a)/15d-4(a) Certification of Principal Financial
                  Officer
              
              Filed
                  herewith
  50
  **Exhibit****No.**
              
              **Description**
              
              **Method
                  of Filing**32.1
              
              Section
                  1350 Certification of Principal Executive Officer
              
              Filed
                  herewith32.2
              
              Section
                  1350 Certification of Principal Financial Officer
              
              Filed
                  herewith
  51
  **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 28, 2008HEALTH
                    SYSTEMS SOLUTIONS, INC.By:
                /s/
                    Stan VashovskyStan
                    Vashovsky, Chairman andChief
                    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 28, 2008.
  SIGNATURE
                
                TITLE/s/
                    Stan Vashovsky
                
                Principal
                    Executive Officer and DirectorStan
                    Vashovsky/s/
                    Michael G. Levine
                
                Principal
                    Financial OfficerMichael
                    G. Levine/s/
                    Steven Katz
                
                DirectorSteven
                    Katz/s/
                    Batsheve Schreiber
                
                DirectorBatsheva
                    Schreiber/s/
                    Wayne LeRoux
                
                DirectorWayne
                    LeRoux/s/
                    Randall J. Frapart
                
                DirectorRandall
                    J. Frapart
  52
  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 sheets of Health Systems
        Solutions, Inc. as of December 31, 2007 and 2006 and the related consolidated
        statements of operations, shareholders' equity (deficit) and cash flows for
        the
        years ended December 31, 2007 and 2006. 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. The
        Company
        is not required to have, nor were we engaged to perform, an audit of its
        internal control over financial reporting as a basis for designing audit
        procedures that are appropriate in the circumstances, but not for the purpose
        of
        expressing an opinion on the effectiveness of the Company’s internal control
        over financial reporting. Accordingly, we express no such opinion. An audit
        also
        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, 2007 and 2006 and the results of their operations
        and
        their cash flows for the years ended December 31, 2007 and 2006, in conformity
        with accounting principles generally accepted in the United States of
        America.
 
 /s/
                    Sherb & Co., LLP
 Sherb
        & Co., LLP
 Certified
        Public Accountants
  New
        York,
        New York
 March
        17,
        2008
  F-1
  **HEALTH
        SYSTEMS SOLUTIONS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        BALANCE SHEET**
 
 **ASSETS**
  **December
                  31,****2007**
              
              **2006****Current
                  assets:**Cash
              
              $
              1,218,620
              
              $
              558,764Accounts
                  receivable, net of allowance for doubtful accounts of $234,801
                  and
                  $302,607
              
              
              898,928
              
              
              914,032Prepaids
                  and other current assets
              
              
              138,890
              
              
              116,025**Total
                  current assets**
              
              
              2,256,438
              
              
              1,588,821Property
                  and equipment, net of accumulated depreciation and amortization
                  of
                  $635,459 and $544,143
              
              
              442,879
              
              
              275,145Software
                  development costs, net of accumulated amortization of $0 and
                  $2,693,434
              
              
              —
              
              
              3,880,577Security
                  deposits and other assets
              
              
              96,278
              
              
              94,661Deferred
                  financing cost, net of accumulated amortization of $28,332
              
              
              273,604
              
              
              —**Total
                  assets**
              
              $
              3,069,199
              
              $
              5,839,203
  **LIABILITIES
        AND STOCKHOLDERS' EQUITY**
  **December
                  31,****2007**
              
              **2006****Current
                  liabilities:**Current
                  portion of capital lease obligation
              
              $
              23,932
              
              $
              8,965Accounts
                  payable
              
              
              639,881
              
              
              549,318Accrued
                  expenses
              
              
              1,404,310
              
              
              340,323Deferred
                  revenue
              
              
              962,788
              
              
              917,494Client
                  deposits
              
              
              96,350
              
              
              90,780Note
                  payable – bank
              
              
              229,000
              
              
              229,000Loans
                  payable
              
              
              —
              
              
              355,032**Total
                  current liabilities**
              
              
              3,356,261
              
              
              2,490,912Capital
                  lease obligation, net of current portion
              
              
              40,705
              
              
              —**Total
                  liabilities**
              
              
              3,396,966
              
              
              2,490,912**Stockholder's
                  equity (deficiency):**Preferred
                  Stock - 15,000,000 shares authorized;Series
                  C Convertible - 4,625,000 and 3,050,000 shares issued and outstanding
                  at
                  December 31, 2007 and 2006, respectively
              
              
              9,250,000
              
              
              6,100,000Series
                  D Convertible – 837,500 and 0 sharesissued
                  and outstanding at December 31, 2007 and 2006,
                  respectively
              
              
              1,675,000
              
              
              —Common
                  Stock $.001 par value - 150,000,000 shares authorized; 7,365,361
                  and
                  6,270,907 issued and outstanding at December 31, 2007 and 2006,
                  respectively
              
              
              7,365
              
              
              6,271Additional
                  paid-in capital
              
              
              14,431,040
              
              
              13,208,417
 Accumulated
                      deficit
                  
                  
                  (25,691,172
                  )
                  
                  (15,966,397
                  )**Total
                      stockholders' equity (deficiency)**
                  
                  
                  (327,767
                  )
                  
                  3,348,291**Total
                      liabilities and stockholders' equity**
                  
                  $
                  3,069,199
                  
                  $
                  5,839,203
  See
          accompanying notes to the consolidated financial statements.
 F-2
 **HEALTH
        SYSTEMS SOLUTIONS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF OPERATION**
  **December
                  31,****2007**
              
              **2006****Net
                  sales**
              
              $
              7,220,671
              
              $
              6,576,991**Cost
                  of sales**
              
              
              5,791,095
              
              
              3,838,965**Gross
                  profit**
              
              
              1,429,576
              
              
              2,738,026**Operating
                  expenses**Selling
                  and marketing
              
              
              2,200,680
              
              
              1,739,887Research
                  and development
              
              
              1,481,743
              
              
              1,230,207General
                  and administrative
              
              
              3,378,851
              
              
              2,037,868Depreciation
                  and amortization
              
              
              166,147
              
              
              139,484Impairment
                  of development costs
              
              
              3,104,466
              
              
              —Interest
              
              
              74,770
              
              
              46,403**Total
                  operating expenses**
              
              
              10,406,657
              
              
              5,193,850**Net
                  loss**
              
              
              (8,977,081
              )
              
              (2,455,824
              )Deemed
                  preferred stock dividend
              
              
              747,694
              
              
              498,229**Net
                  loss applicable to common shareholders**
              
              $
              (
                  9,724,775
              )
              $
              (2,954,053
              )**Basic
                  and diluted net loss per share**
              
              $
              (1.43
              )
              $
              (0.50
              )**Basic
                  and diluted weighted average shares outstanding**
              
              
              6,816,886
              
              
              5,947,526
  See
        accompanying notes to the consolidated financial statements.
  F-3
  **HEALTH
        SYSTEMS SOLUTIONS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY**
 **YEARS
        ENDED 2007 AND 2006**
  **Additional**
                  
                  
                  
