FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

(Mark one)

ý	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended July 31, 2003
		For the quarterly period ended April 30, 2005
o	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	~~for the transition period from to~~	for the transition period from to
Commission file number: 0-23598

NWH, INC.
(Exact name of registrant as specified in its charter)
Delaware		13-3735316
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)
156 West 56 Street, Suite 2001, New York, NY		10019
(Address of principal executive offices)		(Zip Code)
(212) 582 1212
(Registrant’s telephone number, including area code)

Commission file number: 0-23598

NWH, INC.

(Exact name of registrant as specified in its charter)

Delaware		13-3735316
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)

156 West 56 Street, Suite 2001, New York, NY		10019
(Address of principal executive offices)		(Zip Code)

(212) 582 1212
(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 ý No o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)

Yes o No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.01 par value: 2,924,631 shares as of ~~September~~ 12June 7, ~~2003~~2005.

NWH, Inc.

Index

	Page(s)
Part I – Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of July 31, 2003 (Unaudited) and October 31, 2002	3
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended July 31, 2003 and 2002 (Unaudited)	4
Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Nine Months Ended July 31, 2003 and 2002 (Unaudited)	5
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended July 31, 2003 and 2002 (Unaudited)	6
Notes to Condensed Consolidated Financial Statements (Unaudited)	7-11

Part I – Financial Information

Item 1. Unaudited Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Income

Condensed Consolidated Statements of Comprehensive Income

Condensed Consolidated Statements of Cash Flows

Notes to Condensed Consolidated Financial Statements

NWH, Inc.

Condensed Consolidated Balance Sheets

	July 31,			October 31,
	April 30, 2005			October 31, 2004
	2003			2002
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	2823,~~113~~698,~~129~~860		$	3112,~~498~~137,~~217~~155
Marketable securities	~~12,318,361~~—			1314,~~954~~926,~~738~~737
Trade and other receivables	2,371,939			2,083,653
Trade and other receivables, net of allowances of $45,000 and $40,000	3,121,294			2,862,921
Prepaid expenses and other current assets	~~650~~690,~~352~~424			1475,~~285,420~~895
Total current assets	43,453,781			48,822,028
Deferred income taxes	138,200			—
Property and equipment, net of accumulated depreciation of $3,859,786 and $2,908,186, respectively	2,900,104			2,953,741
Refundable income taxes	230,924			—
Total current assets	27,839,702			30,402,708
Property and equipment, net of accumulated depreciation of $3,279,245 and $3,054,359	785,414			750,474
Internally developed software, net of accumulated amortization of $2,707,379 and $2,195,888	2,310,336			2,313,785
Goodwill	3,762,187			3,762,187
Investments and other assets	~~699~~1,~~299~~040,193			~~728~~1,~~413~~065,453
Total assets	$	5035,~~815~~737,~~371~~832		$	5638,~~266~~294,~~369~~607
Liabilities and stockholders’ equity
Liabilities and Stockholders’ Equity
Current liabilities
Current liabilities:
Accounts payable and accrued expenses	$	12,~~783~~602,~~926~~548		$	12,~~794~~376,~~443~~072
Call options written at fair value	1,941,730			4,592,925
Current portion of long-term debt	3,856			11,494
Securities sold short at fair value	—			1,307,500
Income taxes payable	—			147,035
Current maturities of long-term debt	232,288			270,792
Dividends payable	1,461,816			1,462,316
Current income taxes	510			958,130
Total current liabilities	4,068,212			3,996,917
Deferred income taxes	4,156,708			4,735,333
Note payable	140,000			140,000
Dividends payable	2,924,632			—
Deferred income taxes	691,992			692,792
Total current liabilities	11,039,794			13,659,123
Total liabilities	4,900,212			4,829,709
Notes payable to related party	140,000			140,000
Long-term debt	17,712			86,121
Total liabilities	11,197,506			13,885,244
Commitments
Stockholders’ equity
Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares issued or outstanding	—			—
Preferred stock, $.01 par value: 1,000,000 shares authorized; no shares issued or outstanding	—			—
Common stock, $.01 par value: 20,000,000 shares authorized; 3,342,231 and 3,333,000 shares issued, respectively	33,422			33,330
Common stock, $.01 par value: 20,000,000 shares authorized; 3,342,231 shares issued	33,422			33,422
Additional paid-in capital	23,195,991			23,~~071~~195,~~872~~991
Retained earnings	2012,~~658~~714,~~094~~446			2215,~~860~~327,~~321~~119
Accumulated other comprehensive income	821,992			1,137,672
Treasury stock, 418,600 and 417,600 shares, at cost	(5,106,239		)	(5,091,634		)
Treasury stock, 417,600 and 388,400 shares, in 2003 and 2002, respectively, at cost	(5,091,634		)	(4,722,070		)
Total stockholders’ equity	30,837,620			33,464,898
Total stockholders’ equity	39,617,865			42,381,125
Total liabilities and stockholders’ equity	$	35,737,832		$	38,294,607
Total liabilities and stockholders’ equity	$	50,815,371		$	56,266,369

See accompanying notes to unaudited condensed consolidated financial statements.

NWH, Inc.

Condensed Consolidated Statements of ~~Operations (unaudited)~~Income

	Three Months						Nine Months
	For the Three Months Ended April 30						For the Six Months Ended April 30
	Ended July 31,						Ended July 31,
	2005			2004			2005			2004
	2003			2002			2003			2002
Service Revenue	$	4,770,308		$	4,373,436		$	9,418,088		$	8,559,746
Services revenue	$	3,498,567		$	2,961,599		$	9,435,558		$	8,933,949
Cost of services	2,255,419			2,350,541			4,600,800			4,494,783
Cost of services	1,859,045			1,362,553			4,844,338			4,221,035
Professional fees	253,410			179,002			579,666			397,530
Professional fees	222,400			149,456			491,258			471,610
General and administrative	2,139,293			1,768,549			4,197,813			3,655,743
General and administrative	1,644,192			1,469,721			4,723,134			4,334,074
Depreciation and amortization	89,594			76,352			176,803			142,566
Depreciation and amortization	79,001			85,589			247,023			259,739
Total expenses	4,737,716			4,374,444			9,555,082			8,690,622
	3,804,638			3,067,319			10,305,753			9,286,458
Income (loss) from operations	32,592			(1,008		)	(136,994		)	(130,876		)
Loss from operations	(306,071		)	(105,720		)	(870,195		)	(352,509		)
Other income (expense):
Other income (expense)
Gain on securities transactions, net	—			738,015			—			558,458
Gain on securities transactions, net	171,625			1,842,761			910,738			5,089,568
Dividend income	137,551			56,035			137,551			124,571
Dividend income	111,238			96,728			303,851			307,112
Interest income	34,015			65,105			153,671			134,920
Interest income	76,438			128,039			268,078			307,976
Interest expense	(3,093		)	(7,587		)	(6,766		)	(23,999		)
Interest expense	(9,954		)	(24,295		)	(41,320		)	(79,335		)
	168,473			851,568			284,456			793,950
Other income	—			—			421,253			—
Income before provision (benefit) for income taxes	201,065			850,560			147,462			663,074
	349,347			2,043,233			1,862,600			5,625,321
Provision (benefit) for income taxes	74,000			321,000			(164,000		)	250,000
Income before provision for income taxes	43,276			1,937,513			992,405			5,272,812
Net income	$	127,065		$	529,560		$	311,462		$	413,074
Provision for income taxes	126,000			500,000			270,000			1,600,000
Net income per common share
Net (loss) income	$	(82,724	)	$	1,437,513		$	722,405		$	3,672,812
Basic	$	.04		$	.18		$	.11		$	.14
Net (loss) income per common share
Diluted	$	.04		$	.18		$	.11		$	.14
Basic	$	(0.03	)	$	0.47		$	0.25		$	1.17
Weighted average number of common shared outstanding:
Diluted	$	(0.03	)	$	0.47		$	0.25		$	1.17
Basic	2,923,631			2,924,631			2,924,139			2,924,631
Weighted average number of common shares outstanding
Diluted	2,926,954			2,924,657			2,927,624			2,924,657
Basic	2,920,618			3,043,959			2,920,887			3,141,277
Diluted	2,920,618			3,043,959			2,931,507			3,141,277

See accompanying notes to unaudited condensed consolidated financial statements.

