SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                         AMENDMENT NO. 1 TO FORM 10-KSB

                                   (Mark One)

       [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2004
                                       OR

        [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                        Commission file number 000-24681

                         HEALTH SYSTEMS SOLUTIONS, INC.
                         ------------------------------

             (Exact name of registrant as specified in its charter)

             Nevada                                              82-1513245
             ------                                              ----------
  (State or other jurisdiction                                  (IRS Employer
of incorporation or organization)                            Identification No.)

               405 N. Reo Street, Suite 300, Tampa, Florida 33609
               --------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (813) 282-3303
                                 --------------
               Registrant's telephone number, including area code)

         Securities registered under Section 12(b) of the Exchange Act:

Title of each class:  N/A        Name of each exchange on which registered:  N/A

         Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock, $.001 par value
                          -----------------------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

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

State issuer's revenues for its most recent fiscal year.   $3,637,626

The aggregate market value of Common Shares held by non-affiliates of the
Registrant (2,004,721 shares), as of March 23, 2005 (last sales price at which
the common stock was sold on March 23, 2005 as reported by the OTCBB was $1.01).
$2,024,768.21.

The number of Common Shares outstanding on December 31, 2004, was 11,046,780

Documents Incorporated By Reference: Not Applicable.

Transitional Small Business Disclosure Form (check one):  Yes [  ] No [X]


<PAGE>

                         HEALTH SYSTEMS SOLUTIONS, INC.
                                   FORM 10-KSB
                                      INDEX


PART I        ...............................................................1

     Item 1.  Business.......................................................11

     Item 2.  Properties.....................................................11

     Item 3.  Legal Proceedings..............................................11

     Item 4.  Submission of Matters to a Vote of Security Holders............11

PART II       ...............................................................12

     Item 5.  Market for the Common Equity, Related Stockholder
              Matters and Small Business Issuer Purchases of
              Equity Securities..............................................12

     Item 6.  Management's Discussion and Analysis or Plan of Operations.....14

     Item 7.  Financial Statements...........................................27

     Item 8.  Changes in and Disagreements with Accountants on Accounting
              And Financial Disclosure.......................................28

     Item 8A. Controls and Procedures........................................29

     Item 8B. Other Information..............................................29

PART III      ...............................................................30

     Item 9.  Directors and Executive Officers of the Registrant.............30

     Item 10. Executive Compensation.........................................32

     Item 11. Security Ownership of Certain Beneficial Owners and
              Management and Related Stockholder Matters.....................34

     Item 12. Certain Relationships and Related Transactions.................35

     Item 13. Exhibits, Lists, and Reports on Form 8-K.......................37

     Item 14. Principal Accountant Fees and Services.........................38

SIGNATURES    ...............................................................40


                                       ii
<PAGE>

                                     PART I

ITEM 1.     BUSINESS

OVERVIEW

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

      o     Increasing revenue;

      o     Reducing cost;

      o     Standardizing processes;

      o     Improving the quality of patient outcomes; and

      o     Minimizing regulatory compliance risk.

      Our services address the issues of measuring quality of care while
simultaneously reducing cost, improving patient outcomes and minimizing
compliance risk. Effective management of home health agencies requires accurate
collection of many data elements and using this data to determine the
reimbursement for the care and to measure and improve the quality of the care
delivered. Our services offer cost-effective, accurate and automated methods of
improving the quality of the data collected and enable our customers to use the
data to provide daily reports that identify anomalies in clinical observations,
identify profit or loss potential for an episode of care, assist with managing
regulatory compliance risk, and perform benchmark observations about the data
against our national database of over 1 million episodes of care.

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

      We currently derive most of our revenues from per transaction charges
applied to processing patient clinical assessments made by our customers during
a month. As of December 31, 2004, we had approximately 100 customers in 36
states with approximately 373 sites using one or more of our services. During
December 2004, our customers processed over 55,000 patient clinical assessments
using our programs.

      In 2003 there were about 7,000 Medicare certified home health agencies
nationally that provided services to 2.2 million patients. The Balanced Budget
Act of 1997 included mandates to the Centers for Medicare and Medicaid Services
(CMS) to establish a Prospective Payment System (PPS) to reduce the cost of the
home health benefit and to measure the effectiveness of the care delivered. The
regulations are being implemented in phases over time and include a requirement
that home health agencies collect assessment data on each patient at
start-of-care and at discharge (OASIS Data).

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

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


                                       1
<PAGE>

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

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

RECENT EVENTS

      On July 6, 2004, HQS entered into a $1,600,000 loan and security agreement
with Stanford Venture Capital Holdings, Inc. Under this agreement, interest
accrues at the rate of 8% per annum and principal matures and becomes payable
three years from the date of the loan. The loan is secured by a security
interest in all of the assets of our company and HQS and a corporate guaranty
that has been executed in favor of Stanford. As of March 15, 2005, we had drawn
$1,050,000 under this facility and an additional amount of $550,000 was
available to us under the facility.

      Additionally, as consideration for entering into the loan and security
agreement, Stanford received warrants to purchase an aggregate of 720,000 shares
of our common stock. The exercise price of the warrants was $0.001 per share and
the warrants expired on June 30, 2009. Stanford assigned 360,000 warrants to
four of its employees pursuant to a warrant assignment agreement which have been
exercised effective August 12, 2004. We registered the shares of common stock
underlying the warrants held by the Stanford employees pursuant to a
registration rights agreement. Stanford exercised its warrants on September 8,
2004.

      On July 6, 2004, we effectuated a 1-for-2 reverse stock split of all of
the issued and outstanding shares of our common stock. The reverse stock split
was approved by our board of directors and the holders of a majority of our
voting stock on May 13, 2004 and May 27, 2004, respectively.

      Subsequent to the reverse split, Stanford converted all of its Series A
and Series B preferred stock in our company into an aggregate of 7,190,171
shares of our common stock.

HISTORY OF OUR BUSINESS

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

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

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

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


                                       2
<PAGE>

SUMMARY STATEMENT OF OPERATIONS DATA

      The financial data set forth below is derived from our audited financial
statements. The financial data set forth below should be read in conjunction
with the financial statements and notes thereto included elsewhere in this
report and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

                                               Year Ended December 31,
                                               2003             2004

Net sales                                  $2,069,758        $3,637,626
Cost of sales                              $1,410,271        $1,727,205
Gross profit                                 $659,487        $1,910,421
Operating expenses                         $3,324,436        $3,005,950
Net loss                                  ($2,757,086)*     ($1,124,668)**

*     Includes $92,137 deemed preferred stock dividend.

**    Includes $29,139 of non operating expense.

INDUSTRY BACKGROUND

      As reported on September 22, 2003 by the United States Centers for
Medicare and Medicaid Services ("CMS"), an agency of the United States
government, the home health industry is highly fragmented and currently
comprised of more than 7,000 companies that provide skilled nursing, therapy,
aide service, or medical social work to beneficiaries in their homes. These
companies range from facility-based agencies to small, publicly traded and
privately held companies and visiting nurse associations. According to CMS, home
health expenditures were $33 billion in 2001. According to CMS, certain
securities analysts forecast that the industry will grow at an annual rate of 5%
to 10% as a result of favorable demographic trends, new clinical protocols that
have increased the range of home care services (rehab in particular) and the
lower cost of home care versus other institutional settings. A complete copy of
the report is available online at
http://www.cms.hhs.gov/reports/hcimu/heimu_09222003.pdf.

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

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

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


                                       3
<PAGE>

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

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

OUR SOLUTION

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

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

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

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

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

      A Data Transmission Process That Is Cost Effective and Timely.

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

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


                                       4
<PAGE>

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

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

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

      Benchmarking Performance Relative to Our National Database of Outcomes.

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

      Rapid Implementation.

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

      A Highly Flexible, Open and Scalable System.

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

GROWTH STRATEGY

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

      Leverage Our Existing Customer Base.

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

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

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


                                       5
<PAGE>

OUR PRODUCTS AND SERVICES

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

      PPS Outcomes is designed to enable agencies to monitor their patient
status compared to our national database that includes in excess of 2.0 million
assessments. PPS Outcomes supports the CMS Outcomes Based Quality Improvement
(OBQI) process.

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

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


                                       6
<PAGE>

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

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

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

CUSTOMERS

      Our solutions are provided to home health customers ranging in size from
single to large multi-site organizations. As of December 31, 2004, we had
approximately 100 customers in 36 states with approximately 373 sites operating
one or more of our programs. Our largest customer Amedisys, Inc., a publicly
traded company represented approximately 32% of our revenue for the year ended
December 31, 2004. We are substantially reliant on the continued use of our
products by Amedisys. Our only customer that accounted for 10% or greater of our
revenues during the year ended December 31, 2004, was Amedisys, Inc.

      Our largest customers, as measured by revenues during the twelve months
ended December 31, 2004 include the following:

<TABLE>
<S>                               <C>                         <C>
      Amedisys, LLC               Girling Health Care         Visiting Nurse Association

      Personal Touch Home Care    Mobile Medical Industires   Sta-Home Health Agency

      Winyah Health Care Group
</TABLE>

      We have entered into an information management and operations services
agreement with Amedisys, Inc. Under the agreement we have agreed to provide
Amedisys with an internet-accessed, multi-user, post-acute healthcare
information system that permits Amedisys to accomplish certain information
management functions. Under the agreement we are required to maintain a help
desk that provides telephone advice and guidance for Amedisys and its employees.
We receive certain fixed rates for the base services we provide to Amedisys,
plus additional compensation in the event that Amedisys orders and receives
additional services in connection with education or help desk services. The
original term of this agreement was through February 24, 2004 and automatically
extended for successive periods of one year unless either party delivers written
notice to the other party of its election not to extend the term of the
agreement at least 90 days before the expiration of the then current term. The
term was extended through February 24, 2006 pursuant to the agreement. The
agreement may also be terminated by either party: (1) in the event that the
other party defaults in performance of any material provision of the agreement
and such default continues and is not cured within 30 days of written notice of
such default; (2) in the event that the other party commits any material act of
dishonesty, gross carelessness or gross misconduct in the performance of the
agreement; or (3) in the event that voluntary or involuntary proceedings are
commenced for the winding up or dissolution of the other party or for any action
or relief taken or suffered by the other party as bankrupt or insolvent under
any bankruptcy or insolvency laws.

SALES AND MARKETING

      We sell our services primarily through a direct sales force of 3 sales
personnel. Since mid-2003, we have focused on expanding our vendor partnerships
to enhance vendor assisted referrals. Our largest partnership is with Briggs
Corporation, the largest supplier of clinical documentation systems for home
health care and with whom we have jointly developed a selection of
scanner-readable home health forms. Briggs refers leads to us identified during
its sales process.

      In 2004, we began our first national advertisement campaign focused on
brand name recognition. We currently have year long advertisements placed in the
two prominent industry publications: Success In Home Care and The Remington
Report. In 2005, we also plan to add marketing staff to develop our public
relations telemarketing and direct mail campaigns. We also plan to improve our
use of our World Wide Web site for generating sales leads and increasing market
awareness.


                                       7
<PAGE>

PRODUCT DEVELOPMENT

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

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

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

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

      In 2004, we initiated development projects to produce new and enhanced
services that we expect to deliver in mid 2005. We plan to deliver these
services on a transaction pricing basis. These products will not add material
revenue during 2005. Development of the underlying software will be produced
with existing staff. Research and development expenses associated with these
products is not material and may only increase slightly to cover costs related
to short term software development contractors that may be used in the
development cycle.