                  **Total****Preferred Stock**
                  
                  **Common Stock**
                  
                  **Paid-in-**
                  
                  **Accumulated**
                  
                  **Stockholders'****Shares**
                  
                  **Amount**
                  
                  **Shares**
                  
                  **Amount**
                  
                  **Capital**
                  
                  **Deficit**
                  
                  **Equity****Balance
                      December 31, 2005**
                  
                  
                  725,000
                  
                  $
                  1,450,000
                  
                  
                  5,615,905
                  
                  $
                  5,616
                  
                  $
                  12,638,839
                  
                  $
                  (13,012,275
                  )
                  $
                  1,082,180Issuance
                      of Series C Convertible Preferred Stock
                  
                  
                  2,325,000
                  
                  
                  4,650,000
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  4,650,000Deemed
                      Preferred Stock Dividend
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  498,299
                  
                  
                  (498,299
                  )
                  
                  —Issuance
                      of Common Stock by the Exercising of Warrants
                  
                  
                  —
                  
                  
                  —
                  
                  
                  555,000
                  
                  
                  555
                  
                  
                  555
                  
                  
                  —
                  
                  
                  1,110Issuance
                      of Common Stock to Members of VantaHealth
                  
                  
                  —
                  
                  
                  —
                  
                  
                  100,000
                  
                  
                  100
                  
                  
                  34,900
                  
                  
                  —
                  
                  
                  35,000Issuance
                      of Round-up Common Stock
                  
                  
                  —
                  
                  
                  —
                  
                  
                  2
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —Stock
                      Based Compensation
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  35,825
                  
                  
                  —
                  
                  
                  35,825Net
                      Loss
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (2,455,824
                  )
                  
                  (2,455,824
                  )**Balance
                      December 31, 2006**
                  
                  
                  3,050,000
                  
                  $
                  6,100,000
                  
                  
                  6,270,907
                  
                  $
                  6,271
                  
                  $
                  13,208,418
                  
                  $
                  (15,966,398
                  )
                  $
                  3,348,291Issuance
                      of Series C Convertible Preferred Stock
                  
                  
                  1,575,000
                  
                  
                  3,150,000
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  3,150,000Issuance
                      of Series D Convertible Preferred Stock
                  
                  
                  837,500
                  
                  
                  1,675,000
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  1,675,000Deemed
                      Preferred Stock Dividend
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  747,694
                  
                  
                  (747,694
                  )
                  
                  —Issuance
                      of Common Stock by the Exercising of Warrants
                  
                  
                  —
                  
                  
                  —
                  
                  
                  1,042,500
                  
                  
                  1,042
                  
                  
                  1,043
                  
                  
                  —
                  
                  
                  2,085Issuance
                      of Common Stock by the Exercising of Options
                  
                  
                  —
                  
                  
                  —
                  
                  
                  1,250
                  
                  
                  1
                  
                  
                  411
                  
                  
                  —
                  
                  
                  412Issuance
                      of Common Stock
                  
                  
                  —
                  
                  
                  —
                  
                  
                  50,704
                  
                  
                  51
                  
                  
                  25,381
                  
                  
                  —
                  
                  
                  25,432Deferred
                      Financing costs
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  301,936
                  
                  
                  —
                  
                  
                  301,936Stock
                      Based Compensation
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  146,158
                  
                  
                  —
                  
                  
                  146,158Net
                      Loss
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  (8,977,081
                  )
                  
                  (8,977,081
                  )**Balance
                      December 31, 2007**
                  
                  
                  5,462,500
                  
                  $
                  10,925,000
                  
                  
                  7,365,361
                  
                  $
                  7,366
                  
                  $
                  14,431,040
                  
                  $
                  (25,691,172
                  )
                  $
                  (327,767
                  )
 
 See
        accompanying notes to the consolidated financial statements.
  F-4
  **HEALTH
        SYSTEMS SOLUTIONS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
  **For
                  the Year Ended December 31,****2007**
              
              **2006**Cash
                  flows from operating activities:Net
                  loss
              
              $
              (8,977,081
              )
              $
              (2,455,824
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Stock
                  based compensation expense
              
              
              146,158
              
              
              35,825Depreciation
                  and amortization of property and equipment
              
              
              166,147
              
              
              139,484Amortization
                  of software development costs
              
              
              1,833,314
              
              
              1,102,604Loss
                  on disposal of assets
              
              
              16,058
              
              
              —Amortization
                  of deferred finance cost
              
              
              28,332
              
              
              —Impairment
                  of software development
              
              
              3,104,466
              
              
              —Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              82,910
              
              
              (223,412
              )Allowance
                  for doubtful account**s**
              
              
              (67,806
              )
              
              185,835Royalties
                  and referral fees receivable
              
              
              —
              
              
              (2,465
              )Prepaid
                  expenses and other current assets
              
              
              (22,866
              )
              
              (17,464
              )Security
                  deposits
              
              
              (1,617
              )
              
              —Accounts
                  payable
              
              
              90,564
              
              
              (85,983
              )Accrued
                  expenses
              
              
              1,063,987
              
              
              39,258Deferred
                  revenue
              
              
              45,293
              
              
              (41,221
              )Reserve
                  for client refunds
              
              
              —
              
              
              (573,361
              )Client
                  deposits
              
              
              5,569
              
              
              (21,914
              )Net
                  cash used in operating activities
              
              
              (2,486,572
              )
              
              (1,918,638
              )Cash
                  flow from investing activities:Purchase
                  of VantaHealth Technologies, LLC.
              
              
              —
              
              
              (1,052,034
              )Purchase
                  of CareKeeper Software, Inc.
              
              
              —
              
              
              (91,753
              )Acquisition
                  of cash
              
              
              —
              
              
              26,420Purchase
                  of property and equipment
              
              
              (276,845
              )
              
              (127,203
              )Increase
                  in software development costs
              
              
              (1,057,203
              )
              
              (1,003,254
              )Net
                  cash used in investing activities
              
              
              (1,334,048
              )
              
              (2,247,824
              )Cash
                  flow from financing activities:Repayment
                  of capital leases
              
              
              (17,421
              )
              
              (17,311
              )Repayment
                  of loans payable
              
              
              (355,032
              )
              
              (247,503
              )Proceeds
                  from exercise of options
              
              
              412
              
              
              —Proceeds
                  from the exercise of warrants
              
              
              2,085
              
              
              1,110Proceeds
                  from the issuance of common stock
              
              
              25,432
              
              
              —Proceeds
                  form the issuance of preferred stock
              
              
              4,825,000
              
              
              4,650,000Net
                  cash provided by financing activities
              
              
              4,480,476
              
              
              4,386,296Increase
                  in cash
              
              
              659,856
              
              
              219,834Cash,
                  beginning of year
              
              
              558,764
              
              
              338,930Cash,
                  end of year
              
              $
              1,218,620
              
              $
              558,764
  Supplemental
                    cash flow data:Cash
                    paid during the year for interest expense
                
                $
                81,986
                
                $
                46,403Issuance
                    of common stock to members of an acquired company
                
                $
                25,432
                
                $
                35,000Increase
                    in software development costs as a result of an accrued earn
                    out payment
                    to sellers of an acquired company
                
                $
                —
                
                $
                77,207Noncash
                    Financing and Investing activities:Equipment
                    acquired under capital lease
                
                $
                73,094
                
                $
                —Deferred
                    finance cost related to warrants issued for commitment to debenture
                    agreement
                
                $
                301,936
                
                $
                —Deemed
                    dividends on issuance of preferred stock
                
                $
                747,694
                
                $
                498,299
 
 F-5
  **HEALTH
        SYSTEMS SOLUTIONS, INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **DECEMBER
        31, 2007 AND 2006**
 
 **1.**  **Description
        of Business, Acquisitions and Consolidation**
 
 Health
        Systems Solutions, Inc. (the “Company”), through its wholly owned subsidiaries,
        Healthcare Quality Solutions, Inc. (“HQS”), VHT Acquisition Company (“VHT”),
        CareKeeper Solutions, Inc. (“CKS”), and HSS Consultancy, LLC (“HSSC”), is a
        technology and services company dedicated to bringing innovation to the health
        care industry.
 