NWH, Inc.

Condensed Consolidated Statements of Comprehensive ~~(Loss)~~ Income ~~(unaudited)~~

	Three Months						Nine Months
	For the Three Months Ended April 30						For the Six Months Ended April 30
	Ended July 31,						Ended July 31,
	2005			2004			2005			2004
	2003			2002			2003			2002
(unaudited)
Net (loss) income	$	(82,724	)	$	1,437,513		$	722,405		$	3,672,812
Net income (loss)	$	127,065		$	529,560		$	311,462		$	413,074
Other comprehensive loss
Other comprehensive income, net of tax:
Net unrealized holding gain (loss) on marketable securities arising during the period, net of income taxes of $19,779, ($630,613), ($110,231) and ($2,026,240), respectively	34,202			(1,237,134		)	(187,991		)	(3,656,226		)
Net unrealized holding gain on marketable securities arising during the period, net of income taxes of $ -0- and ($261,000), -0- and $52,457, respectively	—			(505,566		)	—			99,237
Reclassification adjustment for gains recognized in net (loss) income, net of income taxes of ($65,779), ($104,388), ($65,779) and ($153,760), respectively	(127,689		)	(193,863		)	(127,689		)	(285,553		)
Reclassification adjustment for losses recognized in net income (loss), net of income tax benefit of $-0-, -0-,-0-, ($169,293), respectively	—			—			—			(507,215		)
Other comprehensive loss	~~(93,487~~—		)	(1505,~~430,997~~566		)	~~(315,680~~—		)	(3407,~~941,779~~978		)
Comprehensive (loss) income	$	(176,211	)	$	6,516		$	406,725		$	(268,967	)
Comprehensive income	$	127,065		$	23,994		$	311,462		$	5,096

See accompanying notes to unaudited condensed consolidated financial statements.

NWH, Inc.

Condensed Consolidated Statements of Cash Flows ~~(unaudited)~~

	Nine Months Ended July 31,
	For the Six Months Ended April 30,
	2003			2002
	2005			2004
(unaudited)
Cash flows from operating activities
Net income	$	~~722~~311,~~405~~462		$	3413,~~672,812~~074
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	~~969~~835,~~081~~432			~~827~~770,~~111~~624
Gain on sale of investment	(421,253		)	—
Accretion of interest	(61,274		)	—
Accretion of interest income	—			(8,562		)
Loss on securities transactions, net	—			(558,458		)
Gain on securities transactions	(364,473		)	(1,246,726		)
Deferred income taxes	(139,000		)	(700,000		)
Unrealized gain on securities transactions	(546,265		)	(3,842,842		)
Bad debt expense	23,572			—
Deferred income taxes	(402,615		)	125,000
Changes in assets and liabilities
Bad debt expense	30,366			16,255
Trade and other receivables	(281,945		)	(445,474		)
Net changes in assets and liabilities
Refundable income taxes	(190,924		)	(45,053		)
Trade and other receivables	(318,652		)	143,008
Prepaid expenses and other current assets	(214,532		)	(82,788		)
Prepaid expenses and other current assets	(364,931		)	(70,262		)
Investments and other assets	(73,795		)	(48,718		)
Investments and other assets	29,114			47,033
Accounts payable and accrued expenses	226,476			(30,162		)
Accounts payable and accrued expenses	(10,517		)	(525,891		)
Income taxes payable	(147,035		)	(970,426		)
Current income taxes payable	(957,620		)	975,000
Net cash provided by (used in) operating activities	288,437			(1,672,740		)
Net cash (used in) provided by operating activities	(1,635,360		)	111,936
Cash flows from investing activities
Acquisition of property and equipment	(~~326~~259,~~811~~826		)	(98202,~~499~~251		)
Increase in internally developed software	(~~588~~508,~~633~~042		)	(~~696~~405,~~066~~479		)
Proceeds from sale of marketable securities	114,~~338~~988,~~155~~011			264,~~294~~144,~~185~~783
Acquisition of marketable securities	—			(7,314,450		)
Acquisition of written call options	—			(3,585,825		)
Proceeds from sale of marketable securities - short sale	1,309,805			2,006,967
Proceeds from sale of written call options	—			1,469,400
Acquisition of marketable securities - short sale	(2,566,701		)	(3,966,003		)
Net cash provided by investing activities	14,220,143			1,420,628
Acquisition of written call options	(11,952,845		)	—
Proceeds from sale of written call options	9,968,315			—
Acquisition of common stock of ENS	—			(790,070		)
Proceeds from sale of investment	1,421,253			—
Net cash (used in) provided by investing activities	(1,397,462		)	15,436,064
Cash flows from financing activities
Acquisition of treasury stock	(369,564		)	(4,379,126		)
Proceeds of short term debt	—			100,000
Borrowing of short-term debt	—			100,000
Dividends paid	(2,924,632		)	(2,924,632		)
Principal payments of long-term debt	(106,913		)	(288,605		)
Principal payments of short-term and long-term debt	(7,638		)	(117,664		)
Proceeds from exercise of stock options	124,211			—
Acquisition of treasury stock	(14,605		)	—
Net cash used in financing activities	(352,266		)	(4,567,731		)
Principal payments of capital leases	—			(70,946		)
Net (decrease) increase in cash and cash equivalents, end of period	(3,385,088		)	10,980,269
Net cash used in financing activities	(2,946,875		)	(3,013,242		)
Net increase (decrease) in cash and cash equivalents	11,561,705			(3,265,354		)
Cash and cash equivalents
Beginning of period	3112,~~498~~137,~~217~~155			1929,~~231~~309,~~683~~192
End of period	$	2823,~~113~~698,~~129~~860		$	3026,~~211~~043,~~952~~838
Supplemental disclosure of cash flow information
Cash paid for interest	$	41,320		$	24,295
Cash paid for income taxes	$	1,523,000		$	500,000

See accompanying notes to unaudited condensed consolidated financial statements.

NWH, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of NWH, Inc. (the “Company”) have been prepared inpursuant ~~accordance~~to ~~with accounting principles generally accepted in~~ the ~~United~~rules and ~~States~~regulations of ~~America for interim financial statements and with~~ the ~~instructions~~Securities ~~to Form 10-Q~~ and Exchange ~~Article~~Commission ~~10 of Regulation S-X~~(“SEC”). Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, consisting solely of normal recurring ~~accruals~~ accruals necessary for a fair presentation of the financial statements for these interim periods, have been recorded. Operating results for the interim period are not necessarily indicative of the results that may be expected for a full year. ~~For~~ ~~further~~These ~~information,~~financial ~~refer~~statements toshould be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, ~~2002 (File No.0-23598) as filed with the Securities and~~ ~~Exchange Commission~~2004.

~~Certain reclassifications have been made in prior period’s financial statements to conform to classifications used in the current period~~2. Reclassification

~~2. New~~Certain ~~Accounting~~reclassifications ~~Pronouncements~~have been made in prior period’s financial statements to conform to classifications used in the current year.

