United States
                       Securities and Exchange Commission
                             Washington, D.C. 20549


                                    Form 10-Q



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

     For the quarterly period ended September 30, 2003

     Commission file number 0-20468


                     ALTERNATIVE TECHNOLOGY RESOURCES, INC.
             (Exact name of registrant as specified in its charter)


            Delaware                                       68-0195770
(State or other jurisdiction of                (IRS Employer Identification No.)
 incorporation or organization)



                       629 J Street, Sacramento, CA 95814
                    (Address of principal executive offices)

                                 (916) 231-0400
              (Registrant's telephone number, including area code)




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  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ]  No [X]

Number of shares of common stock outstanding as of October 31, 2003, 72,476,014

                                       1
<PAGE>
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements


                     ALTERNATIVE TECHNOLOGY RESOURCES, INC.
                            Condensed Balance Sheets
                                   (Unaudited)
<TABLE>
<CAPTION>
<S>                                                                                            <C>                     <C>

                                                                                          September 30,               June 30,
                                       Assets                                                 2003                      2003
                                       ------
                                                                                     ----------------------    ---------------------
Current assets:
  Cash and cash equivalents                                                          $         664,114         $         270,102
  Trade accounts receivable                                                                     28,963                    20,492
  Prepaid expenses and other current assets                                                    113,020                    43,857
                                                                                     ----------------------    ---------------------
Total current assets                                                                           806,097                   334,451
                                                                                     ----------------------    ---------------------

Property and equipment:
  Equipment and software                                                                       788,710                   865,555
  Accumulated depreciation and amortization                                                   (585,853)                 (547,479)
                                                                                     ----------------------    ---------------------

  Property and equipment, net                                                                  202,857                   318,076
                                                                                     ----------------------    ---------------------

Prepaid license and service fees                                                               126,268                   140,567
                                                                                     ----------------------    ---------------------

                                                                                     $       1,135,222         $         793,094
                                                                                     ======================    =====================

                   Liabilities and Stockholders' Equity (Deficit)
                   ----------------------------------------------
Current liabilities:
  Payable to Healthcare Exchange participants                                        $          79,552         $         294,192
  Trade accounts payable                                                                       570,920                   551,762
  Accrued payroll and related expenses                                                         138,458                   142,355
  Accrued preferred stock dividends                                                                  -                   283,195
  Accounts payable and accrued interest payable to stockholders                                  6,232                   871,063
  Notes payable to stockholder                                                                       -                 2,873,694
  Convertible notes payable to stockholder                                                     336,711                 2,681,415
  Accrued interest payable to third party                                                       14,685                    74,521
  Other current liabilities                                                                    284,804                   327,672
                                                                                     ----------------------    ---------------------

Total current liabilities                                                                    1,431,362                 8,099,869
                                                                                     ----------------------    ---------------------

  Convertible notes payable to third party                                                   1,000,000                   896,930

Commitments and contingencies

Stockholders' equity (deficit):
  Convertible preferred stock, $6.00 par value - 1,200,000 shares authorized
     none issued and outstanding at September 30, 2003 and June 30, 2003,
     204,167 shares designated Series D, none issued and outstanding at
      September 30, 2003 and June 30, 2003
     2,000 shares designated Series A, 1,232 shares issued and outstanding at
September 30, 2003 and none issued and outstanding June 30, 2003                                 7,392                         -
  Common stock, $0.01 par value - 100,000,000 shares authorized;
     72,476,014issued and outstanding at September 30, 2003
     (66,908,669 at June 30, 2003)                                                             724,760                   669,087
  Additional paid-in capital                                                                65,911,328                58,155,268
  Accumulated deficit                                                                      (67,939,620)              (67,028,060)
                                                                                     ----------------------    ---------------------

Total stockholders' equity (deficit)                                                        (1,296,140)               (8,203,705)
                                                                                     ----------------------    ---------------------

                                                                                            $1,135,222         $         793,094
                                                                                     ======================    =====================
</TABLE>

        See accompanying notes to condensed financial statements.

                                       2
<PAGE>



                     ALTERNATIVE TECHNOLOGY RESOURCES, INC.
                       Condensed Statements of Operations
                                   (Unaudited)
<TABLE>
<CAPTION>
<S>                                                                                <C>                     <C>

                                                                                         Three Months Ended
                                                                                            September 30,
                                                                                    2003                    2002
Healthcare exchange
    Revenue                                                                  $     380,817          $       776,560
    Costs                                                                         (339,753)                (543,702)
                                                                             ------------------     --------------------
Gross profit (loss)                                                                 41,064                  232,858

Selling, marketing and product development costs                                  (234,840)              (1,397,306)

General and administrative expenses                                               (515,252)                (509,015)
                                                                             ------------------     --------------------

Loss from operations                                                              (709,028)              (1,673,463)

Other income (expense)
    Interest income                                                                    250                      430
    Interest expense to third party                                               (103,070)                 (77,315)
    Interest expense to stockholders and directors                                 (99,712)                (136,458)
                                                                             ------------------     --------------------
Total other income (expense)                                                      (202,532)                (213,343)
                                                                             ------------------     --------------------

Net loss                                                                     $    (911,560)         $    (1,886,806)
                                                                             ==================     ====================


Basic and diluted net loss per share                                         $      (0.01)          $        (0.03)
                                                                             ==================     ====================

Shares used in per share calculations                                           68,595,826               61,016,315
                                                                             ==================     ====================

</TABLE>

        See accompanying notes to condensed financial statements.

                                       3

<PAGE>


                     ALTERNATIVE TECHNOLOGY RESOURCES, INC.
                       Condensed Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
<S>                                                                             <C>                          <C>
                                                                                       Three Months Ended
                                                                                         September 30,
                                                                                2003                        2002
                                                                       ------------------------     ----------------------

Net cash used in operating activities                                  $         (934,391)          $    (1,062,532)
                                                                       ------------------------     ----------------------

Cash flows used in investing activities:
    Purchases of property and equipment                                                 -                   (28,884)
    Sale and disposal of property and equipment                                    76,844                         -
                                                                       ------------------------     ----------------------
Net cash provided (used) by investing activities                                   76,844                   (28,884)
                                                                       ------------------------     ----------------------

Cash flows from financing activities:
    Prepaid financing costs                                                             -                   (52,626)
    Proceeds from sale of preferred stock                                       1,232,000                         -
    Proceeds from exercise of options and warrants                                 19,559                     7,476
    Proceeds from notes payable to stockholders                                         -                   619,000
    Proceeds from convertible notes payable to third party
    and warrants                                                                        -                 1,000,000
                                                                       ------------------------     ----------------------
Net cash provided by financing activities                                       1,251,559                 1,573,850
                                                                       ------------------------     ----------------------


Net increase (decrease) in cash and cash equivalents                              394,012                   482,434
Cash and cash equivalents at beginning of period                                  270,102                   402,291
                                                                       ------------------------     ----------------------

Cash and cash equivalents at end of period                             $          664,114           $       884,725
                                                                       ========================     ======================

</TABLE>


        See accompanying notes to condensed financial statements.