OPERATIONS

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

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

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

ENCRYPTION AND SECURITY FROM HACKERS

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

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


                                       8
<PAGE>

COMPETITION

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

      o     vendor and product reputation,

      o     reliability of the service,

      o     availability of products on preferred computer and communications
            platforms,

      o     scalability,

      o     integration with other applications,

      o     functionality and features,

      o     ease-of-use,

      o     quality of support,

      o     documentation and training,

      o     product quality and performance,

      o     product innovation,

      o     price, and

      o     effectiveness of marketing and sales efforts.

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

PROPRIETARY RIGHTS AND LICENSES

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

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


                                       9
<PAGE>

GOVERNMENTAL REGULATION

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

Health Insurance Portability and Accountability Act of 1996 ("HIPAA")

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

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

      o     Tracking regulatory changes

      o     Performing initial and ongoing privacy risk assessments

      o     Identifying all sources of Protected Health Information ("PHI")

      o     Conducting compliance monitoring activities

      o     Providing guidance for Product Management

      o     Managing education and training

      o     Managing and ensuring sanctions for failure to comply

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

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

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

EMPLOYEES

      At December 31, 2004, we had 45 full time employees, including: 6 in
sales; 5 in product management, education and implementation; 22 in operations
and customer service; 5 in software development; 3 in hardware support; and 4 in
administrative and finance positions. None of our employees are represented by a
labor union, nor governed by any collective bargaining agreements. We consider
relations with our employees as satisfactory.


                                       10
<PAGE>

ITEM 2.     PROPERTY

      We currently rent approximately 13,617 square feet of executive office
space located at 405 Reo Street, Suite 300, Tampa, Florida 33609. We rent this
space for $20,872 per month. The lease term is through January 31, 2009. This
space is adequate to maintain and expand our business operations.

      We also have a one year agreement with Qwest CyberCenter for our
collocation of our data servers. Cost is approximately $5,000 per month. The
current services agreement with Qwest extends from July 1, 2004 until June 30,
2005 and is automatically renewable for additional one year terms.

ITEM 3.     LEGAL PROCEEDINGS

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

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

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


                                       11
<PAGE>

                                     PART II

ITEM  5.    MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
            BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

MARKET

      Our common shares have been listed for trading on the OTC Bulletin Board
("OTCBB") since June 3, 2002. Effective July 8, 2004, our trading symbol changed
to "HSLN." Until March 23, 2005, there was no trading activity for our common
stock since it became eligible for trading on the OTCBB. The closing bid price
for the common stock on March 23, 205 as reported on the OTCBB was $0.55 and the
closing asked price on March 23, 2005 as reported by the OTCBB was $.1.01. These
prices may not be an accurate indicator of the value of our shares. Bid and
asked prices entered by market makers are inter-dealer price quotations and do
not reflect retail markup, markdown or commissions.

      As of December 31, 2004, there were 64 holders of record of our common
stock.

A special note about penny stock rules

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

Dividend Policy

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

RELATED STOCKHOLDER MATTERS

      During the year ended December 31, 2004 we issued the following
securities:

      Effective July 6, 2004, our company agreed to issue an aggregate of
485,000 incentive stock options under our 2003 Management and Director Equity
Incentive and Compensation Plan to 44 employees of our company. In addition, the
company issued non-qualified stock options to purchase 150,000 shares of our
common stock under the plan to B.M. Milvain. We issued an additional 67,000
options to 14 employees on August 3, 2004. On August 3, 2004 we also cancelled
25,500 options issued on July 6, 2004 for employees that had terminated
employment with HQS. These options have been returned to the option pool. All
options have an exercise price of $1.00 per share and vest to the extent of 25%
of the respective aggregate granted for each twelve continuous months of
employment by our company subsequent to January 1, 2004. The options terminate
upon the earlier of June 1, 2009 or as provided under the plan. The Company also
issued Mr. Milvain 150,000 shares of restricted common stock subject to certain
vesting provisions. The securities were issued pursuant to the exemption from
registration provided by Section 4(2) of the Securities Act. The securities
contain a legend restricting their transferability absent registration or
applicable exemption. The employees had information concerning our company and
had the opportunity to ask questions concerning our company.

      Pursuant to a warrant purchase agreement dated July 6, 2004, we issued
warrants to purchase an aggregate of 720,000 shares of our common stock to
Stanford and its assignees. The warrants are exercisable at $0.001 per share on
or before June 30, 2009. The warrants contain a legend restricting their
transferability absent registration or applicable exemption. The warrant holders
had information concerning our company and had the opportunity to ask questions
concerning our company. The warrants were issued pursuant to the exemption from
registration provided by Section 4(2) of the Securities Act.


                                       12
<PAGE>

      On July 6, 2004, we received a notice of conversion from Stanford relating
to our shares of Series A preferred stock and Series B preferred stock held by
Stanford. Pursuant to the conversion notice, we issued Stanford an aggregate of
7,190,171 shares of our common stock. Subsequent to the conversion of these
preferred shares, no shares of our preferred stock remain outstanding. The
shares of common stock issued pursuant to the conversion were issued pursuant to
the exemption from registration provided by Section 4(2) of the Securities Act.
The shares of common stock issued pursuant to the conversion contain a legend
restricting the transferability absent registration or applicable exemption.
Stanford had information concerning our company and had the opportunity to ask
questions concerning our company.

      Effective July 6, 2004, we entered into an agreement to issue 450,000
shares of our common stock to American Capital Ventures, Inc. that was reduced
to 225,000 shares pursuant to an amendment and restatement of the agreement
entered into on August 5, 2004 in consideration for investor relations services
to be provided by American Capital Ventures. Shares of common stock issued to
American Capital Ventures were issued pursuant to the exemption from
registration provided by Section 4(2) of the Securities Act. The shares of
common stock contain a legend restricting the transferability absent
registration or applicable exemption. American Capital Ventures had access to
information concerning our company and had the opportunity to ask questions
concerning our company.

      On August 12, 2004, we issued 360,000 shares of our common stock to four
individuals pursuant to the exercise of warrants held by these individuals. The
individuals were assigned the warrants from Stanford. The warrants were
exercisable at $.001 per share. The shares of common stock issued to these
individuals were issued pursuant to the exemption from registration provided by
Section 4(2) of the Securities Act. The shares of common stock contain a legend
restricting the transferability absent registration or applicable exemption. The
warrant holders had access to information concerning our company and had the
opportunity to ask questions concerning our company.

      On September 8, 2004, we issued 360,000 shares of our common stock to
Stanford pursuant to the exercise of warrants held by Stanford. The warrants
were exercisable at $.001 per share. The shares of common stock issued to
Stanford were issued pursuant to the exemption from registration provided by
Section 4(2) of the Securities Act. The shares of common stock contain a legend
restricting the transferability absent registration or applicable exemption.
Stanford had access to information concerning our company and had the
opportunity to ask questions about our company.

      250,000 shares of our common stock issued to Deluxe Investment Company
were subject to an escrow agreement which provided, among other things, that if
we did not receive third party financing from sources other than Stanford on or
before October 22, 2004 that the 250,000 shares of our common stock held by
Deluxe would be immediately returned to our company and cancelled. As required
under the escrow agreement, on November 10, 2004, we sent the escrow agent a
demand for the shares. When we receive the shares from the escrow agent we will
cancel the shares.

      On February 14, 2005, a registration statement on Form SB-2 covering an
aggregate of 1,470,808 shares of our common stock was declared effective by the
SEC. We receive no proceeds from the sale of shares included in the prospectus,
as the prospectus covers shares being offered for resale by certain selling
shareholders.


                                       13
<PAGE>

ITEM  6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS OR
            PLAN OF OPERATIONS OVERVIEW

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

      o     Increase revenue;

      o     Reduce cost;

      o     Standardize processes;

      o     Improve the quality of patient outcomes; and

      o     Minimize regulatory compliance risk.

      Our products address the issues of measuring quality of care while
simultaneously reducing cost, improving patient outcomes and minimizing
compliance risk. Effective management of home health agencies requires accurate
collection of many data elements and using this data to determine the
reimbursement for the care and to measure and improve the quality of the care
delivered. Our services offer cost-effective, accurate and automated methods of
improving the quality of the data collected and enable our customers to use the
data to provide daily reports that identify anomalies in clinical observations,
identify profit or loss potential for an episode of care, and assist with
managing regulatory compliance risk and performing benchmark observations about
the data against our national database of over 1 million episodes of care.

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

      We currently derive most of our revenues from per transaction charges
applied to processing patient clinical assessments made by our customers during
a month. As of December 31, 2004, we had 100 customers in 36 states with 373
sites using one or more of our services. During December 2004, our customers
processed over 55,000 patient clinical assessments using our programs.

      In 2003 there were about 7,000 Medicare certified home health agencies
nationally that provided services to 2.2 million patients. The Balanced Budget
Act of 1997 included mandates to the Centers for Medicare and Medicaid Services
(CMS) to establish a Prospective Payment System (PPS) to reduce the cost of the
home health benefit and to measure the effectiveness of the care delivered. The
regulations are being implemented in phases over time and include a requirement
that home health agencies collect assessment data on each patient at
start-of-care and at discharge (OASIS Data). These assessments determine the
reimbursement for each patient for a 60 day episode of care.

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

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


                                       14
<PAGE>

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

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

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

EVALUATION OF COMPANY PERFORMANCE AND FINANCIAL CONDITION

      Since our operations and administrative staffing levels and fixed expenses
are relatively stable, the principle factor our management analyzes in
evaluating our performance is changes in our principal sources of revenue.
Management therefore focuses primarily on the volume of transaction sites added
and the number of transactions processed in each fiscal period to evaluate our
performance. To a lesser extent, management evaluates the efficiency of our
operation and our staffing levels by reviewing changes in our revenue per
employee and expenses per employee (which is determined by dividing revenue or
expense during a period by the weighted overage headcount). To evaluate the
effectiveness of our finance department and the strength of our financial
position, management reviews our days of sales outstanding for each period.

OPERATIONAL RISKS AND CHALLENGES

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

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

RESEARCH AND DEVELOPMENT

      In 2004, we initiated development projects to produce new and enhanced
products for delivery in late 2004. Introduction of these systems was delayed
until mid 2005 as resources were re-assigned to meet federal regulatory changes.
We plan to deliver these services on a transaction pricing basis. These products
will not add material revenue during 2005. Development of the underlying
software will be produced with existing staff. Research and development expenses
associated with these products is not material and may only increase slightly to
cover costs related to short term software development contractors that may be
used in the development cycle.


                                       15
<PAGE>

SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition
-------------------

      We recognize revenue when persuasive evidence of a final agreement exists,
delivery has occurred, the selling price is fixed or determinable and
collectibility is reasonably assured. Currently, we primarily employ a web-based
application service provider model to deliver our services to our home
healthcare customers. In instances where the customer specifies final acceptance
of the system or service, we defer revenue until all acceptance criteria have
been met. We price these services primarily on a transaction fee basis
(calculated based upon the number of patient clinical assessments made by a
customer during a period) and, to a lesser extent, on a subscription fee basis.
Clinical assessments, which are mandated by Medicare, require Home Health Care
Agencies to collect assessment data on all patients requiring home health care
at the start-of-care and at discharge. Our products PPS collect, editor,
executive, dashboard trans, outcomes and oasis auditor all assist in the
collection of assessment data and are all charged on a transaction or
subscription basis. We earn the revenues from subscriptions ratably over the
period of the respective agreement, generally one year. We record cash payments
received in advance or at beginning of a contract as deferred revenue. We
recognize transaction fee based revenues in the period the transaction is
processed. Implementation, consultation, training and customer support services
are charged to customers on a fee basis usually based upon time spent. We
recognize implementation fees in the month that the customer goes live and we
recognize training, consultation, advisory and support services revenue in the
month that the service is performed. Implementation costs consisting of payroll
and travel are expensed in the same period implementation fees are recognized.
Typical sales terms would be 30 days from the date of the invoice.