~~In November 2002, the FASB released Interpretation No~~3. Critical ~~45, Guarantor’s~~ Accounting ~~and~~ Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45). This Interpretation elaborates on the disclosures to be made by a guarantor in its financial statements about its obligations under certain guarantees it has issued. The Interpretation also clarifies that a guarantor is required to recognize, at the inception of a guarantee for guarantees issued or modified after December 31, 2002, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements are effective for financial statements of periods ending after December 15, 2002. The initial measurement and recognition provisions are required to be applied on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of FIN 45 did not have any impact on the Company’s consolidated financial position or results of operations.Policies

InThe Company capitalizes purchased software ~~January~~which ~~2003,~~is ready for service and development costs for software incurred from the time ~~FASB~~the ~~issued~~preliminary ~~Interpretation~~project Nostage is completed until the software is ready for use. Under 46the provisions of Statement of Position 98-1, ~~Consolidation~~Accounting for the costs of ~~Variable~~Computer Software Developed or ~~Interest~~Obtained ~~Entities~~for Internal Use (~~FIN~~SOP 4698-1)~~. FIN~~, 46the Company capitalizes costs associated ~~requires~~with ~~variable~~software ~~interest~~developed ~~entities~~or beobtained ~~consolidated~~for byinternal ~~their~~use ~~primary beneficiaries. A~~when ~~primary~~both ~~beneficiary~~the ispreliminary ~~the~~project ~~party~~stage ~~that~~is ~~absorbs~~completed aand ~~majority~~Company ofmanagement has authorized further funding for the ~~entity’s~~project ~~expected~~which ~~losses~~it ordeems ~~residual~~probable will be completed and used to ~~benefits~~perform the function intended. ~~FIN~~ Capitalized 46costs ~~applies~~include ~~immediately~~only to(1) external direct costs of ~~variable~~materials ~~interest~~and ~~entities~~services ~~created~~consumed ~~after~~in ~~January~~developing 31or obtaining internal-use software, ~~2003~~(2) payroll and topayroll-related ~~existing~~costs for employees who are ~~variable~~directly ~~interest~~associated ~~entities~~with inand ~~the~~who ~~periods~~devote ~~beginning~~time ~~after~~to ~~June~~the 15internal-use software project, ~~2003. The~~and ~~Company~~(3) interest ~~does~~costs ~~not~~incurred, ~~expect~~when ~~the~~material, ~~adoption~~while developing internal-use software. Capitalization of ~~this~~such ~~FIN~~costs ~~will~~ceases ~~have~~no alater ~~material~~than ~~impact~~the onpoint which the ~~consolidated~~project ~~operations~~is orsubstantially ~~financial~~complete ~~condition~~and ofready ~~the~~for ~~Company~~its intended purpose.

~~In April~~Research ~~2003,~~and ~~the~~development ~~FASB~~costs ~~issued~~and ~~Statement~~computer software ~~No.~~maintenance ~~149~~costs ~~Amendment~~related ofto ~~Statement~~software ~~133~~development ~~on Derivative~~are ~~Instruments~~expensed ~~and Hedging Activities (FAS 149)~~as incurred. ~~FAS~~Capitalized ~~149 amends FAS 133 for certain decisions~~software ~~made~~development bycosts ~~the~~are ~~FASB~~amortized asusing ~~part of~~ the ~~Derivatives~~straight-line ~~Implementation~~method ~~Group~~generally ~~process. FAS~~over four ~~149~~years, ~~also~~not ~~amends~~to ~~FAS~~exceed ~~133~~the toexpected ~~incorporate clarifications~~life of the ~~definition of a derivative~~product. ~~FAS~~The ~~149~~carrying isvalue ~~effective~~of ~~for~~capitalized ~~contracts~~software development ~~entered~~costs ~~into~~is orregularly ~~modified~~reviewed ~~after June~~by ~~30,~~the ~~2003~~Company, ~~with certain exceptions,~~ and ~~requires~~a ~~prospective~~loss is ~~application. The~~recognized ~~Company~~if ~~does not expect~~ the ~~adoption~~value of ~~FAS~~estimated ~~149~~undiscounted ~~will~~cash ~~have~~flow abenefit ~~significant~~related ~~impact~~to the onasset ~~their~~falls ~~results~~below ofthe ~~operations or~~unamortized ~~financial condition~~cost.

~~In May 2003, the FASB issued Statement of Financial Accounting Standards No~~4. Recently ~~150,~~Issued Accounting ~~for Certain~~ ~~Financial Instruments with characteristics of both Liabilities and Equity (“FAS 150”).~~Pronouncements

In December, 2004, the FASB issued FASB statement No. 123R, “Share-Based Payment” (FAS 123R), a revision of FASB statement No. 123, “Accounting for Stock-Based Compensation” which addresses financial accounting and reporting for costs accounted with stock-based compensation. FAS 123R addresses all forms of share-based payment (“SBP”) awards, including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights. FAS 123R requires the Company to adopt the new accounting provisions beginning in our fourth quarter of 2005. Under the Modified Prospective Method, the Company does not anticipate recording any compensation expense at time of adoption since all options granted were fully vested.

~~This statement establishes standards for how an issuer classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity~~5. In Stock accordance with the standard, financial instruments that embody obligations for the issuer are required to be classified as liabilities. This Statement shall be effective for financial instruments entered into or modified after May 31, 2003, and otherwise shall be effective at the beginning of the first interim period beginning after June 15, 2003. The Company does not expect the provision of this statement to have a significant impact on the Company’s results of operations or financial position.Options

3The Company adopted the disclosure-only provisions of SFAS No. ~~Marketable~~ 148, ~~Securities~~“Accounting for Stock-Based Compensation Transition and Disclosure an amendment of FAS 123.” This statement encourages, but does not require, companies to adopt a fair value based method for determining expense related to stock-based compensation. The Company continues to account for stock-based compensation using the intrinsic value method as prescribed under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. Accordingly, no compensation cost has been recognized with regard to options granted under the Plan in the accompanying financial statements. The following table illustrates the effect on net income (loss) and earnings (loss) per share if the Company had applied the fair value recognition provisions of FAS 123 to stock-based employee compensation.

Components of the available-for-sale marketable securities as of July 31, 2003 are as follows:

	(unaudited)
	For the Three months Ended April 30,					For the Six months Ended April 30,
	2005		2004			2005		2004
Net income
As reported	$	127,065	$	529,560		$	311,462	$	413,074
Deduct total stock based employee compensation expense determined under fair value based method for all awards, net of related tax effects	—		(6,500		)	—		(13,180		)

Pro forma	$	127,065	$	523,060		$	311,462	$	399,894

Earnings per share
Basic – as reported	$	0.04	$	0.18		$	0.11	$	0.14
Basic – pro forma	$	0.04	$	0.18		$	0.11	$	0.13
Diluted – as reported	$	0.04	$	0.18		$	0.11	$	0.14
Diluted – pro forma	$	0.04	$	0.18		$	0.11	$	0.13

			Unrealized
			Holding		Fair
	Cost		Gain		Value
BellSouth common stock	$	11,072,379	$	1,245,982	$	12,318,361

6. Earnings Per Share

~~Included on~~Basic ~~the~~earnings ~~balance~~per ~~sheet~~share ~~are~~is ~~call~~computed ~~options~~as ~~written~~net income ondivided ~~BellSouth~~by ~~common~~the ~~stock~~weighted asaverage number of common shares outstanding for ~~July~~the ~~31,~~period. ~~2003~~Diluted atearnings aper ~~fair~~share ~~value~~includes the dilutive effect of ~~$1,941,730~~the assumed ~~representing~~exercise ~~contracts~~of ~~for~~stock ~~479,500~~options. Reconciliation of the weighted average shares. outstanding for basic and diluted earnings per share are as follows:

4. Capital Stock

	For the Three Months Ended April 30,		For the Six Months Ended April 30,
	2005	2004	2005	2004
Weighted average common shares outstanding:
Basic EPS shares	2,923,631	2,924,631	2,924,139	2,924,631
Dilutive effect of stock options	3,323	26	3,485	40,026
Diluted EPS	2,926,954	2,924,657	2,927,624	2,964,657

For the nine months ended July 31, 2003, the Company acquired 29,200 shares of its common stock for $369,564 under a plan that permits the acquisition of up to 20% of the Company’s stock.