                                       4
<PAGE>



                     ALTERNATIVE TECHNOLOGY RESOURCES, INC.
                     Notes to Condensed Financial Statements
                                 September 30, 2003
                                   (Unaudited)


Note 1 - Basis of Presentation
------------------------------

The accompanying  unaudited condensed financial statements have been prepared in
accordance with accounting  principles  generally  accepted in the United States
for interim  financial  information and pursuant to the rules and regulations of
the Securities and Exchange Commission.  Accordingly, they do not include all of
the  information  and  footnotes  required by  accounting  principles  generally
accepted in the United  States for complete  financial  statements.  For further
information, refer to the financial statements and footnotes thereto included in
the Alternative Technology Resources,  Inc.'s (hereinafter referred to as "ATR",
the  "Company,  " "we," or "us") annual  report on Form 10-K for the fiscal year
ended June 30,  2003.  On November  12,  2003,  the Company and its  independent
auditors,   Ernst  &  Young  LLP,   mutually  agreed  to  cease  their  existing
professional  relationship.  This  change has been  reported in a Form 8-K dated
November 12, 2003. The Company is currently  involved in the process of engaging
a  new  independent  public  accountant.  As a  result,  the  interim  financial
statements  included in this quarterly  report on Form 10-Q were not reviewed by
an independent public accountant.

In the opinion of  management,  the  unaudited  condensed  financial  statements
contain all adjustments,  consisting of normal recurring adjustments, considered
necessary to present  fairly the Company's  financial  position at September 30,
2003 and June 30,  2003,  results  of  operations  for the  three  months  ended
September 30, 2003 and 2002, and cash flows for the three months ended September
30, 2003 and 2002.  The results for the period ended  September 30, 2003 are not
necessarily  indicative of the results to be expected for the entire fiscal year
ending June 30, 2004.

The Company has incurred  operating losses since inception,  which have resulted
in an  accumulated  deficit of  $67,939,620  at September  30, 2003. As we enter
fiscal year 2004,  we continue to face  significant  challenges  with respect to
revenue and cash shortages. In light of our prior losses and current stock price
of our common  stock,  no  assurance  can be given that we will be able to raise
additional  funds for our  operations,  if necessary.  We are taking a number of
steps to address  these  challenges  including  further  reductions in operating
expenses and liabilities.  In addition,  our business  strategy is to transition
our existing  Providers to our direct pay program  where  Providers  will submit
their  claims to us, and we will  process and reprice the claims to the rate set
by Providers. After re-pricing,  claims will be then sent to Purchasers or their
intermediaries who will pay the Providers  directly.  Providers will be invoiced
our transaction fee for each claim re-priced.  We will recognize revenue when it
is earned and  collectibility is reasonably  assured.  Revenue is earned when we
have completed claim re-pricing obligations under our service agreement with the
Provider.

We launched our direct pay program  during  quarter  ending  September 30, 2003.
Under this  program,  we will  receive a fee for each claim that we process.  In
order to  attract  new  Providers  and  increase  the  number of claims  that we

                                       5
<PAGE>

process,  we have reduced our transaction fee which will require us to process a
higher number of claims that we have not previously been able to obtain in order
to generate  sufficient  revenue for our operations.  This program is new and we
are unsure whether it will be accepted by the healthcare  industry or whether we
will be able to attract  sufficient  number of Providers in order to process the
number of claims we will need to  generate  sufficient  revenues  to sustain our
operations.  If we are unable to  successfully  launch our direct pay program or
gain the  confidence  of  Providers,  we may be required  to further  reduce our
operation expenses or be forced into seeking protection under federal bankruptcy
laws.

Note 2 - Financing Arrangements
-------------------------------

On August 15, 2003,  Mr. James W.  Cameron,  the  Company's  former  officer and
director,  purchased  1,232  shares of our Series A Preferred  Stock,  $6.00 par
value per share,  at $1,000 per share for an aggregate  sum of  $1,232,000.  The
Series A Preferred  Stock provides for a dividend  preference of $0.50 per share
if and when declared by the board of directors  and a liquidation  preference of
$6.00 per share.  In  addition,  the shares of Series A Preferred  Stock have no
voting rights, except as required by law, and are not convertible into any other
securities.

On August 15, 2003, Mr. Cameron assigned to Mr. Baron, our new chairman,  all of
his interest to the  promissory  notes  payable by the Company in the  aggregate
principal amount of $2,873,694 along with $283,195 in accrued Series D Preferred
Stock  dividends  owed by the Company.  On September 18, 2003, Mr. Baron forgave
all of the obligations  owed by the Company under the promissory notes including
the  accrued  and unpaid  interest  along  with  $283,195  in  accrued  Series D
Preferred Stock dividends.

On August 15, 2003,  Mr.  Cameron,  McCormick  ATEK  Investments  LLC, an entity
controlled by Mr. Jeffrey  McCormick,  our director and former officer,  and the
Company  mutually  agreed,  without  value,  to cancel the option  requiring Mr.
Cameron to sell  6,000,000  shares of our common  stock owned by Mr.  Cameron to
McCormick ATEK Investment LLC at the purchase price of $3.625 per share.

On September 19, 2003,  we reached an agreement  with The Negri Trust to convert
$2,344,704 of the  outstanding  principal and all accrued and unpaid interest as
of that date under convertible notes into 3,086,043 shares of our common stock.

During fiscal year 2003, the facilities lease agreement  between the Company and
the Mr.  James W.  Cameron  was  modified to reflect an annual base rent of $120
until further notice from lessor, in his sole and absolute discretion, to return
the rent to its previous level.  To recognize the estimated  market rate of this
transaction,  a monthly  expense of $11,424 was recognized  through rent expense
and other capital  contributions.  On July 1, 2003, Company entered into a sixth
addendum to the lease,  which reduces the square footage occupied by the Company
and stipulates the monthly rent to be $3,794.

On July 26, 2002, the Company  received  short-term  unsecured  financing in the
form of a convertible  note of $1,000,000  from a lender  ("Convertible  Note").