 On
        April
        6, 2006, VHT consummated an Asset Purchase Agreement with VantaHealth
        Technologies, LLC (“Vanta”) and the members of Vanta. Under the purchase
        agreement, VHT acquired substantially all of the assets of Vanta in
        consideration for: (a) $850,000 in cash, (b) the assumption of certain
        liabilities of Vanta in the approximate amount of $70,000, and (c) the issuance
        to the members of Vanta, of an aggregate of 100,000 shares of the Company’s
        common stock.
 
 In
        connection with the acquisition of the assets of Vanta, VHT entered into
        a
        Transition Services Agreement with ZAC Capital Partners, LLC (“ZAC”). ZAC is a
        member of Vanta. Under the Transition Services Agreement, ZAC agreed to provide
        to VHT certain transition services for a period of 150 days after the closing
        including transition assistance with respect to existing clients, assistance
        with access to books and records, introduction to Vanta’s existing sales leads,
        assistance in connection with the collection of existing accounts receivable,
        and other services that VHT may reasonably request. In consideration of these
        services, VHT paid ZAC $100,000 on April 19, 2006.
 
 On
        May
        15, 2006, the Company and CKS executed and consummated a Stock Purchase
        Agreement with all of the shareholders of CareKeeper Software, Inc.
        (“CareKeeper”). Under the purchase agreement, CKS, the Company’s wholly owned
        subsidiary, acquired all of the issued and outstanding capital stock of
        CareKeeper. In consideration for the stock of CareKeeper, the Company or
        CKS
        agreed to: (a) make available to CareKeeper an operating line of credit in
        an
        amount of up to $1,500,000 to be made available at such times and in such
        amounts as the Company or CKS shall pre-approve and will be used solely to
        pay
        certain of CareKeeper’s accounts payable enumerated in a schedule to the
        Agreement, certain amounts due to the former shareholders of CareKeeper up
        to
        $143,000 and to pay operating expenses pursuant to an annual budget pre-approved
        by us; (b) make an earn out payment based on a percentage of CareKeeper’s
        operating revenues in 2006, 2007 and 2008; and (c) make a contingent payment
        in
        the amount of up to 400,000 shares of the Company’s common stock based on
        CareKeeper achieving certain milestones with respect to its operating revenues
        during 2006, 2007 and 2008.
 
 With
        respect to the earn out payment for the year ended December 31, 2006 which
        is
        based on a percentage of the cash collected relating to the gross revenue
        earned
        from May 15, 2006 to December 31, 2006, the Company had provided in 2006
        for the
        $77,207 that was paid in February and March 2007 to the sellers of CareKeeper
        in
        accordance to the purchase agreement. Such amounts were included in the
        Company’s intangible assets as of December 31, 2006. With respect to the 2007
        earnout payment, the Company accrued $143,383 at December 31, 2007. This
        amount
        was recorded as an impairment expense as of December 31, 2007.
 
 The
        contingent payment, which consists of shares of the Company’s common stock, is
        based on the achievement of certain pre-approved milestones relating to the
        operating revenues of CareKeeper from May 15, 2006 to December 31, 2006.
        In
        accordance with the agreement, the former shareholders were entitled to 50,704
        shares of the Company’s common stock which were issued on July 10, 2007. The
        value of those shares were recorded as an addition to the Company’s intangible
        assets in March 2007. For the year ended December 31, 2007, the Company reserved
        43,487 shares of common stock to be issued to the CareKeeper selling
        shareholders. The shares were valued at $144,812 and a charge for that amount
        was recorded as an impairment expense.
  F-6
  In
        connection with the purchase of CareKeeper, CKS entered into employment
        agreements with Jake C. Levy and Dorothy A. Levy. Mr. Levy was appointed
        chief
        executive officer of CKS. His employment agreement provides for an annual
        base
        salary of $156,000 and has an initial term of three years. The employment
        agreement also provides for bonuses as determined by CKS’s Board of Directors
        and options to purchase 15,000 shares of the Company’s common stock, which were
        granted on April 6, 2007. Ms. Levy was appointed director of quality assurance
        of CKS. Her employment agreement provides for an annual base salary of $105,000
        and has an initial term of three years. The employment agreement also provided
        for annual bonuses as determined by CKS’s Board of Directors and options to
        purchase 7,500 shares of the Company’s common stock, which were granted on April
        6, 2007.
 
 On
        December 26, 2007 the Company and Mr. Levy and Ms. Levy mutually agreed to
        a
        separation. The separation agreement included a severance package that was
        equal
        to the individuals’ annual salaries. The options granted to Mr. Levy and Ms.
        Levy were forfeited upon the separation as no portion had vested.
 
 The
        following table summarizes the estimated fair values of the assets and
        liabilities assumed at the date of acquisition:
  **CKS**
              
              **VHT**Purchase
                  price
              
              $
              483,014
              
              $
              1,087,034Total
                  assets
              
              $
              (242,122
              )
              $
              (129,965
              )Total
                  liabilities
              
              $
              2,587,264
              
              $
              411,351Identifiable
                  intangible assets
              
              $
              2,828,156
              
              $
              1,368,420
  The
        following unaudited pro forma consolidated results of operations have been
        prepared as if the acquisition of Vanta and CareKeeper had occurred as of
        the
        following period:
  **For the year ended**
                **December 31, 2006**Net
                  revenues
              
              $
              7,613,974Net
                  loss applicable to common shareholders
              
              $
              (3,788,749
              )Weighted
                  average shares - basic and diluted
              
              
              5,947,526Basic
                  and diluted net loss per share
              
              $
              (0.64
              )
  The
        consolidated financial statements include the accounts of the Company and
        its
        subsidiaries. All material inter-company transactions and balances have been
        eliminated in consolidation.
 
 **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
        subsidiaries, HQS, CKS and VHT for the years ended December 31, 2007 and
        2006
        and HSSC for year ended December 31, 2007 have been prepared using accounting
        principals generally accepted in the United States of America. All material
        inter-company 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 collectability of client accounts and the aging of
        the accounts receivable. If there is a deterioration of a major client’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 client’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 collectability of amounts and at which time the Company may need to provide
        additional allowances in excess of that currently provided.


F-7
  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.
 
 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”). The Company capitalizes 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. The Company’s 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
        and
        consulting fees directly associated with the development of the Company’s
        software. Capitalizable personnel costs and consulting fees 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.
 