5. Sale of Investment

Included in prepaid expenses and other current assets at October 31, 2002 was an investment in a partnership accounted for at cost of $1,000,000. During the nine months ended July 31, 2003, the Company sold such investment for cash proceeds of $1,421,253 and recognized a gain of $421,253.

6. Stock Options

The Company adopted the disclosure provisions of SFAS 148, “Accounting for Stock-Based Compensation — Transition and Disclosure,” which amended SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”) to provide alternative methods of transition for an entity that voluntary changes to the fair value based method of accounting for stock-based employee compensation, effective as of the beginning of the fiscal year. The Company continues to apply the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” (“APB 25”) in accounting for stock-based compensation. In accordance with APB No. 25, compensation costs for stock options is recognized in income based on the excess, if any, of the quoted market price over the exercise price of the stock on the date of grant. The exercise price for all stock option grants equals the fair market value on the date of grant, therefore no compensation expense is recorded.

~~The~~7. Segment following table illustrates the effect on net income (loss) and earnings per share as if the Company had applied the fair value recognition provisions for the nine and three months ended July 31, 2003 and 2002 (unaudited):Information

	Three Months Ended					Nine months ended
	2003			2002		2003		2002
Net income (loss)
As reported	$	(82,724	)	$	1,437,513	$	722,405	$	3,672,812
Pro forma	(151,400		)	1,243,833		614,190		3,259,908
Earning per share
Basic - as reported	$(0.03		)	$0.47		$0.25		$1.17
Basic - pro forma	(0.05		)	0.41		0.21		1.04
Diluted - as reported	(0.03		)	0.47		0.25		1.17
Diluted - pro forma	(0.05		)	0.41		0.21		1.04

The company currently operates in two segments; the holding company, including certain investments which are not currently material, and in ENS.

7. Earnings Per Share

	NWH and Other			ENS			Total
Three months ended April 30, 2005

Revenues:
Service	$	—		$	4,770,308		$	4,770,308
Expenses
Cost of services, professional fees, and general administrative	(563,154		)	(4,084,968		)	(4,648,122		)
Depreciation and amortization	(3,941		)	(85,653		)	(89,594		)
Income (loss) from operations	$	(567,095	)	$	599,687		$	32,592

Capital expenditure for property and equipment and internally developed software including capitalized lease obligations	$	9,071		$	455,119		$	464,190

Basic earnings per share is computed as net (loss) income divided by the weighted average number of common shares outstanding for the period. Diluted earnings per share includes the dilutive effect of the assumed exercise of stock options.

	NWH and Other			ENS			Total
Three months ended April 30, 2004

Revenues:
Service	$	—		$	4,373,436		$	4,373,436
Expenses
Cost of services, professional fees, and general and administrative	(485,137		)	(3,812,955		)	(4,298,092		)
Depreciation and amortization	—			(76,352		)	(76,352		)
Income (loss) from operations	$	(485,137	)	$	484,129		$	(1,008	)
Capital expenditure for property and equipment and internally developed software including capitalized lease obligations	$	—		$	326,767		$	326,767

Reconciliation of the weighted average shares outstanding for basic and diluted earnings per share are as follows:

	Periods Ended July 31,
	Three Months		Nine Months
	2003	2002	2003	2002
Basic EPS shares outstanding (weighted average)	2,920,618	3,043,959	2,920,887	3,141,277
Effect of dilutive securities	***	—	10,620	—
Diluted EPS shares outstanding	2,920,618	3,043,959	2,931,507	3,141,277

*** Dilutive securities are excluded for the three months ended July 31, 2003 since the inclusion of such shares would be antidilutive due to the net loss for the quarter then ended.

Options to purchase 75,000 shares of common stock were outstanding during the nine months ended July 31, 2003, but were not included in the computation of diluted earnings per share. Since the exercise price of these options was greater than the average market price of the Company’s common shares during the respective periods, their inclusion in the computation would have been antidilutive. Consequently, these options are excluded from the computation of earnings per share.

8. Segment Information

	NWH and Other			ENS			Total
Six months ended April 30, 2005

Revenues:
Service	$	—		$	9,418,088		$	9,418,088
Expenses
Cost of services, professional fees, and general and administrative	(1,144,059		)	(8,234,220		)	(9,378,279		)
Depreciation and amortization	(6,749		)	(170,054		)	(176,803		)
Income (loss) from operations	$	(1,150,808	)	$	1,013,814		$	(136,994	)
Total assets	$	24,238,130		$	11,528,702		$	35,737,832

Capital expenditure for property and equipment and internally developed software including capitalized lease obligations	$	9,071		$	758,797		$	767,868

The Company currently operates in two operating segments: the holding company, including certain investments which are not currently material; and its investment in ENS.

	NWH and Other			ENS			Total
Six months ended April 30, 2004

Revenues:
Service	$	—		$	8,559,746		$	8,559,746
Expenses
Cost of services, professional fees, and general and administrative	(987,900		)	(7,560,156		)	(8,548,056		)
Depreciation and amortization	(500		)	(142,066		)	(142,566		)
Income (loss) from operations	$	(988,400	)	$	857,524		$	(130,876	)
Total assets	$	32,499,354		$	10,748,645		$	43,247,999

Capital expenditure for property and equipment and internally developed software including capitalized lease obligations	$	—		$	802,817		$	802,817

	NWH and
	Other			ENS			Total
Three months ended July 31, 2003
Revenues
Service	$	—		$	3,498,567		$	3,498,567
Expenses
Cost of services, professional fees, and general and administrative	(614,723		)	(3,110,914		)	(3,725,637		)
Depreciation and amortization	(465		)	(78,536		)	(79,001		)
(Loss) income from operations	$	(615,188	)	$	309,117		$	(306,071	)
Capital expenditure for property and equipment (including costs incurred for internally developed software)	$	17,486		$	370,929		$	388,415
Three months ended July 31, 2002
Revenues
Service	$	—		$	2,961,599		$	2,961,599
Expenses
Cost of services, professional fees, and general and administrative	(480,460		)	(2,501,270		)	(2,981,730		)
Depreciation and amortization	(871		)	(84,718		)	(85,589		)
(Loss) income from operations	$	(481,331	)	$	375,611		$	(105,720	)
Capital expenditure for property and equipment (including costs incurred for internally developed software)	$	—		$	335,832		$	335,832

8. Income Taxes

The provision (benefit) for income taxes for the three and six months ended April 30, 2005 includes a revision of a prior year tax estimate of $-0- and $206,000, respectively.

	NWH and
	Other			ENS			Total
Nine months ended July 31, 2003
Revenues
Service	$			$	9,435,558		$	9,435,558
Expenses
Cost of services, professional fees, and general and administrative	(1,484,010		)	(8,574,720		)	(10,058,730		)
Depreciation and amortization	(1,395		)	(245,628		)	(247,023		)
(Loss) income from operations	$	(1,485,405	)	$	615,210		$	(870,195	)
Total assets	$	41,531,139		$	9,284,232		$	50,815,371
Capital expenditure for property and equipment (including costs incurred for internally developed software)	$	17,486		$	897,958		$	915,444
Nine months ended July 31, 2002
Revenues
Service	$	—		$	8,933,949		$	8,933,949
Expenses
Cost of services, professional fees, and general and administrative	(1,308,046		)	(7,718,673		)	(9,026,719		)
Depreciation and amortization	(8,151		)	(251,588		)	(259,739		)
(Loss) income from operations	$	(1,316,197	)	$	963,688		$	(352,509	)
Total assets	$	46,500,937		$	8,653,799		$	55,154,736
Capital expenditure for property and equipment (including costs incurred for internally developed software)	$	2,216		$	792,349		$	794,565

9. Dividends

9On May 2, 2005, the Board of Directors of the Company declared a quarterly dividend of $0. ~~Dividends~~30 ~~Payable~~per share, plus a special dividend of $0.20 per share. The dividend, aggregating $0.50 per share, payable in cash on August 4, 2005, to stockholders of record at the close of business on July 29, 2005.