                                       6
<PAGE>

This Convertible Note, bearing interest at 8% was originally payable on July 25,
2003.  On July 25, 2003,  the Company  extended this note to the earlier of July
22, 2005 or when the Company  receives  $8,000,000 in debt or equity  financing.
All or a portion of the convertible  note may be converted into shares of common
stock at the lower of $ 1.00 per share or the subsequent  subscription price per
share of any debt or equity offering made by the Company.  In consideration  for
the amendment,  the Company agreed to convert all accrued and unpaid interest as
of July 25, 2003 into  2,285,714  shares of its common stock at a rate of $0.035
per share and to secure the Convertible Note with our assets. In connection with
the amendment,  the Company has classified the  Convertible  Note as a long-term
obligation since the term of repayment has been extended to July 22, 2005.

In consideration  for the Convertible Note, the Company issued three warrants on
July 26, 2002.  Each warrant  provides for the purchase of 100,000 shares of the
Company's common stock at an exercise price equal to the $1.00  subscription per
share price of the  Company's  October  2002  Private  Placement.  The First and
Second  Warrants  became  exercisable  on July 26, 2002 and  January  26,  2003,
respectively,  and are exercisable before the expiration date. The Third Warrant
issued became  exercisable on July 26, 2003 and is also  exercisable  before the
expiration  date.  When,  and if,  exercisable  the  lender may  exercise  these
warrants through July 26, 2009.

In connection  with the issuance of the Note and the First and Second  Warrants,
the Company  estimated the aggregate fair value of the First and Second Warrants
to be $254,000  using the  Black-Scholes  model.  In accordance  with EITF 98-5,
"Accounting for Convertible  Securities with Beneficial  Conversion  Features or
Contingently  Adjustable  Conversion  Ratios," and EITF 00-27,  "Application  of
Issue No. 98-5 to Certain  Convertible  Instruments," the Company has recognized
$952,930 through interest expense for fiscal year 2003 for a portion of the fair
value  of the  First  and  Second  Warrants  and a  portion  of  the  beneficial
conversion feature of the Note, which was estimated to be in total $802,000. The
Company  recorded  additional  amounts  totaling  $103,070 in the quarter ending
September 30, 2004 through  interest expense for the remaining fair value of the
First and Second  Warrants  and the  beneficial  conversion  feature of the Note
recorded at the initial transaction date, and in accordance with EITF 00-27, the
additional beneficial conversion feature recorded in the quarter ending December
31, 2002 of $624,222  relating to the reset of the conversion  price of the Note
from $2.25 to $1.00 per share.

In July 2002,  the Company  engaged a  placement  agent to assist in the sale of
shares of the  Company's  common stock in a private  placement.  During  October
2002,  the Company  received  gross  proceeds of $4,125,000  through the sale of
4,125,000 shares pursuant to this offering.  Cash proceeds net of offering costs
were  $3,816,209.  In connection  with the October 2002 Private  Placement,  the
Company paid the  placement  agent a placement  fee of 6% of the gross  proceeds
raised by them and a five year  warrant  to  purchase  10% of the  common  stock
placed by them at an exercise price of $1.00 per share. In addition, the Company
paid a  finder's  fee to one  individual  of  $12,500  and  issued a warrant  to
purchase  30,000  shares of common stock at $1.00 per share.  The warrant had an
estimated fair value of $22,800.

Resulting  from the closing of the October  2002  Private  Placement,  1,540,729
additional  shares were issued to investors who purchased shares of common stock

                                       7
<PAGE>

in the  January  2002  Private  Placement  based  on the  October  2002  Private
Placement  price of $1.00  per  share.  Compensation  expense  of  $347,222  was
recorded for the  additional  shares issued to the  Company's  then Chairman and
Chief Financial Officer.

As a result of the  issuance of the  Convertible  Note on July 26, 2002 in which
the Company  granted  warrants  equal to 30% of the loan at an exercise price of
$1.00 per share,  the Company  granted to the  investors of the January 2002 and
October 2002  Private  Placements  warrants to purchase 30% of their  respective
investment  at  an  exercise  price  of  $1.00  per  share.  Mr.  Cameron,  as a
participant  in the private  placement,  received a warrant to purchase  150,000
shares of  common  stock at an  exercise  price of $1.00  per  share,  which was
greater than the fair value of the common stock at the warrant issuance date.

As of quarter  ending  September 30, 2003, the amount of $336,711 is outstanding
under an unsecured convertible note from a shareholder of the Company. This note
bears interest at 10.25% per annum and is due on December 31, 2003.


Note 3 - Comprehensive Loss
---------------------------

Total  comprehensive loss for the three months ended September 30, 2003 and 2002
was $911,560,  and $1,886,806.  Other comprehensive income (loss) represents the
net change in unrealized gains (losses) on available-for-sale securities.

Note 4 - Net Loss Per Share
---------------------------

As the  Company has  reported  net losses in all  periods  presented,  basic and
diluted loss per share have been  calculated on the basis of net loss applicable
to common  stockholders  divided by the weighted  average number of common stock
shares outstanding without giving effect to outstanding options,  warrants,  and
convertible  securities  whose effects are  anti-dilutive.  For the three months
ended September 30, 2003 and 2002 there were stock options,  stock warrants, and
convertible notes payable  outstanding,  which could potentially dilute earnings
per share in the future but were not included in the computation of diluted loss
per share as their effect was anti-dilutive in the periods presented.

The  Company  accounts  for  its  stock-based   compensation   plans  under  the
recognition and measurement  principles of Accounting  Principles  Board Opinion
No. 25, "Accounting for Stock Issued to Employees" and related  interpretations.
Under the intrinsic value method,  compensation  cost is the excess,  if any, of
the  quoted  market  price or fair value of the stock at the grant date or other
measurement date over the amount an employee must pay to acquire the stock.

The following table illustrates the effect on net loss and net loss per share if
the Company had applied the fair value  recognition  provision  of  Statement of
Financial   Accounting  Standards  Board  Statement  No.  123,  "Accounting  for
Stock-Based-Compensation" to stock-based compensation.

                                       8
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                  <C>              <C>



                                                                     Three Months Ended
                                                                         September 31,
                                                                    2003              2002

Net loss, as reported                                          $    (911,560)     $(1,886,806)

Add:  Stock-based employee compensation expense included
in reported net loss                                                       -                -

Deduct:  Total stock-based employee compensation expense
determined under fair value based method for all awards
                                                                           -                -
                                                               --------------     -------------


Pro forma net loss                                             $    (911,560)     $(1,886,806)
                                                               ==============     =============

Loss per share:
  Basic and diluted - as reported                              $       (0.01)     $      (0.03)
                                                               ==============     =============
  Basic and diluted - pro forma                                $       (0.01)     $      (0.03)
                                                               ==============     =============
</TABLE>


Option  valuation  models were developed for use in estimating the fair value of
traded options that have no vesting restrictions and are fully transferable.  In
addition,  option  valuation  models  require  the  input of  highly  subjective
assumptions,  including the expected  life of the option.  Because the Company's
employee stock options have characteristics  significantly  different from those
of traded options and because  changes in the subjective  input  assumptions can
materially  affect  the fair  value  estimates,  in  management's  opinion,  the
existing models do not necessarily provide a reliable single measure of the fair
value of its employee stock options.