      We acquired the customer assets at the date of inception of our operating
subsidiary in October 2002. These assets were comprised of subscription and
transaction based customers. For the period ending December 31, 2002, the
subscription based customers represented 85% of the customer base and the
transaction based customers represented 15%. The majority of these subscription
based customers were small, single-site customers with subscription revenues
ranging from $1,500 to $2,400 annually. Over the past two years, we endeavored
to convert our subscription based customers to transaction based customers and
to migrate these customers to the new products of PPS Advantage(TM).

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

Allowance for Doubtful Accounts
-------------------------------

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

Software Development Costs
--------------------------

      We capitalize software development 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 state activities are expenses as
incurred. Our policy provides for the capitalization of certain payroll and
payroll related costs of employees who are directly associated with developing
or obtaining internal use software. Capitalized personnel costs are limited to
the time directly spent on such projects. Capitalized costs are ratable
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. We write of the amount
that the unamortized software development costs exceeds net realizable value.


                                       16
<PAGE>

Recent Accounting Pronouncements
--------------------------------

      In November 2004, the FASB issued Statement of Financial Accounting
Standards No. 151, "Inventory Costs - an amendment of ARB No. 43, Chapter 4".
This Statement amends the guidance in ARB No. 43, Chapter 4, "Inventory
Pricing", to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs, and wasted material (spoilage). This Statement
requires that those items be recognized as current-period charges regardless of
whether they meet the criterion of "so abnormal". In addition, this Statement
requires that allocation of fixed production overheads to the costs of
conversion be based on the normal capacity of the production facilities. The
Company does not have inventory costs and therefore does not expect to be
impacted by SFAS 151 or be required to make additional disclosures.

      In December 2004, the FASB issued Statement of Financial Accounting
Standards No. 152, "Accounting for Real Estate Time-Sharing Transactions - an
amendment of FASB Statements No. 66 and 67". This Statement amends SFAS 66,
"Accounting for Sale of Real Estate", to reference the financial accounting and
reporting guidance for real-estate time-sharing transactions that is provided in
AICPA Statement of Position 04-2, "Accounting for Real Estate Time-Sharing
Transactions". This Statement also amends SFAS 67, "Accounting for Costs and
Initial Rental Operations of Real Estate Projects", to state that the guidance
for (a) incidental operations and (b) costs incurred to sell real estate
projects does not apply to real estate time-sharing transactions. The accounting
for those operations and costs is subject to the guidance in SOP 04-2. The
Company does not expect to be impacted by the adoption of SFAS 152, which will
be effective for financial statements for fiscal years beginning after June 15,
2005.

      In December 2004, the FASB issued Statement of Financial Accounting
Standards No. 153, "Exchanges of Nonmonetary Assets - an amendment of APB
Opinion No. 29". This Statement amends Opinion 29 to eliminate the exception for
nonmonetary exchanges of similar productive assets and replaces it with a
general exception for exchanges of nonmonetary assets that do not have
commercial substance. A nonmonetary exchange has commercial substance if the
future cash flows of the entity are expected to change significantly as a result
of the exchange. The adoption of SFAS 153 did not impact the Company's financial
position or results of operations.

      In December 2004, the FASB revised Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation". This Statement
supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees". This
Statement establishes standards for the accounting for transactions in which an
entity exchanges its equity instruments for goods and services. It also
addresses transactions in which an entity incurs liabilities in exchange for
goods and services that are based on the fair value of the entity's equity
instruments or may be settled by the issuance of those equity instruments. This
Statement focuses primarily on accounting for transactions in which an entity
obtains employee services in share-based payment transactions. The Company is in
the process of assessing the effect of the revised SFAS 123 and does not expect
its adoption will have a material effect on the Company's financial position or
results of operations.

      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.


                                       17
<PAGE>

RESULTS OF OPERATIONS DATA

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

                                                 FOR THE YEAR ENDED DECEMBER 31,
                                                 2003                      2004
                                                 ----                      ----
Net sales...................................      100%                      100%
Cost of sales...............................       68                        47
Gross profit................................       32                        53
Operating expenses:.........................
     Selling and marketing..................       56                        27
     Research and development...............       43                        16
     General and Administrative.............       57                        35
     Depreciation and amortization..........        5                         4
     Interest...............................        -                         1
Total operating expenses....................      161                        83
Other non-operating expense.................       --                         1
Deemed Preferred Stock Dividend.............        4                         0
Net income (loss)...........................     (133)                      (31)

STATISTICAL DATA

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

                                                 FOR THE YEAR ENDED DECEMBER 31,
                                                       2003                2004
                                                       ----                ----
Total customers (weighted average)..........            116                  99
Total customers (end of period).............            104                 100
Total sites (weighted average).............             387                 344
Total sites (end of period).................            403                 373
Total assessments...........................        578,389             628,158
Transaction customers (weighted average)....             72                  77
Transaction customers (end of period).......             73                  81
Transaction sites (weighted average)........            246                 323
Transaction sites (end of period)...........            280                 356
Transaction assessments.....................        424,561             610,034
Transaction revenues........................     $1,557,460          $3,198,730
Average charge per transaction..............         $3.67                $5.24
Subscription customers (weighted average)...             44                  22
Subscription customers (end of period)......             31                  19
Subscription sites (weighted average).......            140                  21
Subscription sites (end of month)...........            123                  17
Subscription assessments....................        153,828              18,124
Subscription revenue........................       $290,756            $211,549
Training revenue............................       $129,647            $123,812
Implementation and set-up revenue...........        $59,808             $64,375
Other revenue...............................        $32,087             $39,161
Weighted average headcount..................             47                  45
Days sales outstanding......................             75                  43


                                       18
<PAGE>

YEAR ENDED DECEMBER 31, 2004 COMPARED TO THE YEAR ENDED DECEMBER 31, 2003

      Revenues for the year ended December 31, 2004 were $3,637,626 and for the
year ended December 31, 2003 were $2,069,758, an increase of $1,567,868 or 76%.
This increase resulted primarily from price increases, an increase in assessment
transaction volume from existing customers and to a lesser extent the addition
of new transaction customers.

      The largest contributor to our revenue growth during the period arose from
the increase in our transaction based revenue. Our average charge per
transaction increased 43% to $5.24 during the twelve months ended December 31,
2004, from $3.67 during the twelve months ended December 31, 2003, and the
number of transactions processed increased 44% to 610,034 during the twelve
months ended December 31, 2004 from 424,561 during the twelve month period
ending December 31, 2003. Revenues for these transactions increased 105% from
the same period last year to $3,198,730 from $1,557,460. This $1,641,270
increase in our transaction revenue is comprised of a 41% increase attributed to
increased volume and 59% of the increase is attributed to price increases. The
price increase is primarily due to an increase in our transaction prices as of
February 2003. As customers renewed services prices were increased. We also
added 21 new customers during the twelve months ended December 31, 2004 using
the new pricing schedule. The average transaction price for these 21 customers
was $7.58. The net effect of adding these new customers and the loss of small
customers that discontinued services due to the price increases had a material
increase in the average price per transaction. The number of transaction based
customers increased 11% to 81 customers at December 31, 2004 compared to 73
customers at December 31, 2003. During the year ending December 31, 2004, the
number of transaction based sites increased 27% to 356 from 280 at December 31,
2003 and the number of subscription based sites decreased 86% to 17 from 123 at
December 31, 2003.

      Cost of sales for the year ended December 31, 2004 and the year ended
December 31, 2003, respectively, were $1,727,205 and $1,410,271, or 47% and 68%
of revenues. We include as part of our cost of sales the employee costs incurred
from our customer service department, our data verification department, our
implementation department and our nurse educators. Other costs included are
travel for our customer service personnel, professional fees, accreditation
fees, teleconferencing, assessment forms shipping, depreciation expense for our
internally developed software and hosted data center expense. The $316,935, or
22%, increase in the cost of sales is principally attributed to an increased
staffing in our customer service and training and education departments to
support the increased customer volume resulting in an increase of $222,494 in
salaries and related expenses, increase in depreciation expense for our
internally developed software of $41,162, an increase in professional fees of
$24,339 resulting primarily from the use of temporary staffing, an increase in
our expense for our hosted data center of $21,163 and an increase in
communications expense of $8,929.

      Operating expenses for the year ended December 31, 2004 and the year
ending December 31, 2003, respectively, totaled $3,002,650 and $3,324,436,
resulting in a decrease in operating expenses of $321,786, or 10%. Operating
expenses were comprised of:

      Selling and marketing expense for the year ended December 31, 2004 and the
year ended December 31, 2003 were $966,870 and $1,162,446, respectively,
resulting in a decrease in selling and marketing expense of $195,576 or 17%. We
included in our selling and marketing expense the employee costs incurred from
our marketing, sales, sales administration and sales support employees. Other
costs included are the travel for our sales personnel, trade shows, advertising,
telephone, teleconferencing, and office expense. The principal reason for the
decrease was that salaries and benefits decreased $139,551 due to the decrease
in the sales and marketing staff, commissions decreased $35,284 due to a change
in our commission plan, which increased the percentage of commissions paid on
new sales but reduced the commission on renewals of HQS services. Travel
decreased $70,423 due to a shift from a regional sales focus to a nation sales
focus which decreased the attendance at regional trade association meetings and
shifted the resources to national trade association meetings, reducing the
number of meetings attended. In addition we reduced the number of employees
attending each sales call to a representative from the sales organization. We
currently demonstrate breadth of knowledge using teleconferencing of clinical
and technical personnel rather than on-site attendance. This decrease was
partially offset by an increase in marketing and promotion expense of $42,811
due to sponsorship and participation in the Remington Think Tank (a clinical
home healthcare industry seminar hosted by the Remington Report) and
professional services increase of $18,519 for employment agency fees for sales
personnel.


                                       19
<PAGE>

      Research and development expense was $576,194 for the year ended December
31, 2004 and the year ending December 31, 2003 was $883,519, resulting in a
decrease in research and development expense of $307,325 or 35%. Included in our
research and development cost is the employee costs for our software developers
and our data center and internal systems staff, professional fees for outside
consultants and contractors, and supplies. The principal reason for the decrease
was a decrease in salaries and benefits of $346,172 due to the decrease in our
development staff. This decrease was partially offset by professional fees of
$48,696 for contract services.

      General and administration expense was $1,269,242 for the year ended
December 31, 2004 and $1,180,748 for the year ended December 31, 2003, an
increase of $88,494, or 7%. Included in our general and administration expense
is salaries and related expenses for our executive officers and administrative
employees. Also included in general and administration are corporate costs such
as, but not limited to, legal and accounting , utilities, rent, office supplies
and office equipment. The principal reason for this increase is a $92,738
increase of professional fees due to the legal and accounting fees associated
with the preparation of our Form SB-2 registration statement, the cost of
documenting our credit facility and an increase of $27,209 in occupancy due to
the relocation of our offices to 405 N. Reo Street on July 17, 2003. These
increases are partially offset by a decrease in communications expense of
$16,841 and a decrease of $13,882 in other expense.