On ~~June~~ 10February 7, ~~2003~~2005, the Board of Directors of the Company declared a quarterly dividend of $0.30 per share, plus a special dividend of $0.20 per share. The dividend, aggregating $0.50 per share~~, will~~ bewas paid onin ~~August~~cash 1on May 4, 2005 ~~2003~~ to ~~stockholders~~the shareholders of record at the close of business on ~~July 18~~April 28, ~~2003~~ 2005.

On July 18, 2003, the Board of Directors of the Company declared a quarterly dividend of $0.30 per share, plus a special dividend of $0.20 per share. The dividend, aggregating $0.50 per share, will be payable in cash on November 3, 2003 to stockholders of record at the close of business on October 20, 2003.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NWH, Inc. (“NWH” or the “Company”), a Delaware corporation, is an electronic commerce and communications company focusing primarily on acquisition and operation of telecommunications, e-commerce and other strategically linked businesses. The Company currently owns and operates Electronic Network Systems, Inc. (“ENS”), ~~formerly known as Electronic Data Submission Systems, Inc.,~~ a ~~business-to-business~~payer ~~healthcare~~services ~~e-commerce~~organization ~~data~~that ~~interchange~~connects ~~company, providing links between~~ healthcare ~~providers~~payers and ~~payers.~~providers Inusing state ~~addition,~~of the ~~Company continues~~art ~~its~~proprietary ~~business~~software ofand ~~acquiring~~telecommunications ~~controlling~~services ~~interests~~for inmost ~~telecommunications,~~ healthcare, ~~other~~payment ~~strategically~~and ~~linked~~insurance ~~areas~~validation ~~and~~transactions. ~~other unrelated~~The ~~businesses.~~Company Infocuses its ~~June~~efforts ~~1997,~~on the ~~Company~~development ~~sold~~of ~~its~~ENS’ ~~wireless~~business ~~cable~~and ~~assets~~continues its business of inacquiring ~~Miami,~~and ~~Florida~~disposing inof ~~exchange~~interests ~~for~~in ~~common~~healthcare ~~stock~~and ofother ~~BellSouth~~business ~~Corporation~~areas.

The Company was incorporated in Delaware under the name National Wireless Holdings Inc. on August 31, 1993. The Company’s fiscal year ends on October 31. ENS’ fiscal year ends on September 30.

ENS is a ~~leading~~payer services ~~healthcare~~organization ~~transactions-processing~~that connects payers (i.e., insurance companies and third ~~intermediary~~party administrators) and providers (i. Ate., ~~ENS~~doctors, wegroup ~~execute~~practices aand other ~~full-cycle~~healthcare ~~suite~~providers) using state of ~~payer-driven~~the ~~services~~art proprietary software and telecommunications ~~products~~services ~~known~~for asmost ~~Health-e~~healthcare payment and insurance ~~Networkâ~~validation ~~that~~transactions. ENS ~~establishes~~provides a ~~transactions~~state ~~processing~~of ~~environment~~the art technology platform for ~~payers,~~web ~~physicians~~based ~~and~~graphical ~~other~~user ~~healthcare~~interfaces on ~~providers~~a national basis, ~~including~~which ~~hospitals~~enables ~~and~~its ~~laboratories. Our~~clients, ~~services~~both payers and ~~products~~providers, ~~(1)~~to comply ~~create~~fully ~~healthcare~~with ~~e-commerce connectivity~~applicable ~~between~~regulatory ~~payers,~~requirements ~~physicians~~such ~~and~~as ~~other~~those ~~healthcare~~imposed ~~providers, (2)~~by ~~significantly~~HIPAA. ENS’ ~~reduce~~service offerings address the ~~volume~~full array of ~~paper~~evolving ~~healthcare~~industry ~~transactions~~needs ~~and~~in ~~processing~~this focused area with a complete ~~errors,~~cycle ~~and~~of ~~(3)~~services ~~set~~from a ~~clear~~single ~~migration~~point ~~path~~of ~~for~~entry ~~payers,~~(a ~~physicians~~personal ~~and~~computer ~~other~~in the ~~healthcare~~client’s ~~providers~~office) tofor ~~utilize~~both ~~Internet~~providers and ~~Web-based~~payers, ~~applications~~compatible ~~and services~~with ~~effectively~~multiple ~~for~~system and ~~greater~~database ~~operational~~operating ~~efficiency~~environments. We These ~~believe~~services ~~Health-e~~include ~~Networkâ~~an Internet transactions portal, payer istransactions ~~one~~hosting, ofelectronic ~~the~~data ~~most~~interchange, ~~effective~~Pre-adjudication software services ~~addressing~~(PASStm), scanning, ~~the~~optical character ~~need~~recognition toand ~~handle~~data ~~both~~entry of paper claims and ~~electronic~~correspondence ~~transactions~~and mailroom onservices. ~~behalf~~ENS ofgenerates ~~its~~revenue ~~customers,~~through torecurring ~~reduce~~subscriptions, flat or ~~eliminate inefficient~~per ~~paper~~transaction ~~transactions~~fees and torevenue ~~conduct business electronically~~sharing.

InOver ~~excess of 29~~54,000 providers are connected to ~~our~~ ENS’ e-commerce and Internet services ~~and,~~which ~~through~~represents ~~our~~a ~~payer~~47% ~~contracts~~increase over the prior year. Through payer arrangements, weENS also currently ~~conduct~~ conducts daily paper to e-commerce claim conversion for another 185,000 healthcare providers. ~~Our~~ENS ~~revenues~~also ~~are generated~~experienced ~~from~~a ~~payers,~~32.6% ~~physicians,~~increase ~~other~~in contracted ~~providers~~billable ~~and~~provider ~~strategic~~sites ~~partners through~~over ~~recurring~~the ~~subscriptions,~~prior ~~flat~~year. All orof ~~per~~ENS’ ~~transaction~~growth ~~fees~~was ~~and~~obtained ~~revenue~~through ~~sharing~~internal sales versus acquisition. As of June 10 7, ~~2003~~2005, weENS ~~were~~ was connected to over 1,~~000~~200 ~~commercial~~payers, including commercial healthcare plans, managed care organizations ~~and~~, Blue Cross/Blue Shield plans, ~~as well as~~ Medicare, Medicaid and CHAMPUS. Nearly 90% of all electronic claims received by ENS are directly submitted to contracted payers.

We focus on the current and future connectivity and transactions processing requirements of the healthcare industry. We provide healthcare providers with a ~~secure~~ secure infrastructure for web-based and private network transactions consisting of, among others, electronic medical claims processing, electronic claims ~~tracking~~ tracking and patient eligibility verification. We also provide health care ~~payers~~ payers e-commerce connectivity with their provider constituency as well as ~~paper~~ paper claims conversion, pre-adjudication, reporting, education and marketing ~~support~~ support to increase utilization of e-commerce in this industry. Our strategy for the future is to facilitate the migration of provider and payer clients from their current inefficient, non-integrated transactions processing environments to efficient, seamlessly integrated applications utilizing the ~~transactions~~ transactions processing capabilities of Health-e Networkâ. Traditional applications linked to on-all-the-time Internet

capabilities ~~of Health-e Networkâ. Traditional applications linked to on-all-the-time Internet capabilities~~ or Application Service Provider (ASP) environments will be able to route real-time transactions to and from all payers utilizing Health-e Networkâ. We believe that the transition to these new levels of integrated transactions processing capabilities will drastically change how the business of healthcare is conducted among healthcare participants. We plan to continue to expand this transactions infrastructure as management believes these applications will evolve into viable and widely used systems over the next three to five years.