Note 5 - Commitments and Contingencies
--------------------------------------

The Company may from time to time  become a party to various  legal  proceedings
arising in the ordinary  course of its  business.  The Company is not  currently
subject to any legal proceedings.

The Company  signed  agreements  effective in January  2001 with an  application
services provider to license, support and run software to process medical claims
submitted to the Company's Healthcare Exchange.  The agreements are for a period
of 66 months.  They required payment of an initial base license fee of $250,000,
which is being  amortized  over the expected term of the  arrangement,  and data
center set up, training and  implementation  fees of about $145,000,  which were
expensed.  The agreements  require monthly minimum  payments  currently of about
$35,000 and additional fees that are transaction  based if volumes exceed levels
included in the monthly  minimums.  On October 10, 2003, the Company  terminated
its agreement with the application  services provider.  As a result, the Company
pursued  the  development  of an  internal  technical  solution  to replace  the
services  provided by this vendor.  The internal  application was implemented on
October 15, 2003.

                                       9
<PAGE>

In November 1995, the Company entered into a lease agreement for its facility in
Sacramento,  California  under a one-year lease with Mr. Cameron.  The lease has
been extended to January 31, 2004.  Payments  under this  facilities  lease were
approximately  $141,330 per year.  At June 30,  2003,  $559,220 of rent owed for
fiscal years 1996  through  2003 is included in the balance of accounts  payable
and accrued interest  payable to stockholders.  During the fiscal year 2003, the
facilities  lease agreement  between the Company and Mr. Cameron was modified to
reflect an annual base rent of $120 until  further  notice from  lessor,  in his
sole and  absolute  discretion,  to return the rent to its  previous  level.  To
recognize the estimated  market rate of this  transaction,  a monthly expense of
$11,424 was recognized through rent expense and other capital contributions.  On
July 1, 2003 the  Company  entered  into a sixth  addendum  to the lease,  which
reduces the square  footage  occupied by the Company and  stipulates the monthly
rent to be $3,794.


Note 6 - Stock Option Grant
---------------------------

On  January  25,  2003,  the  Board of  Directors  approved  the  issuance  of a
non-qualified option grant to Mr. Jeffrey S. McCormick, Chief Executive Officer,
to purchase up to  4,000,000  shares of common  stock at the  exercise  price of
$1.25 per share.  The  effective  date of the option grant was November 7, 2002.
Subject to  acceleration  events,  the option grant was to vest over a four-year
period,  commencing  with the  vesting of the first  1,000,000  shares of common
stock on January 31, 2003.  No  compensation  expense was recorded in connection
with this option grant, as the exercise price was greater than the fair value of
the common stock at the option grant date.  Subsequent to the June 30, 2003, Mr.
McCormick's  employment  agreement was terminated  because of his resignation as
the  Company's  Chief  Executive  Officer.  Pursuant  to the terms of the option
agreement, all 4,000,000 options immediately vested and are exercisable.


Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following  discussion  provides  information to facilitate the understanding
and  assessment  of  significant  changes  in trends  related  to the  financial
condition  of the Company and its  results of  operations.  It should be read in
conjunction  with the Company's  financial  statements and the notes thereto and
other financial  information  included elsewhere in the Form 10-K for the fiscal
year ended June 30, 2003.

OVERVIEW

General

As used in this report,  the terms "we," "us," "our",  "ATR," and the  "Company"
mean Alternative Technology Resources, Inc., unless otherwise indicated.


                                       10
<PAGE>

We are engaged in the business of operating a Healthcare Exchange. In July 2003,
we  began  operating  the  Healthcare  Exchange  under  our new  name  "National
Healthcare  Exchange Services" or "NHXS". The purpose of the Healthcare Exchange
is to  facilitate  provider  initiated  discounts  for all  commercial  lines of
business in the healthcare  industry.  The Healthcare  Exchange  offers a direct
conduit between medical doctors,  medical groups, hospitals and other healthcare
practitioners  (collectively  "Providers")  and those who purchase or facilitate
the  purchase of  healthcare  services  and/or their  agents,  such as Preferred
Provider  Organizations  ("Purchasers").  The Healthcare Exchange is used in the
absence of an existing  agreement  between the  Provider  and the  Purchaser  of
healthcare services.

Under the Healthcare  Exchange  program,  Providers  submit claims to us, and we
process  and  reprice  the  claims to the rate set by the  Providers,  including
adding a  transaction-processing  fee.  We then  route  the  adjusted  claims to
Purchasers  or their  intermediaries.  We receive  payments  from  Purchasers on
behalf of Providers, and then remit payments to Providers.

During  fiscal  2003,  we  experienced  substantial  loss  in  implementing  and
operating the Healthcare  Exchange.  As a result, we are revising our Healthcare
Exchange program to provide for a direct pay program whereby  Providers'  claims
will be sent to the Purchasers  via our Healthcare  Exchange and payment will be
made directly to the Providers. We will then invoice the Providers a transaction
fee for each claim processed and forwarded to the Purchaser.

Our Healthcare  Exchange began operations with a limited number of Providers and
Purchasers in the quarter ending June 30, 2001. We continue to receive, process,
and analyze  operating  data, and the results of our analysis will determine the
amount and timing of remaining development related efforts.

There are no geographic  limitations to the  recruitment of Providers.  However,
our  primary  recruitment  efforts  have been in 15 states and the  District  of
Columbia.

We  have  outsourced  to  multiple  vendors  portions  of  the  development  and
operations of the information systems for the Healthcare Exchange.  We work with
vendors to receive claims from Providers through  electronic  clearinghouses and
to convert  paper  claims  into  electronic  formats.  We are  evaluating  other
potential technology vendors as well.

We do not  provide  healthcare  services,  but rather  act as a neutral  conduit
between Providers and Purchasers including preferred provider organizations.  We
believe that our Healthcare  Exchange provides both economic and  administrative
efficiencies  to both  Providers and  Purchasers in the absence of a traditional
health plan agreement.