 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. On December 31, 2007 the Company
        determined the future sales of software net of the cost of those sales would
        not
        be sufficient to recover any amount of the unamortized costs. As a result,
        the
        Company recorded an impairment to software development costs of
        $3,104,466.
  Concentration
        of credit risk: Concentrations of credit risk with respect to trade receivables
        are limited to clients dispersed across the United States of America. All
        trade
        receivables are concentrated in the health care 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 health care industry.
 F-8
  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 provisions of the Securities and Exchange Commission Staff Accounting
        Bulletin No. 104. The Company recognizes revenue when persuasive evidence
        of an
        arrangement exists, the product or service has been delivered, fees are fixed
        or
        determinable, collection is reasonably assured and all other significant
        obligations have been fulfilled. The corporate strategy is to provide services
        on a recurring transaction pricing basis. The Company believes this is a
        value-based model that more directly relates to our clients’ recognition of
        revenue. The transaction pricing model differs from the typical licensed
        software model in that the implementation of transaction-priced services
        does
        not result in large up front software license fee revenues but results in
        a
        gradual recognition of revenue earned on a transaction by transaction basis
        over
        time. This is a similar model to that used by the mobile phone industry.
        The
        benefit occurs in the future years where leverage is obtained as a client
        grows
        and continues to pay transaction fees year over year, whereas under the licensed
        sale model the only revenue realized in the future years are support and
        maintenance fees.
 
 Within
        the consulting group, the Company recognizes revenue using the percentage
        of
        completion following ARB
        45
        and SOP 81-1 . Management
        believes that its estimates of costs to complete and the extent of progress
        toward completion of a project are reasonably dependable. The Company’s prepares
        a budget for each project that estimates total labor hours for programming,
        quality assurance, testing, implementation, training and service to complete
        all
        the obligations to deliver a project. The Company recognizes the product
        revenue
        as the labor hours expended over the total labor hours budgeted times the
        total
        fixed fee.
 
 The
        Company bills in advance for maintenance agreements associated with the
        servicing of its software. The advanced billings are recorded in deferred
        revenue and amortized ratably over the service period of the maintenance
        agreement.
 
 The
        Company’s revenue is classified into two categories: recurring and
        non-recurring. The Company generates recurring revenue from several sources,
        including the processing of clinical assessments which, as 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, the
        processing of data related to Medicare clinical episodes completed during
        care
        delivery, the
        provision of outsourcing services, such as software hosting and other business
        services, and the sale of maintenance and support for our proprietary software
        products. Recurring services revenue is typically billed and recognized monthly
        over the contract term, typically two to three years. Recurring software
        maintenance revenue is typically based on one-year renewable contracts. Software
        maintenance and support revenues are recognized ratably over the contract
        period. The Company records cash payments received in advance or at the
        beginning of a contract as deferred revenue. The Company generates non-recurring
        revenue from the licensing of our software. Under SOP 97-2, software license
        revenue is recognized upon the execution of a license agreement, upon delivery
        of the software, when fees are fixed or determinable, when collectability
        is
        probable and when all other significant obligations have been fulfilled.
        For
        software license agreements in which client acceptance is a significant
        condition of earning the license fees, revenue is not recognized until
        acceptance occurs. For software license agreements that require significant
        customizations or modifications of the software, revenue is recognized as
        the
        customization services are performed. For multiple element arrangements,
        such as
        software license, consulting services, outsourcing services and maintenance,
        and
        where vendor-specific objective evidence (“VSOE”) of fair value exists for all
        undelivered elements, the Company accounts for the delivered elements in
        accordance with the “residual method.” Under the residual method, the total
        fair value of the undelivered elements, as indicated by VSOE, is deferred
        and
        subsequently recognized in accordance with the relevant sections of SOP
        97 -2 .
        Also,
        the difference between the total arrangement fee and the amount deferred
        for the
        undelivered elements is recognized as revenue related to the delivered elements.
        For arrangements in which VSOE does not exist for each undelivered element,
        including specified upgrades, revenue
        for the delivered element is deferred and not recognized until VSOE is available
        for the undelivered element or delivery of each element has occurred. When
        multiple products are sold within a discounted arrangement, a proportionate
        amount of the discount is applied to each product based on each product’s fair
        value or relative list price. The Company also generates non-recurring revenue
        from implementation fees, consulting, training and client support services
        and
        this non-recurring revenue is charged to clients on a fee basis usually based
        upon time spent.
  F-9
  The
        Company recognizes software licensing fees and implementation fees in the
        month
        that the client 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. The Company currently recognizes 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.
 
 Advertising
        costs: The Company expenses all advertising costs as incurred. Advertising
        costs
        for the year ended December 31, 2007 were $297,367 and for the year ended
        December 31, 2006 were $277,772, 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, 2007 were
        $1,481,743 and for the year ended December 31, 2006 were
        $1,230,207.
 
 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, 2006, the outstanding shares of convertible preferred stock
        were
        convertible into 1,525,000 shares of common stock and outstanding warrants
        and
        options were convertible into 142,500 and 436,125 shares of common stock,
        respectively. At December 31, 2007, outstanding shares of convertible preferred
        stock were convertible into 2,731,250 shares of common stock and outstanding
        options and warrants were convertible into 1,250,000 and 2,771,842 shares
        of
        common stock.
 
 Financial
        instruments: The carrying
        amounts of financial instruments, including cash, accounts receivable, prepaid
        expenses, client deposits and deferred revenue approximate fair value as
        of
        December 31, 2007, due to the relatively short maturity of the instruments.
        The
        capital lease obligation approximates fair value based upon debt terms available
        to Company under similar terms. At December 31, 2007, the Company had a capital
        lease liability of $64,637 at 8% interest.
 
 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.
 
 Stock
        based compensation: Effective January 1, 2006, the Company began recording
        compensation expense associated with stock-based awards and other forms of
        equity compensation in accordance with FASB Statement No. 123-R, *Share-Based
        Payment* (“SFAS
        123R”) as interpreted by SEC Staff Accounting Bulletin No. 107. The Company
        adopted the modified prospective transition method provided under SFAS 123R,
        and
        consequently has not retroactively adjusted results from prior periods. Under
        this transition method, compensation cost associated with stock-based awards
        recognized in 2006 includes 1) quarterly amortization related to the remaining
        unvested portion of stock-based awards granted prior to January 1, 2006,
        based
        on the grant-date fair value estimated in accordance with the original
        provisions of FASB No. 123, *Accounting
        for Stock-Based Compensation* (“SFAS
        123”); and 2) quarterly
        amortization related to stock-based awards granted subsequent to January
        1,
        2006, based on the grant-date fair value estimated in accordance with the
        provisions of SFAS 123R. Prior to January 1, 2006, the Company accounted
        for
        stock-based awards using the “disclosure only” alternative described in SFAS 123
        and FASB Statement No. 148, *Accounting
        for Stock-Based Compensation* .
  F-10
  In
        September, 2006, the FASB issued Statement of Financial Accounting Standards
        No.
        157, *Fair
        Value Measurements* .
        This
        Statement defines fair value, establishes a framework for measuring fair
        value
        in generally accepted accounting principals (GAAP), and expands disclosures
        about fair value measurements. The definition of fair value retains the exchange
        price notion in earlier definitions of fair value. The exchange price is
        the
        price in an orderly transaction between market participants to sell the asset
        or
        transfer the liability in the market in which the reporting entity would
        transact for the asset or liability. Fair value is a market-based measurement,
        not an entity-specific measurement. Therefore, a fair value measurement should
        be determined based on the assumptions that the market would use in pricing
        the
        asset or liability. This Statement expands disclosures about the use of fair
        value to measure assets and liabilities in interim and annual periods subsequent
        to initial recognition. The disclosures focus on the inputs
        used to measure the fair value and the effect of the measurements on earnings.
        This Statement is effective for financial statements issued for fiscal years
        beginning after November 15, 2007. The Company does not expect the adoption
        of
        SFAS 157 to materially effect the Company’s financial position or results of
        operations.
  F-11
  In
        December 2007, the FASB issued FASB Statement No. 141 (revised 2007), Business
        Combinations. This Statement replaces FASB Statement No. 141, Business
        Combinations. This Statement retains the fundamental requirements in
        Statement 141 that the acquisition method of accounting (which Statement
        141 called the purchase method) be used for all business combinations and
        for an
        acquirer to be identified for each business combination. This Statement defines
        the acquirer as the entity that obtains control of one or more businesses
        in the
        business combination and establishes the acquisition date as the date that
        the
        acquirer achieves control. This Statement’s scope is broader than that of
        Statement 141, which applied only to business combinations in which control
        was
        obtained by transferring consideration. By applying the same method of
        accounting—the acquisition method—to all transactions and other events in which
        one entity obtains control over one or more other businesses, this Statement
        improves the comparability of the information about business combinations
        provided in financial reports.
 