ENS Services – Health-e Networkâ

ENS’ Health-e Networkâ suite of services addresses ~~100%~~all of the healthcare industry’s administrative transaction processing needs, both e-commerce and paper. As a provider of a full-cycle payer, ~~physician~~ and provider e-commerce ~~suite~~ of services, ENS ~~developed~~enhances ~~these services to enhance~~ the providers’ ~~and~~ and payers’ administrative efficiency. ~~The~~ The service offerings range from a front-end data capture/transmission software, to advanced pre-adjudication software, to simple mailroom services. ENS ~~presently~~currently ~~services~~provides e-commerce connectivity to over 1,~~000~~200 ~~payer clients~~payers for the e-commerce claims component of Health-e Networkâ and provides ~~five~~several ~~payer~~payers ~~organizations~~ with connectivity for the ~~full~~entire suite of ~~payer~~HIPAA-mandated ~~services~~administrative transactions between payers and providers.

Health-e Networkâ includes the following:

• Healthcare e-Commerce Transactions Processing ENS delivers multiple applications that enable healthcare providers ~~easily~~ to conduct key healthcare transactions ~~with~~easily with many payers. ENS provides these e-commerce applications through the Internet and on multiple operating systems. ENS also delivers transaction ~~processing~~ processing capabilities to strategic partners, such as ~~medical~~physician management software ~~companies~~vendors which, ~~who~~ with their own software, access payers to conduct electronic business transactions via use of ENS’ ~~Application~~Software ~~Programming~~Developer’s ~~Interface~~ Kit (~~API~~SDK). ENS currently processes and routes medical and hospital claims, eligibility requests and responses, claims status, claims tracking, claim payment remittance information, reporting, referral and authorization transactions. ENS ~~plans to~~services support all of the HIPAA -defined transactions and deliver to providers various methods of conducting those transactions with payers.

• Provider Connectivity (Xpedite™ ) enables ENS to identify the paper and manual transaction volumes of a payer’s provider groups, target high paper submitters, track internal progress, and market specifically to selected healthcare transaction submitters. Based on payer specific criteria, ENS assigns different levels of internal resources to convert these providers to electronic business processes with the payer. The ~~XpediteTM~~ Xpediteä conversion program then goes beyond the sales process and combines efforts of all ENS internal departments. The purpose of ~~XpediteTM~~Xpediteä is to connect providers on behalf of payer organizations to make the participants more efficient through e-commerce.

• Automated Document ServicesÔ (ADSÔ) provides payers the complete front-end handling and conversion (imaging/scanning) of paper claims forms to an e-commerce format. Paper claims still constitute from 55-% to 60% of provider claims volume industry-wide to commercial payers. As the claims are converted to an electronic format, ENS captures the names of all paper-submitting providers in order to convert them for other e-commerce

~~names of all paper-submitting providers in order to convert them for other e-commerce products and~~ services with the payer’s support. Utilization of Health-e Networkâ (which includes ADSÔ) provides a payer with the opportunity to have 100% e-commerce claims receipts. With ENS as their partner and core e-commerce strategy implementer, payers can increase e-commerce transactions from their provider constituency.

• Pre-Adjudication Software SystemÔ (PASSÔ) provides a single, HIPAA-compliant connectivity entry point to a payer for all claims transactions, including transactions received via the Internet, through private e-commerce networks, and received on paper. PASSä channels the claims by utilizing customized and algorithm-based logic, and conducts the vital claims processing function of provider and member matching, including real-time eligibility verification, a critical payer requirement for increased claims paying accuracy and efficiency. ENS’ PASSÔ is an open, flexible solution that is used with the vast majority of today’s payer operating environments.

• HIPAA Payer Portal and Hosting (Health-e XchangeÔ) ENS’ transactions infrastructure receives data from providers in virtually any file format and translates to any healthcare Payers’ file specifications, facilitating HIPAA transactions compliance. ENS delivers transactions compliance for Providers, Payers, and Application Service Providers. ENS provides compliance, connectivity, and routing on all HIPAA-defined administrative healthcare transactions with a participating Payer including: healthcare claims or encounter information; health plan eligibility; healthcare claim status; referral certification and authorization; healthcare payment and remittance advice; health plan enrollments; and health plan premium payments.

ENS also provides transaction hosting for Payers so they can outsource their transaction processing needs. ENS’ transaction hosting capabilities provide for compliance, connectivity, routing, and processing of the transaction for the Payer on the following HIPAA-defined administrative healthcare transactions: health plan eligibility; healthcare claim status; referral certification and authorization

• ~~Eligibility is~~Real Time Transaction Processing for eligibility, claim status and referrals is an ENS service that provides physician practices with immediate access to ~~participating~~ participating payers plus various regional and governmental payers for determining member plan eligibility. This service is delivered over the Internet and receives constant updating.

• Electronic Claims Tracking (ECTÔ) provides immediate Internet-based tracking of both e-commerce claims and, for those payers utilizing Health-e Networkâ, up-dated status on the paper claims that have been converted to an e-commerce format. ENS believes that this is the first tool that affords providers the opportunity to utilize an Internet application to track claims forwarded to payers electronically.

• Direct-Payer e-Commerce provides network connectivity for HIPAA-defined transactions to and from payer organizations from existing physicians and gateways.

• Customer Service. As an adjunct to its transaction processing services, we maintain customer service facilities with help desks for real-time customer inquiries. We offer on-line ~~and personal technical support. Client support employs a modern call tracking and response~~

and personal technical support. Client support employs a modern call tracking and response system that is directly connected to the processing center.

As of ~~September 12~~June 7, ~~2003~~2005, in excess of 2954,000 physicians were actively submitting electronic healthcare transactions via Health-e Networkâ suite of services with ~~over~~ an additional ~~2,500~~227 contracted ~~providers~~provider sites scheduled to be installed in ~~2003~~during the remainder of calendar 2005.

In addition to ENS, the Company ~~continues~~may ~~its~~continue ~~business~~to seek ofacquisitions ~~acquiring controlling interests~~ in telecommunications, healthcare and other strategically linked areas. The Company may acquire or invest in other businesses.

Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q, including, without limitation, statements containing the words “believes,” “anticipates,” “expects” and words of similar import, constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission in its rules, regulations and releases, regarding the Company’s financial and business prospects and capital requirements. Such forward-looking statements involve ~~known~~ known and unknown risks, uncertainties and other factors that may cause the ~~actual~~ actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or ~~achievements~~ achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: the limited nature of the Company’s operations and the risk of the Company’s failure to acquire additional businesses; the uncertain acceptance of Health-e Networkâ; competition; existing government regulations and changes in, or the failure to comply with, government regulations; the ability of the Company to sustain, manage or forecast its growth; dependence on significant customers and the potential loss thereof; the ability to attract and retain qualified personnel; risk of technological obsolescence, and other factors referenced in this Quarterly Report on Form 10-Q including, without limitation, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Certain of these factors are discussed in more detail in the Company’s Annual Report on Form 10-K ~~for~~ for the year ended October 31, ~~2002~~2004, including, without limitation, under ~~the~~ the caption “Business” and Exhibit 99.1 thereto. Given these uncertainties, undue reliance should not be placed on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained or incorporated by reference herein to reflect future events or developments.