History

In August  1999,  we  identified  what we believe to be a  significant  business
opportunity  in the  healthcare  industry and began  developing a business model
involving  the   establishment  of  the  Healthcare   Exchange  under  the  name
"DoctorandPatient."  Prior to providing an exchange for healthcare services,  we

                                       11
<PAGE>

were in the  business  of  recruiting,  hiring  and  training  foreign  computer
programmers  and placing them with U.S.  companies.  During fiscal year 2001, we
ceased our computer  programmer  operations  to  concentrate  on our  Healthcare
Exchange and, in July 2003, we began phasing out the name "DoctorandPatient" and
began marketing under the new name "National Healthcare Exchange Services."

During  fiscal year 2003,  we focused our  attention on expanding our markets in
order to try to increase our revenues.  In line with our objectives,  we hired a
significant number of employees to promote the Healthcare  Exchange.  This rapid
growth in employees  placed a significant  strain upon our  financial  resources
without producing sufficient revenue to accommodate this growth. As a result, we
had to take steps to reduce our  expenses in an effort to improve our  financial
condition.  Such steps included closing our headquarters  located in Portsmouth,
New  Hampshire  and  relocating  these  functions  to our office in  Sacramento,
California.  In addition,  we reduced the number of our employees  from 98 as of
December 31, 2002 to 27 by September 30, 2003.

As we enter fiscal year 2004, we continue to face  significant  challenges  with
respect to revenue  and cash  shortages.  As of  September  30,  2003,  our cash
balance had declined to approximately $700,000, and in light of our prior losses
and current stock price of our common  stock,  no assurance can be given that we
will be able to raise additional funds for our operations,  if necessary. We are
taking  a  number  of  steps  to  address  these  challenges  including  further
reductions  in operating  expenses and  liabilities.  In addition,  our business
strategy is to transition our existing Providers to our direct pay program where
Providers  will submit  their  claims to us, and we will process and reprice the
claims to the rate set by Providers. After re-pricing,  claims will be then sent
to  Purchasers  or their  intermediaries  who will pay the  Providers  directly.
Providers will be invoiced our transaction fee for each claim re-priced. We will
recognize revenue when it is earned and  collectibility  is reasonably  assured.
Revenue is earned when we have completed claim re-pricing  obligations under our
service agreement with the Provider.

During quarter ending  September 2003 we launched our direct pay program.  Under
this  program,  we  receive a fee for each claim  that we  process.  In order to
attract new Providers and increase the number of claims that we process, we have
reduced our  transaction fee which will require us to process a higher number of
claims  that we have not  previously  been able to  obtain in order to  generate
sufficient  revenue for our  operations.  This  program is new and we are unsure
whether it will be  accepted  by the  healthcare  industry or whether we will be
able to attract sufficient number of Providers in order to process the number of
claims we will need to generate  sufficient  revenues to sustain our operations.
If we are unable to  successfully  launch  our  direct  pay  program or gain the
confidence  of  Providers,  we may be required to further  reduce our  operation
expenses or be forced into seeking protection under federal bankruptcy laws.

We believe that the value proposition of the Healthcare  Exchange for our direct
pay program is  significant.  The  transition to the direct pay program has been
driven by the cost and  complexity  of receiving  and  processing  payments from
Purchasers on behalf of Providers. Our current program, whereby we would receive
payments directly from the Purchasers and remit the payment, after deducting our
fee,  to the  Providers  created  a tension  between  the  Provider  and us that
interfered  with  efforts  by our  sales  and  marketing  staff to  recruit  new
Providers.  By  developing  the direct pay  program,  we removed the  Healthcare

                                       12
<PAGE>

Exchange  between the  Purchaser's  payments and the  Provider,  and allowed the
Healthcare  Exchange to act as a neutral conduit. We believe that the simplicity
of the  direct  pay  program  will  allow us to  accelerate  the  growth  in new
Providers.  We also  believe  that the direct pay  program  will also reduce the
barriers to  marketing to large  healthcare  provider  organizations.  Under the
direct pay program,  our  transaction  fee will be less than our transaction fee
for our current program. Therefore, we must substantially increase the number of
claims  that we  process  in  order  to  generate  sufficient  revenues  for our
operations. We intend to initially market our direct pay program to our existing
Providers  by  transitioning  them from our  current  program  to the direct pay
program.  If we are unable to successfully launch our direct pay program or gain
the confidence of Providers,  we may be required to further reduce our operating
expenses  and/or seek additional  funds for our operations.  If we are unable to
raise additional  funds, we may be forced into seeking  protection under federal
bankruptcy laws.

In  addition  to the direct pay  program,  we will  begin  test  marketing  of a
compliance  program.  The compliance  program allows the Healthcare  Exchange to
re-price  medical claims within an existing  agreement  between the Provider and
the  Purchaser.  The  compliance  program  could  allow  Providers  to  use  the
Healthcare  Exchange  for more of their  claims.  Our market with the direct pay
program is limited to those  claims for which there is no  existing  health plan
agreement.  Applying the efficiencies of the Healthcare  Exchange to an existing
health plan  agreement can improve the Providers'  ability to insure  compliance
with a health  plan's fee  schedule.  More  importantly,  we  believe  that this
compliance program could significantly  increase the number of claims we process
for Providers.


Critical Accounting Policies

REVENUE    RECOGNITION.    The    Company    recognizes    revenue    for    the
transaction-processing  fee  when  earned  and  the  Company  has  substantially
completed all of its obligations under the contract.

PRODUCT DEVELOPMENT COSTS. In October 1999, the Company began incurring costs to
develop its Healthcare Exchange.  In accordance with SOP 98-5,  "Reporting Costs
on Start-Up  Activities," start-up costs associated with the Healthcare Exchange
have been expensed as incurred.

PREPAID LICENSE AND SERVICE FEES. Prepaid license and services fees are recorded
at cost  and  amortized  on a  straight-line  basis  over  the  service  period.
Management  considers  whether  indicators  of  impairment  of these  assets are
present  at each  balance  sheet date and an  impairment  loss is  recorded,  if
necessary.  In assessing the recoverability of the Company's prepaid license and
service fees, the Company must make assumptions  regarding estimated future cash
flows and other factors to determine the fair value of the respective assets. If
these estimates or their related  assumptions  change in the future, the Company
may be required to record  impairment  charges for these  assets not  previously
recorded.

FINANCIAL CONDITION

Cash and cash equivalents increased $394,012 since June 30, 2003 attributable to
cash proceeds from  financing  activities of  $1,232,000received  in August 2003

                                       13
<PAGE>

from the sale of  Series A  Preferred  stock,  partially  offset by cash used in
operations  of $934,391  during the three months ended  September  30, 2003.  At
September 30, 2003, substantially all of ATR's cash was invested in money market
accounts.

Because the Company is emphasizing the  development of the Healthcare  Exchange,
the results of operation  for the three months ended  September 30, 2003 may not
be indicative of results of operations for the year ended June 30, 2003.