      Depreciation expense was $144,533 for the year ended December 31, 2004 and
$91,114 the year ended December 31, 2003, an increase of $53,419 or 59%. The
principal reason for the increase in depreciation expense of $53,419 is the
acquisition of furniture and fixtures and leasehold improvements when we moved
into our new offices in July 2003.

      Interest expense was $49,111 for the twelve months ended December 31, 2004
and $ $6,609 the twelve months ended December 31, 2003, an increase of $42,502.
The principal reason for the increase in interest expense is due to the
$1,050,000 loan proceeds received during 2004 under the loan and security
agreement.

      The weighted average head count for the twelve month period ending
December 31, 2004 was 45 and for the twelve months ended December 31, 2003 it
was 47, resulting in an decrease in the average headcount of 2 or 4%. The
decrease in staffing is principally attributed to the decreased staffing in our
research and development department. Revenue per employee for the twelve months
ended December 31, 2004 was $80,836 compared to $44,037 for the twelve months
ending December 31, 2003 resulting in an increase of $36,799 per employee or
84%. The increase was due to the increase in transaction assessment volume of
185,473, or 44%, for the twelve months ended December 31, 2004 compared to the
twelve months ending December 31, 2003. These additional 185,473 assessments
were handled with a 4% decrease in the weighted average head count. The average
price per transaction assessment increased to $5.24 for the twelve months ending
December 31, 2004 compared to $3.67 for the twelve months ending December 31,
2003. This increase in price per transaction assessment, the increased
transaction volume and our fixed administrative staffing levels, and our 4%
decrease in the weighted average head count has increased our profit margin per
assessment. Our goal for revenue per employee is $100,000 of revenue annually
per employee.

LIQUIDITY AND CAPITAL RESOURCES

      We have incurred an accumulated deficit at December 31, 2004 of
$12,284,891 compared to $11,160,223 at December 31, 2003. We have working
capital at December 31, 2004 of $330,507 compared to a negative working capital
of $63,112 at December 31, 2003. We have incurred net operating losses for the
year ending December 31, 2003 and December 31, 2004 of $2,664,949 and
$1,124,668, respectively.

      In the past, our principal sources of liquidity were equity placements and
more recently a loan provided by Stanford, our principal shareholder. As our
operations have improved, our external cash requirements have decreased and our
rate of collection of receivables have increased. Our principal sources of
liquidity for the foreseeable future are expected to be the proceeds of our line
of credit from Stanford, under which, as of March 15, 2005, $550,000 remains
available to us. Currently, our monthly negative cash flow from operations is
approximately $20,000. We believe the funds available under our line of credit
will be sufficient to maintain our operations over the next 12 months.

      Operating activities used $710,230 for the twelve months ended December
31, 2004, whereas such activities used $2,638,556 for the twelve months ended
December 31, 2003. Cash used by operating activities for twelve months ended
December 31, 2004, is primarily attributable to a net loss of $1,124,668, an
increase of $7,401 in accounts receivable and a decrease in accrued expenses of
$416,977. These were partially offset by non cash items such as depreciation and
amortization of $672,659, an increase in accounts payable of $39,162 and an
increase in deferred revenue of $120,932.


                                       20
<PAGE>

      Investing activities used $199,972 for the twelve months ended December
31, 2004, whereas such activities used $430,186 for the twelve months ended
December 31, 2003. Cash used in investing activities in 2004 is primarily
attributable to purchases of property and equipment of $100,575 and capitalized
software development cost of $101,250.

      Financing activities provided $1,038,695 for the twelve months ended
December 31, 2004, whereas such activities provided $2,991,209 for the twelve
months ended December 31, 2003. Cash provided by financing activities in 2004 is
primarily attributed to $1,050,000 in proceeds from loan and security agreement
with Stanford.

      Cash at December 31, 2004 and December 31, 2003, respectively, was
$300,221 and $171,728. At December 31, 2004 and December 31, 2003, respectively,
we had total stockholders' equity of $121,340 and $1,236,438. During the year
ended December 31, 2004, we received proceeds from the loan and security
agreement with Stanford in the amount of $1,050,000.

      On July 6, 2004, HQS entered into a $1,600,000 loan and security agreement
with Stanford. Under this agreement, interest accrues at the rate of 8% per
annum and principal matures and becomes payable three years from the date of the
loan. The loan is secured by a security interest in all of the assets of our
company and HQS and a corporate guaranty that has been executed in favor of
Stanford. All funds are currently available to us.

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

      Accounts receivable at December 31, 2004 were $455,440 as compared to
$448,038 at December 31, 2003, an increase of approximately 2%. Days of sales
outstanding was 43 days for the year ended December 31, 2004 compared to 75 days
at December 31, 2003. Our business strategy of attracting larger customers has
resulted in customers that have greater financial resources and submit payment
timely. Our standard contract states that payment is due within 30 days of the
date of the invoice. For the year ended December 31, 2004, 32% of our revenues
were generated from Amedisys and 34% of our accounts receivable were due from
Amedisys. As disclosed under "Risk Factors," the loss of Amedisys would
materially decrease our revenues. We believe that our services are an integral
part of the Amedisys daily operation having a direct impact on Amedisys
clinical, financial and field operations.

      Other assets at December 31, 2004 were $936,695 as compared to $1,409,234
at December 31, 2003. These amounts were primarily due to property and equipment
of $841,462 and $1,313,728, respectively, which consist principally of $538,113
and $964,988, respectively, of internally developed software. The decrease in
internally developed software is due to an increase in accumulated depreciation
which is partially offset by capitalized software development costs for the year
ended December 31, 2004 pursuant to SOP 98-1.

      Accounts payable and accrued expenses at December 31, 2004 and December
31, 2003 were $242,101 and $619,917, respectively. The payables were mainly
attributed to a tax lien of $400,000, assumed from a predecessor company. On
June 30, 2004, the tax liability of $400,000 was paid.

      We anticipate that cash requirements will remain at the current level for
the next 12 months as we plan on continuing to utilize current resources to
continue improving our infrastructure, develop our business, establish our sales
and marketing network, operations, customer support and administrative
organizations. We currently anticipate proceeds from the loan and security
agreement will be sufficient to meet presently anticipated working capital and
capital expenditure requirements through December 31, 2005. As of December 31,
2004, there were no commitments for long-term capital expenditures.


                                       21
<PAGE>

RISK FACTORS

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

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

      We have a history of operating losses in our business and have incurred
significant net losses since our inception. For the fiscal year ending December
31, 2004, we incurred net losses totaling $1,124,668. At December 31, 2004, we
had an accumulated deficit of $12,284,891. Our ability to generate and sustain
significant additional revenues or achieve profitability will depend upon the
factors discussed elsewhere in this "Risk Factors" section.

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

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

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

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

      The loss of certain significant customers would materially decrease our
revenues.

      We had one customer, Amedisys, Inc., who accounted for approximately 32%
of our revenue for the twelve months ended December 31, 2004 and 29% of our
revenues for the year ended December 31, 2003. The loss of this customer would
materially decrease our revenues. Please see "Customers" for a discussion of our
agreement with Amedisys.

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

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

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


                                       22
<PAGE>

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

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

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

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

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

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

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

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

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

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

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


                                       23
<PAGE>

      In 2004 we initiated development projects to produce new and enhanced
services for delivery in late 2004. Introduction of these systems was delayed as
resources were re-assigned to meet federal regulatory changes. We currently
expect to release a number of new products and enhancements to existing products
in mid 2005 and late 2005 and we do not anticipate that a material portion of
our service revenue growth in 2005 will come from these new releases. If we
experience material delays in introducing new products and enhancements, our
prospects for growth will be impaired and our reputation with our customers may
be damaged. The market for management information tools is characterized by
rapid technological change, frequent new product introductions and enhancements,
uncertain product life cycles, changes in government regulation, changes in
customer demands and evolving industry standards. The introduction of products
embodying new technologies, changes in applicable government regulation and the
emergence of new industry standards can render existing products obsolete and
unmarketable. Our future success will depend upon our ability to continue to
enhance our current products while developing and introducing new products on a
timely basis that keep pace with technological developments and government
regulations and satisfy increasingly sophisticated customer requirements.

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

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

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

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

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


                                       24
<PAGE>

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

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

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

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

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

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

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

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

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

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


                                       25
<PAGE>

      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:

      o     Be time consuming to defend;

      o     Result in costly litigation;

      o     Divert management's attention and resources;

      o     Cause product shipment delays;

      o     Require us to redesign products;

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

      o     Cause others to seek indemnity from us.

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

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

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

      Our shares of common stock have not yet begun trading 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.
No trading in shares of common stock has begun and we expect to have only a
limited trading market in the foreseeable future. As a result, you may find it
difficult to dispose of shares of our common stock and you may suffer a loss of
all or a substantial portion of your investment in our common stock.

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

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


                                       26
<PAGE>

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

      Our principal shareholder, Stanford, owns or controls approximately 84% of
our common stock. This shareholder is able to control the outcome of shareholder
votes, including votes concerning: amendments to our charter and by-laws; and
the approval of significant corporate transactions like a merger or sale of our
assets. Although none of our directors or officers are affiliated with Stanford
or have any relationships with Stanford, Stanford is able to control the
election of the board of directors through its ownership of a majority of our
common stock. In addition, Stanford has provided us with significant financing.
This controlling influence could have the effect of delaying or preventing a
change in control, even if our other shareholders believe it is in their best
interest.

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

      Our articles of incorporation permit our board of directors to issue up to
15,000,000 shares of preferred stock without shareholder approval. Currently no
shares of the preferred stock are issued and outstanding. Shares of preferred
stock, if issued, could contain dividend, liquidation, conversion, voting or
other rights which could adversely affect the rights of our common shareholders
and which could also be utilized, under some circumstances, as a method of
discouraging, delaying or preventing our change in control. Provisions of our
articles of incorporation, bylaws and Nevada law could make it more difficult
for a third party to acquire us, even if many of our shareholders believe it is
in their best interest. These provisions may decrease your ability to sell your
shares of our common stock.

ITEM 7.     FINANCIAL STATEMENTS

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


                                       27
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors
Health Systems Solutions, Inc.

We have audited the accompanying consolidated balance sheet of Health Systems
Solutions, Inc. as of December 31, 2004 and the related consolidated statements
of operations, shareholders' deficit and cash flows for the years ended December
31, 2004 and December 31, 2003. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Health Systems
Solutions, Inc. as of December 31, 2004 and the results of their operations and
their cash flows for the years ended December 31, 2004 and December 31, 2003, 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 18, 2005


<PAGE>


                  HEALTH SYSTEMS SOLUTIONS, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2004


                                     ASSETS

CURRENT ASSETS:
    Cash                                                           $    300,221
    Accounts receivable, net of allowance for doubtful accounts
      of $5,000                                                         455,440
    Prepaids and other current assets                                    72,249
                                                                   ------------

      TOTAL CURRENT ASSETS                                              827,910

Property and equipment, net of accumulated depreciation
    and amortization of $245,952                                        303,349

Software development costs, net of accumulated amortization
    of $1,091,319                                                       538,113

Security deposits                                                        22,984

                                                                   ------------
                                                                   $  1,692,356
                                                                   ============


                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Current portion of capital lease obligation                    $     13,550
    Accounts payable                                                     68,467
    Accrued expenses                                                    173,634
    Deferred revenue                                                    241,752
                                                                   ------------

      TOTAL CURRENT LIABILITIES                                         497,403

Capital lease obligation, net of current portion                         23,613

Loans payable                                                         1,050,000
                                                                   ------------

                                                                      1,571,016
                                                                   ------------

STOCKHOLDERS' EQUITY
    Common Stock; $.001 par value; 150,000,000 shares
      authorized; 11,046,780 shares issued and outstanding               11,047
    Additional paid-in capital                                       12,395,184
    Accumulated deficit                                             (12,284,891)
                                                                   ------------

      TOTAL STOCKHOLDERS' EQUITY                                        121,340
                                                                   ------------

                                                                   $  1,692,356
                                                                   ============

See accompanying notes to the consolidated financial statements.