Results of Operations

~~Nine~~Six months ended ~~July 31~~April 30, ~~2003~~2005 as compared to six ~~nine~~ months ended ~~July 31~~April 30, ~~2002~~2004:

Services Revenue:

Services revenue increased from $8,~~933~~559,~~949~~746 for the ~~nine~~ six months ended ~~July 31~~April 30, ~~2002~~2004 to $9,~~435~~418,~~558~~088 for the ~~nine~~six months ended ~~July 31~~April 30, 2005 ~~2003~~(approximately 10%), ~~primarily~~ reflecting ENS’ increased sales. See below for a discussion of ENS results of operations.

Cost of Services:

Cost of services increased from $4,~~221~~494,~~035~~783 for the ~~nine~~six months ended ~~July~~ 31April 30, 2004 ~~2002~~ to $4,~~844~~600,~~338~~800 for the ~~nine~~six months ended ~~July 31~~April 30, ~~2003~~2005 (approximately 2%), reflecting costs related to increased sales at ENS ~~and higher levels of amortization of capitalized software for revenue producing projects at ENS~~. ~~Cost of sales increased at a greater percentage than related sales due to implementation costs of ENS.~~ See below for a discussion of ENS’ results of of operations.

Professional Fees:

Professional fees increased from $~~471~~397,~~610~~530 in the ~~nine~~six months ended ~~July 31~~April 30, 2004 ~~2002~~ to $~~491~~579,~~258~~666 ~~for~~ in the ~~nine~~six months ended ~~July 31~~April 30, ~~2003~~2005 ~~primarily~~(approximately 46%) as a result of ~~compliance~~arbitration proceedings with a major customer over additional ~~Sarbanes-Oxley~~business opportunities and review of our other potential legal claims against third parties. The professional fees relating to the Company independent of ENS’ business increased from $327,731 in the six months ended April 30, 2004 to $391,966 in the six months ended April 30, 2005, reflecting higher levels of transaction activity.

General and Administrative:

General and administrative expense increased from $43,~~334~~655,~~074~~743 in the ~~nine~~ six months ended ~~July 31~~April 30, ~~2002~~2004 to $4,~~723~~197,~~134~~813 in the ~~nine~~six months ended ~~July~~Apri1 3130, 2005 ~~2003~~(approximately15%), reflecting business growth ~~increased~~in ~~marketing~~EDI ~~costs~~transactions onwith ~~the~~providers ~~provider~~and payers. The general and ~~payer~~administrative ~~side~~expenses relating to the operations of the Company, independent of ENS’ business, increased from $660,170 in the six months ended April 30, 2004 to $752,093 in the six months ended April 30, 2005.

Depreciation and Amortization:

Depreciation and amortization ~~decreased~~increased from $~~259~~142,~~739~~566 in the ~~nine~~six months ended ~~July 31~~April 30, 2004 ~~2002~~ to $~~247~~176,~~023~~803 in the ~~nine~~six months ended ~~July 31~~April 30, ~~2003~~2005, primarily due to the aamortization ~~reduction~~ of ~~equipment~~additional ~~purchased~~software bydevelopment ~~ENS~~projects.

Loss from Operations:

As a result of the foregoing events, loss from operations increased from a loss of ($~~352~~130,~~509~~876) in the ~~nine~~six months ended ~~July 31~~April 30, ~~2002~~2004 to a loss of ($~~870~~136,~~195~~994) in the ~~nine~~six months ended ~~July 31~~April 30, ~~2003~~2005.

Gain on Securities Transactions, ~~net~~Net:

~~Gain~~We realized a net gain on securities transactions, ~~net,~~for ~~decreased~~the ~~from~~six ~~gain~~months ended April 30, 2004 of $5558,~~089,568~~458 ~~for~~as compared to no net gain or loss for the ~~nine~~six months ended ~~July~~ 31April 30, ~~2002~~2005, toas ~~gain~~we had already disposed of ~~$910,738~~our ~~for~~remaining holdings of BellSouth common stock prior to the ~~nine~~start ~~months~~of ~~ended~~fiscal ~~July~~2005. Under ~~31,~~Financial ~~2003,~~Accounting Standards Board Statement No. 133 “Accounting ~~representing~~for ~~the~~Derivative ~~net~~Instruments ~~results~~and ofHedging ~~option~~Activities,” unrealized gains and ~~short~~losses ~~sale~~related ~~positions~~to written call options and ~~settlements~~short ~~and~~sales ~~realized~~are ~~gains~~recorded ~~from~~in the ~~sale~~Statement of Income. Further, unrealized gains and losses on BellSouth common stock, are recorded through Other Comprehensive (Loss) Income and are only recorded in the Statement of Income when realized upon ultimate sale. The realized and unrealized gain (on derivative transactions decreased from a loss of ($209,497) for the six months ended April 30, 2004 to no gain or loss for the six months ended April 30, 2005. The unrealized loss on Bell South common stock, reflected in Other Comprehensive Income ~~(Loss)~~, net of income taxes, for the ~~nine~~six months ended ~~July 31~~April 30, 2004 ~~2002~~ was ($3407,~~656,226~~978) as compared to ~~($187,991)~~ no gain or loss for the ~~nine~~six months ended ~~July 31~~April 30, ~~2003~~ 2005.

Interest and Dividend Income:

Interest income decreased from $307,976 for the nine months ended July 31, 2002 to $268,078 for the nine months ended July 31, 2003, primarily because of lower interest rates and lower cash levels relating to option and short positions on BellSouth common stock. Dividend income decreased from $307,112 for the nine months ended July 31, 2002 to $303,851 for the nine months ended July 31, 2003, due to a higher dividend rate on BellSouth common stock offset by fewer shares owned during the nine months ended July 31, 2003 as compared to the nine months ended July 31, 2002.

Other Income:

During the nine months ended July 31, 2003, we realized gain of $421,253 from sale of our

~~interest~~Interest inand anDividend ~~investment partnership.~~Income:

Interest income increased from $134,920 for the six months ended April 30, 2004 to $153,671 for the six months ended April 30, 2005, primarily as a result of higher interest rates and changes in cash levels and our investment in treasury bills with the proceeds of the disposition of our remaining Bell South common stock. Dividend income increased from $124,571 for the six months ended April 30, 2004 to $137,551 for the six months ended April 30, 2005, due to our investment in various preferred index funds during 2005 as compared to the dividends received from Bell South common stock in 2004.

Interest Expense:

Interest ~~expense~~ expense decreased from $7923,~~335~~999 ~~for~~in the ~~nine~~six months ended ~~July 31~~April 30, ~~2002~~2004 to $416,~~320~~766 ~~for~~ in the ~~nine~~six months ended ~~July 31~~April 30, ~~2003~~2005, primarily due to ~~lower~~a ~~debt~~decrease in the ~~under~~average ~~ENS~~amount of debt and capital lease ~~obligations~~balances outstanding.

~~Income~~Other ~~Before Provision for~~ Income ~~Taxes~~(Expense):

We realized ~~income~~$793,950 ~~before~~of ~~provision~~other ~~for~~ income ~~taxes~~during ~~of $5,272,812 for~~ the ~~nine~~six months ended ~~July~~April 30, 312004, ~~2002,~~ aswhich ~~compared~~was primarily attributable to ~~income~~our ~~before~~gain ~~provision~~on ~~for~~securities ~~income~~transactions, ~~taxes~~net, ofwhile ~~$992,405~~during ~~for~~ the ~~nine~~ six months ended ~~July 31~~April 30, ~~2003~~2005, ~~primarily~~we asrealized aother ~~result~~income of ~~lower~~$284,456, ~~gains on~~reflecting ~~options~~our ~~and~~interest ~~short~~income ~~positions~~ and ~~sales~~dividend asincome, ~~described~~net ~~above~~of interest expense.