RESULTS OF OPERATION

Healthcare Exchange

HEALTHCARE EXCHANGE REVENUE.  The Company began operations with a limited number
of Providers in the quarter ending June 30, 2001. Providers submit bills to ATR,
who  reprices  the bills to the rate set by the  Providers,  including  adding a
transaction-processing  fee,  and  then  routes  them  to  Purchasers  or  their
intermediaries.  ATR receives  payments from  Purchasers on behalf of Providers,
and then remits payments to Providers.  The Company  recognizes  revenue for the
transaction-processing  fee  when  earned  and  the  Company  has  substantially
completed  all of its  obligations  under the  contract.  Under the  direct  pay
program  providers  submit their  healthcare  claims to us for re-pricing to the
Healthcare  Exchange  rate.  We then route the adjusted  claims to Purchasers or
their  intermediaries,  who pay the  Providers  directly.  We then  invoice  the
Providers  a  transaction  fee for each claim  processed  and  forwarded  to the
Purchaser.

During the three month period ending September 30, 2003, $380,817 of revenue was
recognized,  as compared to $776,560 for the three month period ending September
30,  2002.  The  development  and  implementation  of the direct pay program and
transitioning  of our  Providers to the direct pay program was the primary cause
of the reduction in revenue in comparison to the previous year.

HEALTHCARE  EXCHANGE  COSTS.  Healthcare  Exchange  costs are the  direct  costs
related to the  processing  of the bills  submitted  by  Providers  and payments
received  from  Purchasers.  These  costs  include the salary and other wage and
benefit costs of the Healthcare Exchange operations staff and the operating cost
of the application services provider and other technology  providers.  The costs
for the three month period ending September 30, 2003 were $339,753 in comparison
to $543,702 for the three month period ending  September 30, 2002.  The decrease
is primarily due to the reduction in staffing and related costs,  and other cost
reduction  measures  implemented  during the  September  2003 quarter end. As of
September 30, 2003, there were 10 operations  staff members  responsible for the
processing  of  bills   submitted  by  Providers  and  payments   received  from
Purchasers, compared to 31 operations staff members as of September 30, 2002.

Selling, Marketing and Product Development Costs

In October 1999,  the Company began  incurring  costs to develop its  Healthcare
Exchange.  Costs incurred are primarily the salary, other wage and benefit costs
of ATR's employees and other  operational  costs  associated with recruiting the
network of  healthcare  providers.  The costs for the three month period  ending
September 30, 2003 were  $234,840,  in  comparison  to $1,397,306  for the three

                                       14
<PAGE>

month period ending  September 30, 2002. The decrease is the result of reduction
of sales staff to 8 at  September  30, 2003 from 43 at September  30, 2002.  The
Company's  existing IT staff  developed the internal  repricing  and  compliance
program, resulting in development costs being recognized as compensation.

General and Administrative Expenses

General and  administrative  expenses  were  $515,252 for the three month period
ended  September  30, 2003, in comparison to $509,015 for the three month period
ending  September  30,  2002.  The  increase  for the three month  period  ended
September 30, 2003 in comparison to the same period ended September 30, 2002 was
the result of the expense of  approximately  $125,714  recorded during the three
month period ended September 30, 2003 for the conversion of interest  accrued on
the  $1,000,000  convertible  note  payable to common  stock at less than market
value.  This  expense  was offset by the  decrease in  compensation  and related
expenses as a result of reductions in staffing.

Other Income (Expense)

INTEREST INCOME. Interest income is related to the short-term investment of cash
balances,  primarily  in money  market  accounts.  The change in the three month
period ending  September 30, 2003 is not  significant  in comparison to the same
period in fiscal 2002.

INTEREST  EXPENSE TO THIRD PARTY.  Interest  expense to third party of $103,070,
for the three month period ending September,  2003, in comparison to $77,315 for
the three month period ending  September 30, 2002,  resulted  primarily from the
fair value of warrants  issued in  connection  with a  convertible  note and the
beneficial conversion feature of the convertible note to third party, which were
recognized through interest expense

INTEREST EXPENSE TO STOCKHOLDERS AND DIRECTORS. Interest expense to stockholders
and  directors of $99,712,  was  recognized  for the three month  period  ending
September 30, 2003 in comparison to $136,458,  for the three month period ending
September 30, 2002.  This decrease  resulted  primarily  from the  conversion of
accrued  interest on convertible  notes payable to stockholder into common stock
and the forgiveness of debt of accrued  interest on notes payable to stockholder
during the three month period ending September 30, 2003.

Income Taxes

As of June 30, 2003, we had net operating loss  carryforwards for federal income
tax purposes of approximately  $53,000,000 that expire in the years 2005 through
2023 and federal research and development tax credits of approximately  $100,000
that expire in the year 2005.

As of June 30, 2003, we had net operating  loss  carryforwards  for state income
tax purposes of approximately  $20,000,000 that expire in the years 2004 through
2013 and state research and  development  tax credits of  approximately  $30,000
that do not expire.

                                       15
<PAGE>

In  connection  with our initial  public  offering in August  1992,  a change of
ownership  (as defined in Section 382 of the Internal  Revenue Code of 1986,  as
amended) occurred.  As a result, our net operating loss carryforwards  generated
through  August 20,  1992  (approximately  $1,900,000)  are subject to an annual
limitation in the amount of approximately $300,000.

In 1993,  a  controlling  interest of our stock was  purchased,  resulting  in a
second annual limitation in the amount of approximately  $398,000 on our ability
to utilize net operating loss  carryforwards  generated  between August 11, 1992
and September 13, 1993 (approximately $7,700,000).

Utilization of our net operating loss and credit carryforwards may be subject to
substantial annual limitation due to the ownership change  limitations  provided
by the  Internal  Revenue  Code and  similar  state  provisions.  Such an annual
limitation  could result in the expiration of the net operating loss and credits
before utilization.

We  expect  that  the  aforementioned  annual  limitations  will  result  in net
operating loss carryovers, which will not be utilized prior to the expiration of
the carryover period.