<PAGE>

                  HEALTH SYSTEMS SOLUTIONS, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                         FOR THE YEAR         FOR THE YEAR
                                                       ENDED DECEMBER 31,   ENDED DECEMBER 31,
                                                             2004                 2003
                                                         ------------         ------------
<S>                                                      <C>                  <C>
NET SALES                                                $  3,637,626         $  2,069,758
COST OF SALES                                               1,727,205            1,410,271
                                                         ------------         ------------

    GROSS PROFIT                                            1,910,421              659,487
                                                         ------------         ------------

OPERATING EXPENSES
    Selling and marketing                                     966,870            1,162,446
    Research and development                                  576,194              883,519
    General and administrative                              1,269,242            1,180,748
    Depreciation and amortization                             144,533               91,114
    Interest                                                   49,111                6,609
                                                         ------------         ------------

    TOTAL OPERATING EXPENSES                                3,005,950            3,324,436
                                                         ------------         ------------

NET OPERATING LOSS                                         (1,095,529)          (2,664,949)
                                                         ------------         ------------

NON-OPERATING EXPENSES
    Other non-recurring                                        29,139                   --
                                                         ------------         ------------

    TOTAL NON-OPERATING EXPENSES                               29,139                   --
                                                         ------------         ------------

NET LOSS                                                   (1,124,668)          (2,664,949)

       Deemed preferred stock dividend                             --               92,137
                                                         ------------         ------------

NET LOSS APPLICABLE TO COMMON STOCKHOLDERS               $ (1,124,668)        $ (2,757,086)
                                                         ============         ============


BASIC AND DILUTED NET LOSS PER SHARE                     $      (0.17)        $      (1.14)
                                                         ============         ============

BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING       6,536,156            2,421,169
                                                         ============         ============
</TABLE>

See accompanying notes to the consolidated financial statements.


<PAGE>

                  HEALTH SYSTEMS SOLUTIONS, INC. AND SUBSIDIARY
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                         FOR THE PERIOD JANUARY 1 , 2003
                            THROUGH DECEMBER 31, 2004

<TABLE>
<CAPTION>
                                           Preferred Stock             Common Stock                                        Total
                                       ------------------------   ---------------------    Additional    Accumulated   Stockholders'
                                         Shares        Amount       Shares      Amount  Paid-in Capital    Deficit         Equity
                                       ----------   -----------   ----------   --------   ------------   ------------   -----------
<S>                                    <C>          <C>           <C>          <C>        <C>            <C>            <C>
Balance, December 31, 2002              1,025,640     1,200,000    1,821,438      1,822      8,100,822     (8,403,137)      899,507

Issuance of Series A Convertible          854,701     1,000,000           --         --             --             --     1,000,000
  Preferred Stock

Warrants issued in connection with             --            --           --         --         92,137        (92,137)           --
  Preferred Stock

Issuance of Series B Convertible        2,500,000     2,000,000           --         --             --             --     2,000,000
  Preferred Stock

Issuance of Common Stock by the
  exercising of warrants                       --            --      940,171        940            940             --         1,880

Net Loss                                       --            --           --         --             --     (2,664,949)   (2,664,949)
                                       ----------   -----------   ----------   --------   ------------   ------------   -----------

BALANCE DECEMBER 31, 2003               4,380,341     4,200,000    2,761,609      2,762      8,193,899    (11,160,223)    1,236,438

  Conversion of Series A Convertible   (1,880,341)   (2,200,000)     940,171        940      2,199,060             --            --
     Preferred Stock

  Conversion of Series B Convertible   (2,500,000)   (2,000,000)   6,250,000      6,250      1,993,750             --            --
     Preferred Stock

  Issuance of Common Stock for                 --            --      225,000        225          2,025             --         2,250
    Investor Relations Agreement

  Issuance of Common Stock to                  --            --      150,000        150           (150)            --            --
     President of Company

  Issuance of Common Stock by the              --            --      720,000        720             --             --           720
    Exercising of Warrants

  Value of Warrants Issued                     --            --           --         --          6,600             --         6,600

  Net Loss                                     --            --           --         --             --     (1,124,668)   (1,124,668)
                                       ----------   -----------   ----------   --------   ------------   ------------   -----------

BALANCE DECEMBER 31, 2004                      --   $        --   11,046,780   $ 11,047   $ 12,395,184   $(12,284,891)  $   121,340
                                       ==========   ===========   ==========   ========   ============   ============   ===========
</TABLE>

See accompanying notes to the consolidated financial statements.


<PAGE>

                  HEALTH SYSTEMS SOLUTIONS, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2004 and 2003

<TABLE>
<CAPTION>
                                                                  For the Year         For the Year
                                                                Ended December 31,   Ended December 31,
                                                                      2004                 2003
                                                                  ------------         ------------
Cash flows from operating activities:
<S>                                                               <C>                  <C>
    Net loss                                                      $ (1,124,668)        $ (2,664,949)

    Adjustments to reconcile net loss to net cash used in
      operating activities:
       Depreciation and amortization of property and equipment         144,533               89,469
       Amortization of software development costs                      528,126              486,964
       Gain on property and equipment disposals                           (421)                  --
       Stock based compensation                                          8,850                   --
    Changes in operating assets and liabilities:
       Accounts receivable                                              (7,401)            (334,834)
       Notes receivable                                                     --               54,400
       Royalties and referral fees receivable                            1,550              (11,300)
       Prepaid expenses and other current assets                        (1,277)             (29,464)
       Security deposits                                                    --               (7,330)
       Accounts payable                                                 39,162             (157,228)
       Accrued expenses                                               (416,977)             159,416
       Deferrred revenue                                               120,932             (224,849)
       Customer deposits                                                (2,639)               1,149
                                                                  ------------         ------------

Net cash used in operating activities                                 (710,230)          (2,638,556)
                                                                  ------------         ------------

Cash flow from investing activities:
    Purchase of property and equipment                                (100,575)            (288,112)
    Increase in software development costs                            (101,250)            (142,074)
    Sale of property and equipment                                       1,853                   --
                                                                  ------------         ------------

Net cash used in investing activities                                 (199,972)            (430,186)
                                                                  ------------         ------------

Cash flow from financing activities:
    Repayment of capital lease obligation                              (12,025)             (10,671)
    Proceeds from loans payable                                      1,050,000                   --
    Proceeds from the issuance of Series A Preferred Stock                  --            1,000,000
    Proceeds from the issuance of Series B Preferred Stock                  --            2,000,000
    Proceeds from the exercise of warrants                                 720                1,880
                                                                  ------------         ------------

Net cash provided by financing activities                            1,038,695            2,991,209
                                                                  ------------         ------------

Increase (decrease) in cash                                            128,493              (77,533)

Cash, beginning of period                                              171,728              249,261
                                                                  ------------         ------------

Cash, end of period                                               $    300,221         $    171,728
                                                                  ============         ============

Cash paid during the period for interest expense                  $     42,511         $      6,609
                                                                  ============         ============
</TABLE>


See accompanying notes to the consolidated financial statements.

<PAGE>

                  HEALTH SYSTEMS SOLUTIONS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


1. DESCRIPTION OF BUSINESS, ACQUISITIONS AND CONSOLIDATION

Health Systems Solutions, Inc. ("HSS") through its wholly owned subsidiary,
Healthcare Quality Solutions, Inc. ("HQS") provides assistance to the home
healthcare industry in managing their businesses throughout the United States of
America, utilizing internally developed software. The software produces
information to support clinical, financial and administrative decisions made by
management in operating and administrating their organization. The Company
operates in one segment.

On September 17, 2002 Provider Acquisition, LLC ("PAL"), which was formed in the
State of Florida on June 28, 2002, acquired certain assets of Provider Solutions
Corp. ("PSC") for $250,000 in cash, subject to certain liabilities. The
principal reason for the acquisition was to purchase the technology that the
Company currently employs in its business. Total consideration paid has been
allocated as follows:

      Current Assets                                         $    357,820
      Goodwill                                                  6,838,135
      Software Development Costs                                1,325,000
      Fixed Assets                                                 68,206
      Other Assets                                                 15,654
      Accounts Payable and Accrued Expenses                      (557,362)
      Deferred Revenue                                           (438,131)
      Secured Debt                                             (7,357,322)
      Other Liabilities                                            (2,000)
                                                             ------------
      Purchase price                                         $    250,000
                                                             ============

Following PAL's acquisition of the assets of PSC, the holder of PSC's secured
indebtedness converted all of the indebtedness into equity of PAL. The debt was
converted to relieve the Company of the obligation. The debt conversion was
recorded as additional paid-in capital.

This acquisition created $6,954,927 of purchased goodwill that includes other
excess costs of approximately $116,800. As of September 17, 2002 PAL determined
that this goodwill was impaired and subsequently wrote off the entire balance.

Silver Key Mining Company, Inc. ("Silver Key"), the predecessor to HSS, was
originally incorporated in the State of Idaho on June 25, 1971. On September 17,
2002 Silver Key changed its domicile from Idaho to Nevada by filing Articles of
Merger between Silver Key (Idaho) and Silver Key Mining Company, Inc. a Nevada
corporation. The surviving entity Silver Key (Nevada) (the "Company"), which was
incorporated in the State of Nevada on July 31, 2001, acquired 100% of the
outstanding common stock of Silver Key (Idaho)

On October 11, 2002 the Board of Directors of the Company approved a five to one
reverse stock split with a record date of October 21, 2002. After the reverse
stock split the Company had 512,601 shares of common stock outstanding. All
share and per share amounts have been adjusted to reflect the reverse stock
split.

On October 15, 2002, the Company formed HQS, a Florida corporation, which was
and remains wholly owned by the Company.

On October 22, 2002 PAL entered into an Agreement and Plan of Merger (the
"Merger Agreement") with the Company, HQS and certain principal stockholders of
the Company, as defined in the Merger Agreement. Pursuant to the Merger
Agreement, PAL was merged with and into HQS and HQS survived as the Company's
wholly owned subsidiary.


<PAGE>

                  HEALTH SYSTEMS SOLUTIONS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

1. DESCRIPTION OF BUSINESS, ACQUISITIONS AND CONSOLIDATION - CONTINUED

The merger became effective on October 24, 2002, (the "Effective Date")
concurrent with the Articles of Merger being filed with the Secretary of State
of Florida. As a result of the former members of PAL acquiring a controlling
interest (58%) of the outstanding common stock of the Company the transaction
was accounted for as a "reverse merger." Pursuant to the Merger Agreement the
Company issued 1,071,429 shares of its common stock to the members of PAL. Upon
completion of the acquisition, the Company issued an additional 237,399 shares
of its common stock to parties who were instrumental in arranging the merger.
These shares of common stock were considered part of the cost of the acquisition
and have been recorded at the fair value of $4,750 (quoted market price - $.02
per share) on the date of the transaction with a corresponding reduction of
additional paid in capital. The acquisition was accounted for using the purchase
method of accounting.