 This
        Statement requires an acquirer to recognize the assets acquired, the liabilities
        assumed, and any non-controlling interest in the acquiree at the acquisition
        date, measured at their fair values as of that date, with limited exceptions
        specified in the Statement. That replaces Statement 141’s cost-allocation
        process, which required the cost of an acquisition to be allocated to the
        individual assets acquired and liabilities assumed based on their estimated
        fair
        values.
 
 This
        Statement applies to all transactions or other events in which an entity
        (the
        acquirer) obtains control of one or more businesses (the acquirer), including
        those sometimes referred to as “true mergers” or “mergers of equals” and
        combinations achieved without the transfer of consideration, for example,
        by
        contract alone or through the lapse of minority veto rights. This Statement
        applies to all business entities, including mutual entities that previously
        used
        the pooling-of-interests method of accounting for some business combinations.
        It
        does not apply to: (a) the formation of a joint venture, (b) the acquisition
        of
        an asset or a group of assets that does not constitute a business, (c) a
        combination between entities or businesses under common control, (d) a
        combination between not-for-profit organizations or the acquisition of a
        for-profit business by a not-for-profit organization.
 
 This
        Statement applies prospectively to business combinations for which the
        acquisition date is on or after the beginning of the first annual reporting
        period beginning on or after December 15, 2008. An entity may not apply it
        before that date. Management believes this Statement will have no impact
        on the
        financial statements of the Company once adopted.
 
 In
        December 2007, the FASB issued FASB Statement No. 160 – Non-controlling
        Interests in Consolidated Financial Statements – an amendment of ARB No.
        51. This Statement applies to all entities that prepare consolidated financial
        statements, except not-for-profit organizations, but will affect only those
        entities that have an outstanding non-controlling interest in one or more
        subsidiaries or that deconsolidate a subsidiary. Not-for-profit organizations
        should continue to apply the guidance in Accounting
        Research Bulletin No. 51, Consolidated Financial Statements, before the
        amendments made by this Statement, and any other applicable standards, until
        the
        Board issues interpretative guidance.
 
 F-12
 This
        Statement amends ARB 51 to establish accounting and reporting standards for
        the
        non-controlling interest in a subsidiary and for the deconsolidation of a
        subsidiary. It clarifies that a non-controlling interest in a subsidiary
        is an
        ownership interest in the consolidated entity that should be reported as
        equity
        in the consolidated financial statements. Before this Statement was issued,
        limited guidance existed for reporting non-controlling interests. As a result,
        considerable diversity in practice existed. So-called minority interests
        were
        reported in the consolidated statement of financial position as liabilities
        or
        in the mezzanine section between liabilities and equity. This Statement improves
        comparability by eliminating that diversity.
 
 A
        non-controlling interest, sometimes called a minority interest, is the portion
        of equity in a subsidiary not attributable, directly or indirectly, to a
        parent.
        The objective of this Statement is to improve the relevance, comparability,
        and
        transparency of the financial information that a reporting entity provides
        in
        its consolidated financial statements by establishing accounting and reporting
        standards that require: (a) the ownership interests in subsidiaries held
        by
        parties other than he parent be clearly identified, labeled, and presented
        in
        the consolidated statement of financial position within equity, but separate
        from the parent’s equity, (b) the amount of consolidated net income attributable
        to the parent and to the non-controlling interest be clearly identified and
        presented on the face of the consolidated statement of income, (c) changes
        in a
        parent’s ownership interest while the parent retains its controlling financial
        interest in its subsidiary be accounted for consistently. A parent’s ownership
        interest in a subsidiary changes if the parent purchases additional ownership
        interests in its subsidiary or if the parent sells some of its ownership
        interests in its subsidiary. It also changes if the subsidiary reacquires
        some
        of its ownership interests or the subsidiary issues additional ownership
        interests. All of those transactions are economically similar, and this
        Statement requires that they be accounted for similarly, as equity transactions,
        (d) when a subsidiary is deconsolidated, any retained non-controlling equity
        investment in the former subsidiary be initially measured at fair value.
        The
        gain or loss on the deconsolidation of the subsidiary is measured using the
        fair
        value of any non-controlling equity investment rather than the carrying amount
        of that retained investment, (e) entities provide sufficient disclosures
        that
        clearly identify and distinguish between the interests of the parent and
        the
        interests of the non-controlling owners.
 
 This
        Statement is effective for fiscal years, and interim periods within those
        fiscal
        years, beginning on or after December 15, 2008 (that is, January 1, 2009,
        for
        entities with calendar year-ends). Earlier adoption is prohibited. This
        Statement shall be applied prospectively as of the beginning of the fiscal
        year
        in which this Statement is initially applied, except for the presentation
        and
        disclosure requirements. The presentation and disclosure requirements shall
        be
        applied retrospectively for all periods presented. Management believes this
        Statement will have no impact on the financial statements of the Company
        once
        adopted.
 
 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.**  **Preferred
        Stock Purchase Agreement**
 
 The
        Company entered into a Preferred Stock Purchase Agreement dated as of October
        31, 2005, with our principal shareholder, SIBL, to acquire 4,625,000 shares
        of
        our Series C Preferred Stock, together with five-year warrants to purchase
        1,387,500 shares of our Common Stock at an exercise price of $0.002 per share.
        The Company agreed to issue to SIBL its Series C Convertible Preferred Stock
        at
        a price of $2.00 per share together with warrants to purchase 3/10 of a share
        of
        common stock for each share of Series C Preferred Stock purchased. Each share
        of
        Series C 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 preferred share. At December 31, 2007,
        the
        Company had $0 available to draw down under this agreement.
 