LIQUIDITY AND CAPITAL RESOURCES

For the three month period  ending  September  30, 2003,  we earned  revenues of
$380,817  but  incurred  a net loss of  $911,560.  In  August  2003,  we  raised
additional  capital  through the sales of 1,232 shares of our Series A Preferred
Stock,  $6.00 par value per share,  at $1,000 per share for an aggregate  sum of
$1,232,000.  It is our intention to use this capital to successfully  market and
implement  the direct pay program to attract new  Providers  and to increase the
number of claims that we process. However, this direct pay program is new and we
are unsure whether it will be accepted by the healthcare  industry or whether we
will be able to attract a sufficient number of Providers in order to process the
number of claims we will need to  generate  sufficient  revenues  to sustain our
operations.  In order to attract new Providers and increase the number of claims
that we  process  under  this  new  direct  pay  program,  we have  reduced  our
transaction  fee which will require us to process a higher number of claims that
we have not  previously  been  able to obtain  in order to  generate  sufficient
revenue for our  operations.  As of  September  26,  2003,  our cash balance had
declined to  approximately  $700,000.  In light of our prior  losses and current
stock  price,  it is  unlikely  that we will be  able,  at this  time,  to raise
additional  capital if required.  If our direct pay program is unsuccessful,  we
will  be  required  to  further  reduce  our  expenses.  If  we  are  unable  to
successfully  launch our direct pay program or gain the confidence of Providers,
we may be required to further  reduce our  operating  expenses  and/or be forced
into seeking  protection  under federal  bankruptcy  laws.  Given the conditions
described  above,  the  report  of  independent  auditors  on our June 30,  2003
financial  statements  includes an  explanatory  paragraph  indicating  there is
substantial  doubt  about  our  ability  to  continue  as a going  concern.  The
financial  statements  do not include any  adjustments  to reflect the  possible
future effects on the recoverability and classification of assets or the amounts
and  classification  of  liabilities  that may result  from the  outcome of this
uncertainty.

As of June 30, 2003, we had received short-term, unsecured financing to fund our
operations in the form of notes payable of $5,555,109 from Mr. Cameron, our then
chairman and chief financial officer and another  stockholder.  These notes bear

                                       16
<PAGE>

interest at 10.25%.  On November 1, 2002,  we agreed with Mr.  Cameron to extend
the due date on notes payable to him until  December 31, 2003 in exchange for an
extension fee of 2%. These extended notes total  $2,873,694,  including  accrued
interest and  extension  fees,  and bear  interest at 10.25% per annum.  Also on
November 1, 2002, we agreed with the other note holder to extend the due date of
his  convertible  promissory  notes until December 31, 2003.  These  convertible
promissory notes total $2,681,415,  including accrued interest, bear interest at
10.25% per annum and are convertible into common stock at $3.00 per share at the
note  holder's  option.  During  fiscal  year  2003,  Mr.  Cameron  loaned us an
additional  $619,000 bearing interest at 10.25%, of which $193,000 was repaid to
Mr. Cameron in October 2002.  During the first quarter of fiscal 2004, the notes
payable in the amount of $2,873,694  were assigned by Mr.  Cameron to Mr. Baron,
and as September 30, 2003, Mr. Baron forgave all of the  obligations  under such
notes.  In addition,  of the  convertible  notes totaling  $2,681,415,  the note
holder agreed to convert $2,344,704 of the outstanding principal and all accrued
and unpaid interest under certain convertible notes into 3,086,043 shares of our
common stock leaving a total of $336,711 outstanding.

In October  2002,  we sold  4,125,000  shares of our common  stock at a purchase
price of $1.00 per  share.  The  shares of common  stock  issued in the  private
placement are restricted securities.  Cash proceeds, net of offering costs, were
$3,816,209.  In connection with the October 2002 private placement,  we paid the
placement agent a placement fee of 6% of the gross proceeds raised by them and a
five year  warrant  to  purchase  10% of the common  stock  placed by them at an
exercise  price of $1.00 per share.  In addition,  we paid a finder's fee to one
individual  of $12,500 and issued a warrant to purchase  30,000 shares of common
stock at $1.00 per share.

On July 26, 2002, we received  short-term  unsecured  financing in the form of a
convertible  note of  $1,000,000  from a lender.  This  convertible  note  bears
interest at 8% and was originally payable on July 25, 2003. On July 25, 2003, we
extended this note to the earlier of July 22, 2005 or when we receive $8,000,000
debt or  equity  financing.  All or a  portion  of the  convertible  note may be
converted  into  shares of  common  stock at the lower of $1.00 per share or the
subsequent  subscription  price per share of any debt or equity offering made by
us.

In  consideration  for the loan, we issued three warrants on July 26, 2002. Each
warrant  provides for the  purchase of 100,000  shares of our common stock at an
exercise  price equal to the $1.00  subscription  per share price of the October
2002 private placement. The first and second warrants became exercisable on July
26,  2002  and  January  26,  2003,  respectively.   The  third  warrant  became
exercisable on July 25, 2003.  The lender may exercise  these  warrants  through
July 26, 2009.

In connection with the issuance of the convertible note and the first and second
warrants, we estimated the aggregate fair value of the first and second warrants
to be $254,000  using the  Black-Scholes  model.  In accordance  with EITF 98-5,
"Accounting for Convertible  Securities with Beneficial  Conversion  Features or
Contingently  Adjustable  Conversion  Ratios," and EITF 00-27,  "Application  of
Issue No. 98-5 to Certain Convertible  Instruments," we have recognized $309,211
and $952,930  through  interest  expense for the three and twelve month  periods
respectively,  ending June 30, 2003 for a portion of the fair value of the first
and second  warrants and a portion of the beneficial  conversion  feature of the
convertible note, which was estimated to be in total $802,000.  We have recorded
additional  amounts  totaling  $103,070 during the first quarter of 2004 through

                                       17
<PAGE>

interest  expense for the remaining fair value of the first and second  warrants
and the beneficial  conversion  feature of the convertible  note recorded at the
initial  transaction  date,  and in accordance  with EITF 00-27,  the additional
beneficial  conversion  feature recorded in the quarter ending December 31, 2002
of $624,222  relating to the reset of the  conversion  price of the  convertible
note from $2.25 to $1.00 per share.

During the period between  January 9, 2002 and March 28, 2002, we sold 1,232,584
shares of our common stock at a purchase price of $2.25 per share. The shares of
common  stock  issued  in  the  private  placement  are  restricted  securities.
Proceeds, net of offering costs, were $2,742,519.  The proceeds from the private
placement  were used to fund  operations  and repay debt.  Our then chairman and
chief financial officer purchased 222,222 shares our common stock in the private
placement.  Because  the  purchase  price of such stock was less than the public
trading  price on the date of  purchase,  we  recorded  compensation  expense of
$138,583 during fiscal year 2002. In October 2002, pursuant to the terms of this
private  placement  and as a result of the October 2002  private  placement at a
purchase  price lower than  $2.25,  1,540,729  additional  shares were issued to
these investors  based on the October 2002 private  placement price of $1.00 per
share.  Compensation  expense of $347,222 was recorded for the additional shares
issued to our then chairman and chief financial officer.