Although Silver Key is the legal survivor in the merger and remains the
registrant, until November 2002 (see below) with the Securities and Exchange
Commission, under accounting principles generally accepted in the United States
of America because the stockholders of PAL acquired more than 50% of the post
transaction consolidated entity, PAL is considered to be the "acquirer" of
Silver Key for financial reporting purposes. Accordingly, this requires Silver
Key, among other things, to present in all future financial statements and other
public filings after completion of the merger, prior historical financial
information and other information of PAL and requires a retroactive restatement
of PAL's historical stockholders' investment for the equivalent number of shares
of common stock received in the merger.

On December 10 2002, the Company filed an articles of amendment to its articles
of incorporation changing its name from Silver Key (Nevada) to Health Systems
Solutions, Inc.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and consolidation: The accompanying consolidated financial
statements which present the results of operations of HSS and its wholly owned
subsidiary, HQS, for the period from January 1, 2003 through December 31, 2004
have been prepared using accounting principals generally accepted in the United
States of America. All material intercompany transactions and accounts have been
eliminated in consolidation.

Allowance for doubtful accounts: The Allowance for doubtful accounts is based on
the Company's assessment of the collectibilty of customer accounts and the aging
of the accounts receivable. The Company regularly reviews the adequacy of the
Company's allowance for doubtful accounts through identification of specific
receivables where it is expected that payments will not be received. The Company
also establishes an unallocated reserve that is applied to all amounts that are
not specifically identified. In determining specific receivables where
collections may not be received, the Company reviews past due receivables and
gives consideration to prior collection history and changes in the customer's
overall business condition. The allowance for doubtful accounts reflects the
Company's best estimate as of the reporting dates.

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.


<PAGE>

                  HEALTH SYSTEMS SOLUTIONS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

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

Goodwill and other intangibles: Goodwill represents the excess of costs over
fair value of assets of businesses acquired. The Company adopted the provisions
of SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), as of
January 1, 2002. SFAS 142 requires goodwill to be tested for impairment on an
annual basis and between annual tests in certain circumstances, and written down
when impaired, rather than being amortized as previous accounting standards
required. Furthermore, SFAS 142 requires purchased intangible assets other than
goodwill to be amortized over their useful lives unless these lives are
determined to be indefinite. In accordance with SFAS 142, the Company performed
impairment tests on all goodwill and purchased intangible assets from the
acquired assets and liabilities of Provider Solutions Corp. on September 17,
2002. The goodwill was written off after the company performed these impairment
tests and determined that the fair value of the goodwill exceeded its carrying
value. Fair value was determined by estimates of future cash flows. At September
17, 2002, the state of the business, the projected shortage of short term and
future cash, the anticipation of continued losses and the reduced level of sales
indicated that without ongoing investment, a source for which had not been
identified, the business was not a going concern and that there was no utility
to the value of the goodwill. We determined the company's projections for cash
flow from the acquired assets was insufficient to support the goodwill as an
asset and that an immediate goodwill impairment write-off was in order. Pursuant
to the impairment tests, all goodwill and purchased intangibles of $6,954,927
was written off as of September 17, 2002.

Impairment of long-lived assets: In accordance with SFAS 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets", the Company reviews long-lived
assets for impairment whenever circumstances and situations change such that
there is an indication that the carrying amounts may not be recovered. In such
circumstances, the Company will estimate the future cash flows expected to
result from the use of the asset and its eventual disposition. Future cash flows
are the future cash inflows expected to be generated by an asset less the future
outflows expected to be necessary to obtain those inflows. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, the Company will recognize an impairment
loss to adjust to the fair value of the asset. At December 31, 2004 no
long-lived assets were impaired.

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


<PAGE>

                  HEALTH SYSTEMS SOLUTIONS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Income taxes: The Company uses the liability method for income taxes as required
by SFAS No. 109 "Accounting for Income Taxes." Under this method, deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax basis of assets and liabilities. Deferred tax assets and
liabilities are measured using enacted tax rates and laws that will be in effect
when the differences are expected to reverse. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized.

Revenue recognition and deferred revenue: The Company follows the guidance of
the Securities and Exchange Commission's Staff Accounting Bulletin 104 for
revenue recognition. In general, the Company records revenue when persuasive. We
recognize revenue when persuasive evidence of a final agreement exists, delivery
has occurred, the selling price is fixed or determinable and collectibility is
reasonably assured. Currently, we primarily employ a web-based application
service provider model to deliver our services to our home healthcare customers.
In instances where the customer specifies final acceptance of the system or
service, we defer revenue until all acceptance criteria have been met. We price
these services primarily on a transaction fee basis (calculated based upon the
number of patient clinical assessments made by a customer during a period) and,
to a lesser extent, on a subscription fee basis. Clinical assessments, which are
mandated by Medicare, require Home Health Care Agencies to collect assessment
data on all patients requiring home health care at the start-of-care and at
discharge. Our products PPS collect, editor, executive, dashboard, trans,
outcomes, and Oasis auditor all assist in the collection of assessment data and
are all charged on a transaction basis. We earn the revenues from subscriptions
ratably over the period of the respective agreement, generally one year. We
record cash payments received in advance or at beginning of a contract as
deferred revenue. We recognize transaction fee based revenues in the period the
transaction is processed. Implementation, consultation, training and customer
support services are charged to customers on a fee basis usually based upon time
spent. We recognize implementation fees in the month that the customer goes live
and we recognize training, consultation, advisory and support revenue in the
month that the service is performed. Implementation costs consisting of payroll
and travel are expensed in the same period implementation fees are recognized.
Typical sales terms would be 30 days from the date of invoice.

Advertising costs: The Company expenses all advertising costs as incurred.
Advertising costs for the year ended December 31, 2004 were $114,207, and for
the year ended December 31, 2003 were $69,837, 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, 2004
were $576,194 and for the year ended December 31, 2003 were $883,519.

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, 2003, the Convertible Preferred Stocks were convertible into
7,190,171 Common Stock shares.

Financial instruments: The carrying amounts of financial instruments, including
cash, accounts receivable, prepaid expenses, customer deposits and deferred
revenue approximate fair value as of December 31, 2004, due to the relatively
short maturity of the instruments. The capital lease obligation approximates
fair value based upon debt terms available to Company's under similar terms.

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


<PAGE>

                  HEALTH SYSTEMS SOLUTIONS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Recent accounting pronouncements: In November 2004, the FASB issued Statement of
Financial Accounting Standards No. 151, "Inventory Costs - an amendment of ARB
No. 43, Chapter 4". This Statement amends the guidance in ARB No. 43, Chapter 4,
"Inventory Pricing", to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and wasted material (spoilage). This
Statement requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal". In addition,
this Statement requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the production
facilities. The Company does not have inventory costs and therefore does not
expect to be impacted by SFAS 151 or be required to make additional disclosures.

In December 2004, the FASB issued Statement of Financial Accounting Standards
No. 152, "Accounting for Real Estate Time-Sharing Transactions - an amendment of
FASB Statements No. 66 and 67". This Statement amends SFAS 66, "Accounting for
Sale of Real Estate", to reference the financial accounting and reporting
guidance for real-estate time-sharing transactions that is provided in AICPA
Statement of Position 04-2, "Accounting for Real Estate Time-Sharing
Transactions". This Statement also amends SFAS 67, "Accounting for Costs and
Initial Rental Operations of Real Estate Projects", to state that the guidance
for (a) incidental operations and (b) costs incurred to sell real estate
projects does not apply to real estate time-sharing transactions. The accounting
for those operations and costs is subject to the guidance in SOP 04-2. The
Company does not expect to be impacted by the adoption of SFAS 152, which will
be effective for financial statements for fiscal years beginning after June 15,
2005.

In December 2004, the FASB issued Statement of Financial Accounting Standards
No. 153, "Exchanges of Nonmonetary Assets - an amendment of APB Opinion No. 29".
This Statement amends Opinion 29 to eliminate the exception for nonmonetary
exchanges of similar productive assets and replaces it with a general exception
for exchanges of nonmonetary assets that do not have commercial substance. A
nonmonetary exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the exchange. The
adoption of SFAS 153 did not impact the Company's financial position or results
of operations.

In December 2004, the FASB revised Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation". This Statement supersedes
APB Opinion No. 25, "Accounting for Stock Issued to Employees". This Statement
establishes standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods and services. It also addresses
transactions in which an entity incurs liabilities in exchange for goods and
services that are based on the fair value of the entity's equity instruments or
may be settled by the issuance of those equity instruments. This Statement
focuses primarily on accounting for transactions in which an entity obtains
employee services in share-based payment transactions. The Company is in the
process of assessing the effect of the revised SFAS 123 and does not expect its
adoption will have a material effect on the Company's financial position or
results of operations.

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

3. LOAN AND SECURITY AGREEMENT

On July 6, 2004, HQS entered into a $1,600,000 loan and security agreement with
Stanford Venture Capital Holdings, Inc., the majority stockholder of the
Company. Under this agreement, interest accrues at the rate of 8% per annum and
principal matures and becomes payable three years from the date of the loan. The
loan is secured by a security interest in all of the assets of the Company and
HQS and a corporate guaranty of the Company that has been executed in favor of
Stanford. Through December 31, 2004, HQS has borrowed $1,050,000 against the
loan and security agreement leaving an availability of remaining funds of
$550,000.


<PAGE>

                  HEALTH SYSTEMS SOLUTIONS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


4. PROPERTY AND EQUIPMENT AND SOFTWARE DEVELOPMENT COSTS

Property and equipment and software development costs consist of the following:

                                                               December 31, 2004
                                                               ($ In Thousands)
      --------------------------------------------------------------------------
      Office equipment                                           $        235
      Purchased computer software                                         150
      Furniture and fixtures                                               31
      Leasehold improvements                                              133
                                                                 ------------
                                                                          549

      Less accumulated depreciation and amortization                      246
                                                                 ------------
         Total                                                   $        303
                                                                 ============

      Software development costs                                 $      1,629

      Less accumulated amortization                                     1,091
                                                                 ------------

          Total                                                  $        538
                                                                 ============

Depreciation expense for property and equipment for the years ended December 31,
2003 and December 31, 2004 for the Company was $91,114 and $144,533
respectively.

Amortization expense for software development costs for the years ended December
31, 2003 and December 31, 2004 for the Company was $486,964 and $528,126
respectively.

The unamortized balance of software development costs was $538,113 at December
31, 2004 and the future amortization expense amounts are as follows:

      Fiscal Year                                                    Amount
      --------------------------------------------------------------------------
      2005                                                       $    466,915
      2006                                                             56,180
      2007                                                             15,018
                                                                 ------------

      Total future amortization expense                          $    538,113
                                                                 ============

During the period ended December 31, 2002 the Company entered into a capital
lease for $64,735 to acquire office equipment. For the years ended December 31,
2003 and December 31, 2004 the Company recorded depreciation of $12,947 and
$12,947 respectively.

5. ACCRUED EXPENSES

A liability to the Internal Revenue Service from a prior business acquisition
amounting to $400,000 at December 31, 2003 was paid in June 2004.


<PAGE>

                  HEALTH SYSTEMS SOLUTIONS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


6. INCOME TAXES

For Federal income tax purposes, the Company has a net operating loss of
approximately $5,856,000. The net operating loss expires in the year 2024. The
Company recorded a 100% valuation allowance on its deferred tax asset since it
is more likely than not that their benefit will not be realized in the future.