 F-13
  On
        August
        17, 2007, the Company entered into a Preferred Stock Purchase Agreement with
        SIBL whereby SIBL has agreed to acquire 1,425,000 shares of our Series D
        Preferred Stock, together with five-year warrants to purchase 427,500 shares
        of
        our common stock at an exercise price of $0.001 per share. Each share of
        Series
        D Preferred Stock is initially convertible into one-half share of our common
        stock. SIBL agreed to pay $2.00 per share of preferred stock acquired, and
        the
        warrants were issued for no additional consideration. The proceeds from the
        sale
        of the Series D Preferred Stock pursuant to this agreement are to be used
        for
        working capital, subject to SIBL’s approval of each funding in its sole
        discretion; provided, however, that SIBL will not have discretion to reject
        requests by the Company for sales of up to an aggregate of 250,000 shares
        of
        preferred stock provided the Company is in compliance with the agreement.
        In
        2007, the Company sold 837,500 shares of Series D Preferred Stock to
        SIBL.
 
 **4.**  **Convertible
        Debenture**
 
 Effective
        August 17, 2007, we entered into a Convertible Debenture Purchase Agreement
        with SIBL ,
        whereby SIBL agreed
        to acquire up to $5,000,000 of our convertible debentures. The debentures
        will
        be purchased incrementally at such time as requests are made by us and subject
        to various conditions. The proceeds from the sale of the debenture(s) are
        to be
        used for working capital and/or acquisitions, in any case subject to the
        approval of SIBL. Each debenture that will be issued will be due four years
        from
        the date of issuance and will be convertible at any time at the option of SIBL into
        shares of preferred stock, in the aggregate 1,250,000 shares, subject to
        adjustments. As of December 31, 2007, we had not sold any debentures to SIBL
        in
        connection with this agreement. In consideration for entering into this
        agreement and making these funds available upon request, SIBL was issued
        five-year warrants to purchase 1,250,000 shares of our common stock at an
        exercise price of $1.00 per share.
 
 **5.**  **Property
        and Equipment and Software Development Costs**
 
 Property
        and equipment consist of the following:
  **December
                  31,**
                **2007**
              
              **December
                  31,**
                **2006**Office
                  equipment
              
              $
              523,322
              
              $
              361,481Purchased
                  computer software
              
              
              271,439
              
              
              216,928Furniture
                  and fixtures
              
              
              103,436
              
              
              64,473Leasehold
                  improvements
              
              
              180,142
              
              
              176,4061,078,339
              
              
              819,288Less
                  accumulated depreciation and amortization
              
              
              635,459
              
              
              544,143Total
              
              $
              442,879
              
              $
              275,145
  Software
        development costs consist of the following:
  **December
                  31,**
                **2007**
              
              **December
                  31,**
                **2006**Software
                  development costs
              
              $
              —
              
              $
              6,574,011Less
                  accumulated amortization
              
              
              —
              
              
              2,693,434Total
              
              $
              —
              
              $
              3,880,577
  Depreciation
        expense for property and equipment for the years ended December 31, 2007
        and
        December 31, 2006 for the Company was $166,147 and $139,484,
        respectively.
 
 Amortization
        expense for software development costs for the years ended December 31, 2007
        and
        December 31, 2006 for the Company was $1,833,314 and $1,102,604, respectively,
        and is included in cost of sales.
 
 The
        unamortized balance of software development costs was $0 and $3,880,577 at
        December 31, 2007 and 2006, respectively.
  F-14
  6.Income
        Taxes
 
 For
        Federal income tax purposes, the Company has net operating losses of
        approximately $13,950,000. The net operating losses expire at various times
        through the year 2027. The Company recorded a 100% valuation allowance on
        its
        deferred tax assets 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,
        2007 are as follows:
  Operating
                  loss carryforward
              
              $
              5,580,000Goodwill
                  amortization
              
              
              1,823,000Depreciation
                  and other
              
              
              1,042,000Valuation
                  allowance
              
              
              (8,445,000
              )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,**
                **2007**
              
              **Year ended**
                **December 31,**
                **2006**Statutory
                  Federal income tax (benefit)
              
              $
              (3,142,000
              )
              $
              (859,000
              )State
                  tax (benefit), net of federal effect
              
              
              (449,000
              )
              
              (123,000
              )Permanent
                  difference
              
              
              737,000
              
              
              206,000Other
              
              
              —
              
              
              90,000Increase
                  in valuation allowance
              
              $
              2,854,000
              
              $
              686,000
  **7.**  **Capital
        Lease Obligations**
 
 The
        Company has entered into capital leases for certain office equipment.
        Obligations under the capital leases have been recorded in the accompanying
        consolidated financial statements at the present value of future minimum
        lease
        payments at an interest rate of 8%.
 
 Future
        minimum payments under capital lease obligation are as follows at December
        31,
        2007:
  **Fiscal
                  Year**
              
              **Amount**2008
              
              $
              28,2382009
              
              
              28,2382010
              
              
              15,185Total
                  future payments
              
              
              71,661Less
                  amount representing interest
              
              
              7,024Present
                  value of future payments
              
              
              64,637Less
                  current portion
              
              
              23,932Total
                  long-term capital lease obligations
              
              $
              40,705
  **8.**  **Equity
        Transactions**
 
 Common
        Stock Issued: On April 6, 2006, 100,000 shares of common stock were issued
        in
        connection with the asset purchase of VantaHealth Technologies, LLC.
 
 The
        selling shareholders of CareKeeper Software, Inc. are entitled to receive
        a
        contingent stock payment of common stock in 2006, 2007 and 2008. The number
        of
        shares is determined by operating revenues generated by CareKeeper during
        each
        of the fiscal years. The measurement date for 2006 was from
        May
        15, 2006 to December 31, 2006, the period the Company owned CareKeeper. As
        determined by operating revenues, the Company issued 50,704 shares of common
        stock to the selling shareholders. The Company has reserved 43,487 shares
        of
        common stock to be issued based on 2007 operating revenues.
  F-15
  Preferred
        Stock Issued: The Company entered into a Preferred Stock Purchase Agreement
        dated as of October 31, 2005, with SIBL to acquire 4,625,000 shares of our
        Series C Preferred Stock, together with five-year warrants to purchase 1,387,500
        shares of our Common Stock at an exercise price of $0.002 per share. The
        Company
        agreed to issue to SIBL its Series C Convertible Preferred Stock at a price
        of
        $2.00 per share together with warrants to purchase 3/10 of a share of common
        stock for each share of Series C Preferred Stock purchased. Each share of
        Series
        C 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 preferred share. Throughout 2007, the
        Company sold 1,575,000 shares of Series C Preferred Stock to SIBL for $3.15
        million to fund working capital needs. At December 31, 2007, the Company
        had
        sold all the shares available under the agreement.
 
 On
        August
        17, 2007, the Company entered into a Preferred Stock Purchase Agreement with
        SIBL whereby SIBL has agreed to acquire 1,425,000 shares of our Series D
        Preferred Stock, together with five-year warrants to purchase 427,500 shares
        of
        our common stock at an exercise price of $0.001 per share. Each share of
        Series
        D Preferred Stock is initially convertible into one-half share of our common
        stock. SIBL agreed to pay $2.00 per share of preferred stock acquired, and
        the
        warrants were issued for no additional consideration. The proceeds from the
        sale
        of the Series D Preferred Stock pursuant to the agreement are to be used
        for
        working capital, subject to SIBL’s approval of each funding in its sole
        discretion; provided, however, that SIBL will not have discretion to reject
        requests by the Company for sales of up to an aggregate of 250,000 shares
        of
        preferred stock provided the Company is in compliance with the agreement.
        In
        2007 the Company sold 837,500 shares of its Series D Preferred Stock for
        $1,675,000 to fund working capital needs. At December 31, 2007 the Company
        had
        587,500 shares of its Series D Preferred Stock available for sale.
 