As a result of our July 2002 bridge financing in which we granted warrants equal
to 30% of the loan at an  exercise  price of $1.00 per share,  we granted to the
investors of the January 2002 and October  2002 private  placements  warrants to
purchase 30% of their  respective  investment at an exercise  price of $1.00 per
share.  Our then chairman and chief  financial  officer,  a  participant  in the
private placement, received a warrant to purchase 150,000 shares of common stock
at an exercise  price of $1.00 per share,  which was greater than the fair value
of the common stock at the warrant issuance date.

The following table represents the debt  requirements  pertaining to contractual
obligations of the Company over the next five years:
<TABLE>
<CAPTION>
<S>                                                   <C>              <C>              <C>            <C>           <C>

--------------------------------------------- ------------------------------------------------------------------------------
Contractual Obligations                                                  Payments Due by Period
--------------------------------------------- ------------------------------------------------------------------------------
                                                       Total         Less than 1      1-3 years       4-5 years      After 5
                                                                         year                                         years
--------------------------------------------- ------------------ --------------- --------------- -------------- ------------

Convertible notes payable to stockholder            336,711            336,711               -               -            -

Convertible note payable to third party           1,000,000                          1,000,000               -            -

Operating  leases -  facilities - payable to
stockholder                                         275,860             34,146         140,722         100,992            -

Operating leases - equipment                         52,549             32,190          20,359               -            -

Application services provider                        33,842             33,842               -               -            -

--------------------------------------------- ------------------ --------------- --------------- -------------- ------------
Total contractual cash obligations            $   1,698,962      $     436,889   $   1,161,081   $     100,992  $         -
--------------------------------------------- ------------------ --------------- --------------- -------------- ------------
</TABLE>

                                       18
<PAGE>

During fiscal year 2003, the facilities lease agreement  between the Company and
the Mr.  James W.  Cameron  was  modified to reflect an annual base rent of $120
until further notice from lessor, in his sole and absolute discretion, to return
the rent to its previous level.  To recognize the estimated  market rate of this
transaction,  a monthly  expense of $11,424 was recognized  through rent expense
and other capital  contributions.  On July 1, 2003, Company entered into a sixth
addendum to the lease,  which reduces the square footage occupied by the Company
and stipulates the monthly rent to be $3,794.


Item 3. Quantitative and Qualitative Disclosures About Market Risk

The  Company  has notes  payable in the  aggregate  amount of  $1,336,711  as of
September 30, 2003 payable to a stockholder  of the Company and another  lender.
The notes bear  interest at 8% to 10.25% per annum and are due from December 31,
2003 to July 22, 2005, or earlier if other funding is obtained. The Company does
not believe that any change in interest rates will have a material impact on the
Company during fiscal 2004.  Further,  the Company has no foreign operations and
therefore is not subject to foreign currency fluctuations.

Item 4. Controls and Procedures

We carried out an evaluation,  under the supervision and with the  participation
of our management,  including our Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure  controls and
procedures  (as defined by  Exchange  Act Rule  13a-15(e))  as of the end of our
first fiscal quarter  pursuant to Exchange Act Rule  13a-15(b).  Based upon that
evaluation,  our Chief Executive  Officer and Chief Financial  Officer concluded
that our  disclosure  controls and  procedures  are  effective in ensuring  that
information  required to be  disclosed  by us in reports  that we file or submit
under the Exchange Act is recorded,  processed,  summarized and reported  within
the time periods specified in the Securities and Exchange Commission's rules and
forms.

There have been no changes in our  internal  control  over  financial  reporting
identified in connection  with our  evaluation as of the end of the first fiscal
quarter that occurred during such quarter that have materially affected,  or are
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.  However,  on November  12,  2003,  the  Company and its  independent
auditors,   Ernst  &  Young  LLP,   mutually  agreed  to  cease  their  existing
professional  relationship.  This  change has been  reported in a Form 8-K dated
November 12, 2003. The Company is currently  involved in the process of engaging
a  new  independent  public  accountant.  As a  result,  the  interim  financial
statements  included in this quarterly  report on Form 10-Q were not reviewed by
an independent public accountant.

PART II. OTHER INFORMATION

Item 1 Legal Proceedings

None

                                       19
<PAGE>

Item 2  Changes in Securities and Use of Proceeds

On July 25, 2003, we issued 2,285,714 shares of our common stock to a lender for
all  accrued  and unpaid  interest in the  aggregate  amount of $80,000  under a
convertible note as of July 25, 2003. The issuance was exempt from  registration
pursuant to Rule 506.

On August 15, 2003, we sold 1,232 shares of our Series A Preferred Stock,  $6.00
par value per share,  at $1,000 per share for an aggregate  sum of $1,232,000 to
an accredited  investor  pursuant to Rule 506. No commission or finder's fee was
paid in connection with this transaction.  The Series A Preferred Stock provides
for a dividend  preference  of $0.50 per share if and when declared by the board
of directors and a liquidation  preference of $6.00 per share. In addition,  the
shares of Series A Preferred Stock have no voting rights,  except as required by
law, and are not convertible into any other securities.

On September 19, 2003,  we reached an agreement  with The Negri Trust to convert
$2,344,704 of the  outstanding  principal and all accrued and unpaid interest as
of that date under the  convertible  notes into  3,086,043  shares of our common
stock.  The  issuance  was exempt  from  registration  pursuant  to Rule 506. We
amended the original convertible notes to provide for the issuance of shares for
accrued and unpaid  interest.  Further,  under the terms of this amendment,  The
Negri Trust is entitled to piggy back registration rights.

Item 3  Defaults Upon Senior Securities

None

Item 4  Submission of Matters to a Vote of Security Holders

Not Applicable

Item 5  Other Information

The  Company  intends  to file a  Certificate  of  Amendment  with the  Delaware
Secretary  of State to change its  corporate  name from  Alternative  Technology
Resources,  Inc. to National  Healthcare  Exchange Services,  Inc. and a Form 15
with the Securities and Exchange Commission to terminate the registration of its
common stock and to suspend its duty to file reports  required by Section  13(a)
under the Securities Exchange Act of 1934.

Item 6  Exhibits and Reports on Form 8-K

a.   Exhibits

None.



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<PAGE>

b.   Reports on Form 8-K:


Date of Report         Item(s)    Description

November 12, 2003      4          Changes in Registrant's Certifying Accountants



                               SIGNATURES

     Pursuant to the  requirements  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.

                               ALTERNATIVE TECHNOLOGY RESOURCES, INC.
                               (Registrant)


Dated: February 9, 2004


                               /s/ Mark W. Rieger
                             ---------------------------------------------------
                               Mark W. Rieger
                               Chief Executive Officer/Chief Financial Officer




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