The significant components of the Company's deferred tax asset as of December
31, 2004 are as follows:

      Operating loss carryforward                            $  2,225,000
      Goodwill  amortization                                    2,261,000
      Depreciation and other                                     (152,000)
                                                             ------------
      Valuation allowance                                      (4,334,000)
                                                             ------------

      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      Year ended
                                                   December 31,    December 31,
                                                       2004            2003
                                                   ------------    ------------

      Statutory Federal income tax (benefit)       $   (392,000)   $   (933,000)
      State tax (benefit), net of federal effect        (34,000)       (133,000)
      Increase in valuation allowance                   426,000       1,066,000
                                                   ------------    ------------
                                                   $        -0-    $        -0-
                                                   ============    ============

7. CAPITAL LEASE OBLIGATION

The Company has entered into a capital lease for certain office equipment.
Obligations under the capital lease have been recorded in the accompanying
consolidated financial statements at the present value of future minimum lease
payments, discounted at an interest rate of 12%.

Future minimum payments under capital lease obligation are as follows at
December 31, 2004:

      Fiscal Year                                                Amount
      --------------------------------------------------------------------------
      2005                                                    $     17,280
      2006                                                          17,280
      2007                                                           8,640
                                                              ------------

      Total future payments                                         43,200
      Less amount representing interest                              6,037
                                                              ------------

      Present value of future payments                              37,163
      Less current portion                                          13,550
                                                              ------------
                                                              $     23,613
                                                              ============


<PAGE>

                  HEALTH SYSTEMS SOLUTIONS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

8.  EQUITY TRANSACTIONS

Reverse Stock Split: On May 13, 2004, the Company's Board of Directors voted
unanimously to authorize and recommend that stockholders approve a proposal to
affect a reverse split. Pursuant to the reverse split, each two of the
outstanding shares of common stock for shareholders of record on May 27, 2004
are automatically converted into one share of common stock. The reverse split
does not alter the number of shares of Common Stock authorized but simply
reduces the number of shares of Common Stock issued and outstanding. Further,
holders of Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock will receive half the number of shares of common stock upon
conversion of their preferred stock, which such holders would have been able to
receive upon conversion of their preferred shares immediately preceding the
reverse split.

The Amendment of the Articles of Incorporation was filed with the Nevada
Secretary of State on July 6, 2004. The reverse stock split is presented as
being retroactive to January 1, 2003.

Conversion of Preferred Stock: In fiscal 2004, all the outstanding shares of the
Series A Convertible Preferred Stock and Series B Convertible Preferred Stock
were converted by Stanford into an aggregate of 7,190,171 Common Stock shares.

Common Stock Issued: The Company's Board of Directors on July 6, 2004, awarded
the president of the Company 150,000 restricted shares of the Company's common
stock at a purchase price of $0.001 per share. The vesting of the restricted
common shares are contingent on the Company prior to June 1, 2010 filing audited
annual financial statements with the SEC for a calendar year that sets forth
both $10 million or more in revenues and $2 million or more in operating income.

Effective August 4, 2004, the Company issued 225,000 shares of its common stock
to American Capital Ventures, Inc. in consideration for investor relations
services. Under an amended and restated investor relations agreement with
American Capital Ventures, Inc., American Capital Venture is required to provide
the Company with investor relations services for a period of 18 months in
consideration of 225,000 shares of common stock. The Company has also agreed to
pay American Capital Ventures $12,000 per month for the term of the agreement.
The shares were recorded at their fair value of $2,250 and charged to consulting
expense.

Warrants Issued and Exercised: As additional consideration for Stanford entering
into the loan and security agreement with HQS on July 6, 2004, the Company
agreed to issue warrants to purchase up to an aggregate of 720,000 shares of the
Company's common stock $0.001 par value per share at an exercise price of $0.001
per share. Stanford has assigned 360,000 of the warrants to four of its
employees pursuant to a warrant assignment agreement. All the warrants have been
exercised. The warrants were recorded at their fair value of $6,600 and charged
against paid in capital and charged as interest expense.

9. CONTINGENCIES

Operating Leases: The Company leases its office space in Tampa, Florida. Rent
expense totaled $244,035 and $187,007 for the years ended December 31, 2004 and
2003 and is included in general and administrative expenses in the accompanying
consolidated financial statements. The Company also leases certain pieces of
office and communication equipment as well as a co-location site for its
application and data base servers. The Company's lease for its office space has
a duration through January 31, 2009 with monthly payments approximating $20,000.

Future minimum annual payments under all lease agreements are as follows:

      2005                                                    $    348,833
      2006                                                    $    321,072
      2007                                                    $    299,915
      2008                                                    $    279,266
      2009                                                    $     23,786


<PAGE>

                  HEALTH SYSTEMS SOLUTIONS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


9. CONTINGENCIES - CONTINUED

Legal Proceedings: There are presently no material pending legal proceedings to
which the Company is a party or to which any of its property is subject and, to
the best of management's knowledge, no such actions against the Company are
contemplated or threatened.

10. EMPLOYEE SAVINGS PLANS

The Company has a savings plan, which qualifies under Section 401(k) of the
Internal Revenue Code. Participating employees may contribute up to the maximum
amount allowed by law. Currently the Company does not match participants'
contributions, but may at a future date.

11.  STOCK BASED COMPENSATION

On July 6, 2004, the Company's Board of Directors unanimously voted to authorize
that incentive stock options to purchase an aggregate of 485,000 shares of the
Company's common stock be granted employees under the 2003 Management and
Director Equity Incentive and Compensation Plan ("the Plan"). In addition,
67,000 options were granted under the Plan on August 3, 2004. All options shall
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 employment
subsequent to January 1, 2004, with the unexercised portion of such respective
options to expire June 1, 2009 or should the employee leave the employ of the
Company. On August 3, 2004, 25,500 of the options were cancelled.

Further, on July 6, 2004, the Company's Board of Directors authorized under the
Plan that the president of the Company be granted non-qualified stock options to
purchase 150,000 shares of the Company's common stock at an exercise price of
$1.00 per share. The vesting of the non-qualified stock options are contingent
on the Company prior to June 1, 2010 filing audited annual financial statements
with the SEC for a calendar year that sets forth both $10 million or more in
revenues and $2 million or more in operating income.

During the first quarter of 2003, the Company adopted, effective January 1,
2003, the provision of Statement of Financial Accounting Standards No. 148
"Accounting for Stock-Based Compensation - Transition and Disclosure" an
amendment of SFAS No. 123. The Company has adopted the "disclosure only"
alternative described in SFAS 123 and SFAS 148 which require pro forma
disclosure of net income and earnings per share as if fair value method of
accounting had been applied.

<TABLE>
<CAPTION>
                                                                Year Ended          Year Ended
                                                             December 31, 2004   December 31, 2003
                                                               ------------        ------------
<S>                                                            <C>                 <C>
Net loss (as reported)                                         $ (1,124,668)       $ (2,757,086)

Deduct: Total stock based compensation expense determined
under the fair value based method for all awards granted
modified or settled during the period, net of related taxes              --                  --
                                                               ------------        ------------

Pro forma net loss                                             $ (1,124,668)       $ (2,757,086)
                                                               ============        ============
Basic, as reported                                             $       (.17)       $      (1.14)
==================                                             ============        ============
Basic, pro forma                                               $       (.17)       $      (1.14)
================                                               ============        ============
</TABLE>


<PAGE>

                  HEALTH SYSTEMS SOLUTIONS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


12. CONCENTRATIONS

Cash: The Company maintains cash balances with commercial financial institutions
which at times, may exceed the FDIC insured limits of $100,000. Management has
placed these funds in high quality institutions in order to minimize the risk.

Accounts Receivable: The Company's largest customer represents 34.1% and 28.3%
of the Company's accounts receivable at December 31, 2004 and December 31,2003
respectively.

Revenue: The Company's largest customer accounted for 31.7% and 28.5% of the
Company's revenue for the years ended December 31, 2004 and December 31, 2003
respectively.


<PAGE>

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

      Effective February 17, 2004, Rogoff & Company P.C. ("RC") resigned as the
principal accountants to audit our financial statements.

      The reports of RC on the financial statements of the Registrant for the
past two fiscal years contained no adverse opinion or disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or accounting
principle; however, the reports were modified to include an explanatory
paragraph wherein RC expressed substantial doubt about our ability to continue
as a going concern.

      The resignation of RC and subsequent engagement of new independent
accountants was approved by our audit committee and board of directors.

      During the two most recent fiscal years and including the interim period
up to and including the date of resignation, the Registrant has had no
reportable events (as defined in Item 304 (a)(1)(v) of Regulation S-K).

      RC furnished a letter addressed to the Securities and Exchange Commission
stating that they agreed with the statements made above. A copy of this letter,
dated February 17, 2004, was filed as Exhibit 16.1 to Form 8-K.

      Effective February 17, 2004, we engaged the accounting firm of Sherb & Co.
LLP as our new independent accountants to audit our financial statements for the
fiscal year ending December 31, 2003.

      We have not consulted with Sherb & Co. LLP during the last two years or
subsequent interim period on either the application of accounting principles or
type of opinion Sherb & Co. LLP might issue on our financial statements.


                                       28
<PAGE>

ITEM 8A. CONTROLS AND PROCEDURES

      Evaluation of disclosure controls and procedures

      As of the end of the period covered by this report, we carried out an
evaluation of the effectiveness of the design and operation of its disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14. This evaluation
was done under the supervision and with the participation of our Principal
Executive Officer and Principal Financial Officer. Based upon that evaluation,
the Principal Executive Officer and Principal Financial Officer concluded that
our disclosure controls and procedures are effective in gathering, analyzing and
disclosing information needed to satisfy our disclosure obligations under the
Exchange Act.

      Changes in internal controls

      There were no significant changes in our internal controls or in other
factors that could significantly affect those controls since the most recent
evaluation of such controls.

ITEM 8B. OTHER INFORMATION

      None.


                                       29
<PAGE>

                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

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

      NAME                       AGE               POSITION
      ----                       ---               --------

      B. M. Milvain               68               President and Director

      Steven Katz                 57               Director

      Batsheva Schreiber          58               Director

      Susan Baxter Gibson         47               Principal Financial Officer

BUSINESS EXPERIENCE

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

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

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


                                       30
<PAGE>

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

COMMITTEES OF THE BOARD OF DIRECTORS

      Audit Committee

      The Audit Committee, which currently consists of Steven Katz and Batsheva
Schreiber, reviews the professional services provided by our independent
auditors, the independence of our auditors from our management, our annual
financial statements and our system of internal accounting controls. Mr. Katz is
considered by us to be a "financial expert." The Audit Committee also reviews
other matters with respect to our accounting, auditing and financial reporting
practices and procedures as it may find appropriate or may be brought to its
attention. The Company's board of directors has adopted a written Charter of the
Audit Committee. Ms. Schreiber, a member of the Audit Committee, is deemed
independent, as defined in the National Association of Securities Dealers'
listing standards. The Audit Committee met on four occasions during the year
ended December 31, 2004.

      Compensation Committee

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

      Nominating Committee

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

      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:

      o     Must, above all, be of proven integrity with a record of substantial
            achievement.

      o     Must have demonstrated ability and sound judgment that usually will
            be based on broad experience.

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

      o     Must possess a judicious and somewhat critical temperament that will
            enable objective appraisal of management's plans and programs.


                                       31
<PAGE>

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

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

Compliance with Section 16(a) of the Exchange Act

      Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to us under Rule 16a-3(d) of the Exchange Act, we are not aware of any
person that failed to file on a timely basis, as disclosed in the aforementioned
Form, reports required by Section 16(a) of the Exchange Act during the fiscal
year ended December 31, 2004.