 Warrants
        Issued and Exercised: The warrants issued with the Series C purchases have
        been
        attributed with a fair value of the $384,618 using the Black-Sholes pricing
        model and included in additional paid in capital. In total, 615,000 warrants
        were exercised during the year that ended December 31, 2007, and 615,000
        shares
        of common stock were issued. All the warrants issued in connection with the
        Series C Preferred Stock had been exercised as of December 31,
        2007.
 
 As
        required under the Preferred Stock Purchase Agreement executed on August
        17,
        2007, warrants to purchase up to an aggregate of 472,500 shares of the Company’s
        common stock at an exercise price of $0.002 per share were issued in conjunction
        with the issuance of its Series C Preferred Stock in the year ended December
        31,
        2007. The warrants have been attributed a fair value of the $363,076 using
        the
        Black-Sholes pricing model and included in additional paid in capital. The
        427,500 warrants were exercised, 427,500 shares of common stock were issued
        by
        the Company, and the Company received $428 representing the exercise
        price.
 
 In
        August
        2007, the Company issued warrants to purchase 1,250,000 shares of common
        stock
        at an exercise price of $1.00 per share as a commitment fee for the Debenture
        Purchase Agreement entered into with SIBL. The warrants granted for the
        commitment have been attributed a fair value of $301,936 using the Black-Sholes
        pricing model and included in additional paid-in capital. These warrants
        were
        outstanding at December 31, 2007.
 
 **9.**  **Commitments
        and Contingencies**
 
 Operating
        Leases: The Company leases office space in Tampa, Florida, and Dunwoody,
        Georgia. Rent expense totaled $535,551 and $363,972 for the years ended December
        31, 2007 and 2006 and is included in general and administrative expenses
        in the
        accompanying consolidated financial statements. The
        Company’s leases for its office space have durations through August 31, 2013 in
        Tampa and July 31, 2008 in Dunwoody with monthly payments approximating $33,000
        and $11,000, respectively.
  F-16
 
 Other
        Agreements: The Company also leases a co-location site for its application
        and
        data base servers and has other long-term agreements.
 
 Future
        and annual minimum lease payments under all noncancelable operating leases
        and
        service agreements with an initial term in excess of one year are as
        follows:
  2008
              
              $
              530,4102009
              
              $
              511,8492010
              
              $
              523,6612011
              
              $
              415,8212012
              
              $
              431,3542013
              
              $
              300,173
  Legal
        Proceedings: On September 13, 2007, Briggs Medical Service Company, a Delaware
        corporation ("Briggs Medical"), served the Company with a summons and complaint
        filed in the United States District Court for the Middle District of Florida,
        Tampa Division.  The complaint, as amended on October 24, 2007, names
        as the only defendant "Health Systems Solutions, Inc., a Florida corporation,
        f/k/a Healthcare Quality Solutions, Inc."  The amended complaint alleges
        that the defendant has (a) infringed various copyrighted medical
        forms which Briggs Medical alleges that it owns, (b) breached a 2003
        Co-Development Agreement and associated "Statement of Work" between Briggs
        Corporation, an Iowa corporation, and Healthcare Quality Solutions, Inc.,
        (the
        "Agreement"), and (c) tortiously interfered with actual and prospective
        business relations between Briggs Medical and thousands of Briggs Medical's
        clients by inducing them to use other medical forms which Briggs Medical
        allege infringe its alleged copyrights.  Briggs Medical seeks the
        following relief in the amended complaint:  (a) judicial findings of
        infringement, breach and tortious interference, (b) an award of an indeterminate
        amount of lost profits and other special, consequential and punitive
        damages, together with prejudgment interest, attorneys fees and costs
        and (c) an injunction prohibiting the defendant and others acting in
        concert with the defendant from infringing Briggs Medical's alleged
        copyrights.  On November 7, 2007, the Company moved to dismiss the
        breach of contract claim for failure to state a claim upon which relief can
        be
        granted. In
        response, Briggs amended their complaint. We have responded and, at this
        time,
        the case is scheduled for trial.
 
 **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 50% of the first 6% of salary the
        participants contribute provided they are employed at year end or have worked
        the required amount of hours per the plan.
 
 **11.**  **Stock
        Based Compensation**
 
 On
        April
        6, 2007, the Company’s Board of Directors unanimously voted to authorize that
        options to purchase 22,500 shares of the Company’s common stock be granted to
        its employees under the 2003 Management and Director Equity Incentive and
        Compensation Plan (the “Plan”). The options have an exercise price of $0.95 per
        share and shall vest to the extent of 25% of the respective aggregate granted
        for each twelve continuous months of employment subsequent to April 6, 2007,
        with the unexercised portion of such respective options to expire April 6,
        2012
        or should the employee leave the employ of the Company.
 
 On
        September 1, 2007, the Company granted stock options to purchase an aggregate
        of
        2,542,500 shares of common stock to the Company’s two executive officers. Such
        options have an exercise price of $1.00 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 September 1, 2007, with the unexercised
        portion of such respective options to expire March 29, 2017 or should the
        executive leave the Company.
  F-17
  As
        of
        December 31, 2006, 436,125 stock options were issued and outstanding leaving
        an
        unissued stock option balance of 63,875. As of December 31, 2007, 2,771,842
        options were issued and outstanding and 436,908 options were available for
        future grants.
 
 Effective
        January 1, 2006, the Company began recording compensation expense associated
        with stock-based awards and other forms of equity compensation in accordance
        with Statement of Financial Accounting Standards No. 123-R, *Share-Based
        Payment* (“SFAS
        123R”) as interpreted by SEC Staff Accounting Bulletin No. 107. The Company
        adopted the modified prospective transition method provided under SFAS 123R,
        and
        consequently has not retroactively adjusted results from prior periods. Under
        this transition method, compensation cost associated with stock-based awards
        recognized in 2007 includes 1) amortization related to the remaining unvested
        portion of stock-based awards granted prior to January 1, 2006, based on
        the
        grant-date fair value estimated in accordance with the original provisions
        of
        Statement of Financial Accounting Standards No. 123, *Accounting
        for Stock-Based Compensation* (“SFAS
        123”); and 2) amortization related to stock-based awards granted subsequent to
        January 1, 2006, based on the grant-date fair value estimated in accordance
        with
        the provisions of SFAS 123R. Prior to January 1, 2006, the Company accounted
        for
        stock-based awards using the “disclosure only” alternative described in SFAS
        123R and FASB Statement No. 148, *Accounting
        for Stock-Based Compensation* .
 