Code of Ethics

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

ITEM 10. EXECUTIVE COMPENSATION

Summary Compensation Table

      The following table shows, for the year ended December 31, 2002, December
31, 2003 and December 31, 2004, the cash and other compensation paid to our
President, Chief Executive Officer and each other executive officer whose annual
compensation was $100,000 or more.

<TABLE>
<CAPTION>
                                                     Annual Compensation                        Long Term Compensation
                                                     -------------------                        ----------------------

                                                                        Other         Restricted    Securities      All Other
                                            Salary       Bonus      Compensation     Stock Awards   Underlying     Compensation
Name and Principal Position       Year       (US$)       (US$)          (US$)           (US$)         Options         (US$)
---------------------------       ----       -----       -----          -----           -----         -------         -----
<S>                               <C>       <C>            <C>            <C>         <C>             <C>               <C>
B. M. Milvain, President and      2004      150,000        0              0           $150.00(1)      150,000           0
Chief Executive Officer(2)        2003      150,000        0              0               0              0              0
                                  2002      150,000        0              0               0              0              0

Susan Baxter Gibson Chief         2004      100,000        0              0               0            60,000           0
Financial Officer                 2003       27,693        0              0               0              0              0
</TABLE>

      (1)   Effective July 6, 2004, we granted B.M. Milvain 150,000 shares of
            our common stock under a restricted stock agreement. If on any date
            prior to June 1, 2010 we file audited financial statements with the
            SEC for a calendar year that sets forth both, $10,000,000 or more of
            revenues and $2,000,000 or more in operating income, Mr. Milvain
            shall receive these shares.

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

STOCK OPTIONS GRANTED IN 2004

      The following table summarizes options to purchase shares of our common
stock that we granted during the twelve months ended December 31, 2004 to each
of the executive officers identified in the summary compensation table above.


                                       32
<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
           NAME              NUMBER OF SECURITIES       PERCENT OF TOTAL         EXERCISE PRICE(S)         EXPIRATION DATE
                              UNDERLYING OPTIONS       OPTIONS GRANTED TO            ($/SHARE)
                                    GRANTED             EMPLOYEES IN 2004
--------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                        <C>                     <C>                         <C>
Brian M. Milvain                    150,000                    28%                     $1.00                  June 2010
--------------------------------------------------------------------------------------------------------------------------
Susan Baxter Gibson                 60,000                     11%                     $1.00                  June 2009
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR-END OPTION VALUE TABLE

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
          Name                Shares          Value           Number of Unexercised Securities          Value of Unexercised
                            Acquired on    Realized ($)    Underlying Options at Fiscal Year End       In-the-Money Options at
                             Exercise                            Exercisable/Unexercisable                 Fiscal Year End
                                                                                                      Exercisable/Unexercisable
-------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>           <C>                     <C>                                       <C>
Brian M. Milvain                 0             N/A                     37,500/112,500                            0/0
-------------------------------------------------------------------------------------------------------------------------------
Susan Baxter Gibson              0             N/A                     15,000/45,000                             0/0
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

LONG TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR

      The following table summarizes long term incentive awards that were made
during the twelve months ended December 31, 2004 to each of the executive
officers identified in the summary compensation table above.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                       Number            Performance                 Estimated Future Payouts Under
                                     Of Shares,           Or Other                    Non-Stock Price-Based Plans
                                      Units or          Period Until         -----------------------------------------------
                                    Other Rights         Maturation
             Name                       (#)               Or Payout
----------------------------------------------------------------------------------------------------------------------------
                                                                              Threshold           Target           Maximum
                                                                              ($ or #)           ($ or #)         ($ or #)
----------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>               <C>                      <C>               <C>               <C>
Brian M. Milvain                      150,000           June 1, 2010             (1)               (1)               (1)
----------------------------------------------------------------------------------------------------------------------------
Susan Baxter Gibson                      0                    -                   -                 -                 -
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

      (1)   Effective July 6, 2004, we granted B.M. Milvain 150,000 shares of
            our common stock under a restricted stock agreement. If on any date
            prior to June 1, 2010 we file audited financial statements with the
            SEC for a calendar year that sets forth both $10,000,000 or more of
            revenues and $2,000,000 or more in operating income, Mr. Milvain
            shall receive these shares.


2003 MANAGEMENT AND DIRECTOR EQUITY INCENTIVE AND COMPENSATION PLAN

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

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


                                       33
<PAGE>

      Effective July 6, 2004, we issued an aggregate of 485,000 incentive stock
options under the Plan to 44 employees of our company. In addition, we issued
non-qualified stock options to purchase 150,000 shares of our common stock under
the Plan to B.M. Milvain. We issued an additional 67,000 options to 14 employees
on August 3, 2004. On August 3, 2004 we also cancelled 25,500 options issued on
July 6, 2004 for employees that had terminated employment with HQS. These
options have been returned to the option pool. All options have an exercise
price of $1.00 per share and vest to the extent of 25% of the respective
aggregate granted for each twelve continuous months of employment by our company
subsequent to January 1, 2004. The options terminate upon the earlier of June 1,
2009 or as provided under the Plan. Effective July 6, 2004, we granted B.M.
Milvain 150,000 shares of our common stock under a restricted stock agreement
pursuant to the Plan. If on any date prior to June 1, 2010 we file audited
financial statements with the SEC for a calendar year that sets forth both
$10,000,000 or more of revenues and $2,000,000 or more in operating income, Mr.
Milvain shall receive these shares.

DIRECTOR COMPENSATION

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

EMPLOYMENT AND CONSULTING AGREEMENTS

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

LIMITATION OF LIABILITY

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

      Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
our company pursuant to the foregoing provisions, or otherwise, we have been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.

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

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

      As of December 31, 2004, there were 11,046,780 shares of our common stock
issued and outstanding. The following table sets forth, as of the close of
business on December 31, 2004, (1) the name and number of shares of each person
known by us to be the beneficial owner of more than 5% of the class of stock;
and (2) the number of shares of these securities owned by each director and all
officers and directors as a group, together with their respective percentage
holdings of such shares. Beneficial ownership is determined in accordance with
the rules of the SEC, and generally includes voting or investment power with
respect to securities, and includes any securities, which the person has the
right to acquire within 60 days of the date of the filing of this report. Unless
otherwise indicated, the address for each person is 405 Reo Street, Suite 300,
Tampa, Florida 33609.


                                       34
<PAGE>

                                         SHARES                   PERCENT OF
NAME                               BENEFICIALLY OWNED         SHARES OUTSTANDING
----                               ------------------         ------------------

Stanford Venture Capital
   Holdings, Inc. (1)                     8,978,177                    82.0%
B. M. Milvain                               251,382(2)                  2.3%
Steven Katz                                       0                       0%
Batsheva Schreiber                                0                       0%
Susan Baxter Gibson                          15,000(3)                     *

All executive officers and
directors as a group
(4 persons)                                 266,382                     2.4%
------------

*     Less than 1%

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

(2)   Includes 150,000 shares of common stock subject to a restricted stock
      agreement and 37,500 shares of common stock underlying underlying options
      exercisable at $1.00 per share

(3)   Includes 15,000 shares of common stock underlying options exercisable at
      $1.00 per share.

Securities Authorized for Issuance Under Equity Compensation Plans

      The table below provides information pertaining to all compensation plans
under which equity securities of our company are authorized for issuance as of
December 31, 2004:

<TABLE>
<CAPTION>
                                                                                           Number of securities
                                       Number of securities                               remaining available for
                                         to be issued upon         Weighted-average        future issuance under
                                            exercise of            exercise price of        equity compensation
                                       outstanding options,      outstanding options,   plans (excluding securities
                                        warrants and rights       warrants and rights     reflected in 1st column
-----------------------------------------------------------------------------------------------------------------
<S>                                              <C>                       <C>                   <C>
Equity compensation plans
   approved by security holders                  676,500                   $1.00                 323,500

Equity compensation plans not
   approved by security holders                  None                      N/A                   N/A

       Total                                     676,500                   $1.00                 323,500
</TABLE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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


                                       35
<PAGE>

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

      Pursuant to a securities purchase agreement dated April 30, 2003, Stanford
made an aggregate investment of $2,000,000 in our company, in several tranches.
The investment was in the form of Series B $0.80 convertible preferred stock of
our company, convertible into 6,250,000 shares of our common stock. The shares
of Series B preferred stock were issued and sold in various tranches on eight
monthly closing dates, commencing on May 19, 2003.

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

      On July 6, 2004, Stanford exercised its right to convert all of the
outstanding Series A preferred stock and Series B preferred stock into shares of
common stock.

      We granted to Stanford and its affiliates certain registration rights
under certain registration rights agreements (as amended) with respect to the
Series A and Series B preferred stock and shares of common stock underlying the
warrants described above and the shares of common stock it owns. No later than
December 31, 2004, we were required to file an SB-2 Registration Statement under
the Securities Act covering all of the shares of common stock underlying the
Series A and Series B preferred stock and warrants. Stanford has waived its
registration rights.

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

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

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

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

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


                                       36
<PAGE>

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

(a)   Documents filed as part of this Form 10-KSB.

EXHIBIT NO.    DESCRIPTION OF DOCUMENT
-----------    -----------------------

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

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

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

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

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

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

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

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

   3.7         Bylaws (9)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


                                       37
<PAGE>

   10.15       Escrow Agreement with Deluxe Investment Company (9)

   10.16       Deluxe Investment Company Purchase Agreement (9)

   10.17       First Amendment to Loan and Security Agreement (9)

   10.18       Qwest Hosting Services Agreement (9)

   14.0        Code of Ethics (6)

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

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

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

   32.1        Section 1350 Certification of Principal Executive Officer

   32.2        Section 1350 Certification of Principal Financial Officer

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

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

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

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

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

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

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

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

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

(b)   Reports on Form 8-K.

      None.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fees to Auditors.

Year ended December 31, 2004

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

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

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

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


                                       38
<PAGE>

Year ended December 31, 2003

      Audit Fees: The aggregate fees, including expenses, billed by our
principal accountant in connection with the audit of our consolidated financial
statements for the fiscal year ended December 31, 2003 and for the review of our
financial information included in our Annual Report on Form 10-KSB; and our
quarterly reports on Form 10-QSB during the fiscal year ending December 31, 2003
was $31,000.

      Audit Related Fees: The aggregate fees, including expenses, billed by our
principal accountant for services reasonably related to the audit for the year
ended December 31, 2003 were $17,000.

      Tax Fees: The aggregate fees, including expenses, billed by our principal
accountant for services reasonably related to the preparation of our tax return
for the year ended December 31, 2003 were $5,000.

      All Other Fees: The aggregate fees, including expenses, billed for all
other services rendered to us by our principal accountant during year 2003 was
$-0-.

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


                                       39
<PAGE>

                                   SIGNATURES

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

Dated March 28, 2005

                                        HEALTH SYSTEMS SOLUTIONS, INC.


                                        /s/ B. M. Milvain
                                        -----------------------------------
                                        B. M. Milvain, President
                                        Chief Executive Officer
                                        (Principal Executive Officer)

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on March 28, 2005.

SIGNATURE                               TITLE


/s/ B. M. Milvain                       Principal Executive Officer,
---------------------------             President and Director
B. M. Milvain


/s/ Susan Baxter Gibson                 Principal Financial Officer
---------------------------
Susan Baxter Gibson


/s/ Steven Katz                         Director
---------------------------
Steven Katz


/s/ Batsheva Schreiber                  Director
---------------------------
Batsheva Schreiber


                                       40