 The
        Company utilizes the Black-Scholes option-pricing model to calculate the
        fair
        value of each individual issuance of options. The following assumptions were
        used for grants during the years ended December 31, 2007 and 2006:
  **2007**
              
              **2006**Expected
                  dividend yield
              
              
              0.0
              %
              
              0.0
              %Risk-free
                  interest rate
              
              
              4.8
              %
              
              5.0
              %Expected
                  volatility
              
              
              124.5
              %
              
              163.3
              %
  The
        Company recorded $35,825 of stock-based compensation expense relative to
        stock
        options for the year ended December 31, 2006, in accordance with SFAS 123R.
        As
        of December 31, 2007 the total future compensation expense related to non-vested
        and vested options not yet recognized in the Consolidated Statement of
        Operations is $146,158. A summary of stock option activity for the years
        ended
        December 31, 2006 and 2007 is presented as follows:
  **Number of**
                **Options**
              
              **Weighted Average**
                **Exercise Price**Balance
                  at December 31, 2005
              
              
              371,250
              
              $
              2.299Granted
              
              
              162,875
              
              
              0.493Exercised
              
              
              -
              
              
              -Forfeited
              
              
              (98,000
              )
              
              2.194Balance
                  at December 31, 2006
              
              
              436,125
              
              $
              1.648Granted
              
              
              2,565,000
              
              
              1.000Exercised
              
              
              (1,250
              )
              
              .330Forfeited
              
              
              (228,033
              )
              
              1.463Balance
                  at December 31, 2007
              
              
              2,771,842
              
              $
              1.063Options
                  exercisable at December 31, 2007
              
              
              212,774
              
              $
              1.877
  F-18
  The
        following table summarizes information about employee stock options outstanding
        at December 31, 2007:
  **Options Outstanding**
              
              
              
              **Options Exercisable****Range of**
                **Exercise**
                **Price**
              
              **Number Outstanding**
                **at****December 31, 2007**
              
              **Weighted**
                **Average**
                **Remaining**
                **Contractual**
                **Life**
              
              **Weighted**
                **Average**
                **Exercise**
                **Price**
              
              **Number**
                **Exercisable at**
                **December 31, 2007**
              
              **Weighted**
                **Average**
                **Exercise**
                **Price**$               2.00
              
              
              90,250
              
              
              1.5 years
              
              $
              2.00
              
              
              90,250
              
              $
              2.003.50
              
              
              37,500
              
              
              2.2 years
              
              
              3.50
              
              
              37,500
              
              
              3.503.90
              
              
              11,250
              
              
              2.4 years
              
              
              3.90
              
              
              11,250
              
              
              3.900.33
              
              
              59,967
              
              
              3.2
                  years
              
              
              0.33
              
              
              45,368
              
              
              0.331.01
              
              
              30,375
              
              
              3.4
                  years
              
              
              1.01
              
              
              28,406
              
              
              1.011.00
              
              
              2,542,500
              
              
              9.7
                  years
              
              
              1.00
              
              
              -
              
              
              1.002,771,842
              
              
              
              
              $
              1.06
              
              
              212,774
              
              $
              1.87
  **12.**  **Other
        Assets**
 
 Included
        in other assets is a receivable due from a former shareholder of CareKeeper
        in
        the amount of $71,177 at December 31, 2007 and 2006, representing unsecured
        advances to a related party, which are non-interest bearing.
 
 **13.**  **Note
        Payable – Bank**
 
 The
        Company has a demand commercial loan with Wachovia Bank with a balance of
        $229,000 at December 31, 2007. Interest on the loan is at the Bank’s prime rate
        (8.25% at December 31, 2007) plus 0.5% per annum and the loan is collateralized
        by security provided by a shareholder in the form of a money market account.
        The
        note is due and payable in full, including all principal and accrued interest,
        on demand. Until then, commencing August 15, 2005, consecutive monthly payments
        of accrued interest only are payable.
 
 **14.**  **Loans
        Payable**
 
 On
        January 10, 2006, CareKeeper converted an accounts payable of $389,892 owed
        to
        its primary software developer, Xpanxion, into a promissory note payable.
        The
        Company was required to pay a minimum of $1,000 per week to the note holder
        under the note payable. Interest on the note is equal to the Wall Street
        Journal
        Prime Rate of interest (8.25% at December 31, 2006) plus four percent (4%).
        If
        the Company during any single month should pay at least $20,000 against the
        note
        payable, the interest charged would be equal to the Wall Street Prime Rate
        of
        Interest (8.25% at December 31, 2006) plus two percent (2%). If during any
        period in which the Company was in default under the terms of the note, the
        interest charged would be equal to one and one half percent (1.5%) per
        month.
 
 CareKeeper
        and the software developer to which it is obligated under the promissory
        note
        entered into a Master Service Agreement dated as of January 9, 2006 regarding
        software services to be provided. If this agreement had been canceled, by
        either
        party, the minimum payment for the promissory note would have increased to
        $8,000 per week. In addition, if CareKeeper achieved certain contractual
        payment
        milestones from certain major clients, the Company was obligated to remit
        50% of
        such contractual payment milestones.
 
 The
        note
        was secured by a security interest in CareKeeper’s software products. The
        Company was obligated to pay any unpaid portion of the promissory note,
        including interest, on or before June 30, 2007. The balance of this note
        was
        $355,032 at December 31, 2006.
 
 On
        or
        about April 20, 2007, the Company was served with a Verified Complaint in
        the
        matter of Xpanxion, LLC v. CareKeeper Software, Inc., d/b/a CareKeeper
        Solutions, Inc. and Health Systems Solutions, Inc., filed in the State Court
        of
        Fulton County, Georgia. The Verified Complaint alleges breach of
        contract and seeks payment of the balance due on a promissory note issued
        by
        CareKeeper. The alleged balance due on the promissory note was $342,904.
  F-19
  On
        December 7, 2007, the Company reached an agreement with Xpanxion to settle
        the
        Promissory Note and all unpaid invoices for a payment of $225,000. The Company
        made the payment on December 12, 2007. The Company applied the balance of
        the
        forgiven note and unpaid invoices to reduce the carrying amount of the
        capitalized software costs.
 
 **15.**  **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: Two of the Company’s clients represent 38% and 32% of the Company’s
        accounts receivable net of allowance for doubtful accounts at December 31,
        2007
        and 2006, respectively.
 
 Revenue:
        The Company’s two largest clients accounted for 19% and 17% of earned revenue
        for the year ended December 31, 2007, while the Company’s largest client
        accounted for 35.4% of earned revenue for the year ended December 31,
        2006.
 
 **16.**  **Segment
        Information**
 
 In
        accordance with the provisions of Statement of Financial Accounting Standards
        no. 131 (SFAS 131), Disclosures about Segments of an Enterprise and Related
        Information, a company is required to disclose selected financial and other
        related information about its operating segments. Operating segments are
        components of an enterprise about which separate financial information is
        available and is utilized by the chief operating decision maker (“CODM”) related
        to the allocation of resources and in the resulting assessment of the segment’s
        overall performance. The measure used by the Company’s CODM is a business
        segment’s gross profit. For the three months ended December 31, 2007 the Company
        had two reportable segments, Technology Solutions and Software. Prior to
        October
        1, 2007, the Company’s only reportable segment was Software. For the year ended
        December 31, 2007, total revenue and gross profit for Software was $5,858,952
        and $1,241,405, respectively. For the three months ended December 31, 2007,
        total revenue and gross profit for Technology Solutions was $1,361,719 and
        $188,171, respectively.
 
 **17.**  **Subsequent
        Events**
 
 Effective
        January 1, 2008, the Company entered into a corporate restructuring pursuant
        to
        which it (i) created a wholly owned operating subsidiary, (ii) created a
        wholly
        intellectual property holding company and (iii) combined its two operating
        CareKeeper subsidiaries.
  F-20