Income Before Provision (Benefit) for Income Taxes:

~~Provision~~We realized income before provision for income taxes ~~was~~of $1663,~~600,000~~074 for the ~~nine~~six months ended ~~July 31~~April 30, ~~2002~~2004, primarily as ~~compared~~a toresult aof losses on ~~provision~~options ~~for~~and ~~income~~gains ~~taxes~~on sales of ~~$270~~Bell South stock,~~000~~ while for the ~~nine~~six months ended ~~July~~April 30, 2005, 31the income before provision for income taxes decreased to $147,462. These ~~2003~~results are primarily attributable to higher interest rates and because there were no securities transactions in 2005.

Provision (Benefit) for Income Taxes:

The provision for income taxes was $250,000 for the six months ended April 30, 2004, as compared to a benefit of $164,000 for the six months ended April 30, 2005. The benefit for income taxes for the six months ending April 30, 2005 includes primarily the revision of a prior year tax estimate of $206,000.

Net Income:

Net income decreased from $3413,~~672,812~~074 for the ~~nine~~six months ended ~~July 31~~April 30, 2004 ~~2002~~ to $~~722~~311,~~405~~462 for the ~~nine~~ six months ended ~~July 31~~April 30, ~~2003~~2005 as a result of the foregoing events.

Three months ended ~~July 31~~April 30, ~~2003~~2005 as ~~compared~~ compared to three months ended ~~July 31~~April 30, ~~2002~~2004:

Services Revenue:

Services revenue increased from $24,~~961~~373,~~599~~436 infor the three months ended ~~July 31~~April 30, ~~2002~~2004 to $34,~~498~~770,~~567 in~~308 for the three months ended ~~July 31~~April 30, 2005 ~~2003~~(approximately 9%), ~~primarily~~ reflecting ENS’ increased sales ~~at ENS~~. See below for a discussion of ENS results of operations.

Cost of Services:

Cost of services ~~increased~~decreased from $12,~~362~~350,~~553~~541 infor the three months ended ~~July~~ 31April 30, 2004 ~~2002~~ to $12,~~859~~255,~~045~~419 infor the three months ended ~~July 31~~April 30, ~~2003,~~2005 ~~reflecting costs~~(approximately ~~related~~4%), due to ~~increased~~additional labor ~~sales~~being ~~at ENS and higher levels of amortization of~~ capitalized ~~software~~ for ~~revenue~~software ~~producing~~development projects ~~at ENS~~. ~~Cost of sales increased at a greater percentage than related sales due to implementation costs of ENS.~~ See below for a discussion of ENS’ results of of operations.

Professional Fees:

Professional fees increased from $~~149~~179,~~456~~002 in the three months ended ~~July 31~~April 30, 2004 ~~2002~~ to $~~222~~253,~~400~~410 in the three months ended ~~July 31~~April 30, ~~2003,~~2005 ~~primarily~~(approximately 42%) as a result of ~~compliance~~arbitration proceedings with a major customer over additional ~~Sarbanes-Oxley~~business opportunities and review of our other potential legal claims against third parties. The professional fees relating to the Company independent of ENS’ business increased from $143,902 in the three months ended April 30, 2004 to $156,710 in the three months ended April 30, 2005, reflecting higher levels of transaction activity.

General and Administrative:

General and administrative ~~expenses~~expense increased from $1,~~469~~768,~~721~~549 in the three months ended ~~July~~ 31April 30, ~~2002~~2004 to $12,~~644~~139,~~192~~293 in the three months ended ~~July 31~~April 30, 2005 ~~2003,~~(approximately ~~reflecting~~21%), ~~increased~~reflecting ~~marketing~~business ~~costs~~growth onin ~~the~~EDI ~~provider~~transactions with providers and ~~payer~~payers. The ~~side~~general and administrative expenses relating to the operations of ~~its~~the Company, independent of ENS’ business, increased from $341,235 in the three months ended April 30, 2004 to $406,444 in the three months ended April 30, 2005.

Depreciation and Amortization:

Depreciation and amortization ~~decreased~~increased from $8576,~~589~~352 in the three months ended April 30, 2004 to $89,594 in the three months ended ~~July~~April 30, 312005, ~~2002~~primarily due to the amortization of additional software development projects.

17Income (Loss) from Operations:

toAs a result of the foregoing events, income from operations increased from a loss of ($791,~~001~~008) in the three months ended ~~July 31~~April 30, ~~2003,~~2004 ~~primarily due~~ to aincome ~~reduction~~ of ~~equipment~~$32,592 ~~purchased~~in bythe ~~ENS~~three months ended April 30, 2005.

Gain (Loss) ~~from~~on ~~Operations~~Securities Transactions, Net:

AsWe realized a ~~result~~gain ofon securities transactions for the three months ~~foregoing~~ended ~~events~~April 30, ~~loss~~2004 ~~from~~of ~~operations~~$738,015 ~~increased~~as ~~from~~compared ato no net gain or loss offor ~~($105~~the three months ended April 30,~~720)~~ in2005, as we had already disposed of our remaining holdings of BellSouth common stock prior to the ~~three~~start ~~months~~of ~~ended~~fiscal ~~July~~2005. Under 31Financial Accounting Standards Board Statement No. 133 “Accounting for Derivative Instruments and Hedging Activities,” ~~2002~~unrealized gains and losses related to awritten ~~loss~~call options and short sales are recorded in the Statement of ~~($306~~Income. Further,~~071~~ unrealized gains and losses on BellSouth common stock, are recorded through Other Comprehensive (Loss) Income and are only recorded in the Statement ~~three~~of Income when realized upon ultimate sale. The realized and unrealized gain on derivative transactions decreased from a gain of $738,015 for the three months ended April 30, ~~July~~2004 ~~31,~~to ~~2003~~no gain or loss for the three months ended April 30, 2005.

~~Gain on Securities Transactions, Net:~~18

WeThe ~~realized~~unrealized aloss ~~net gain~~ on ~~securities~~Bell ~~transactions~~South ~~for~~common ~~the~~stock, ~~three~~reflected ~~months~~in ~~ended~~Other Comprehensive ~~July 31~~Income, ~~2002~~net of ~~$1,842,761~~ asincome ~~compared~~taxes, ~~to a net gain~~ for the three months ended ~~July 31~~April 30, ~~2003~~ of2004 ~~$171,625,~~was ~~representing~~a ~~the net results of option and short sale positions and settlements. The effect of unrealized (~~loss) ~~gain on marketable securities reflected in Other Comprehensive Income (Loss), net~~ of ~~related income taxes, amounts to~~ ($1505,~~237,134~~566) atas ~~July~~compared ~~31,~~to ~~2002~~no ~~and~~gain ~~$34,202~~or ~~at July 31, 2003, representing the unrealized (~~loss) ~~gain~~for in the ~~BellSouth~~three ~~common~~months ~~stock~~ended April 30, 2005.

Interest and Dividend Income:

Interest income decreased from $~~128~~65,~~039~~105 infor the three months ended ~~July 31~~April 30, 2004 ~~2002~~ to $7634,~~438~~015 in for the three months ended ~~July 31~~April 30, ~~2003~~2005, primarily ~~because~~as a result of ~~lower~~liquidating ~~interest~~our ~~rates~~investment in ~~and~~treasury ~~decreased~~bills ~~cash~~in ~~levels relating to option and short positions on BellSouth common stock~~2005. Dividend income increased from $9656,~~728~~035 infor the three months ended ~~July 31~~April 30, ~~2002~~2004 to $~~111~~137,~~238~~551 infor the ~~three~~ three months ended ~~July 31~~April 30, ~~2003~~2005, due to ~~higher~~our ~~dividends~~investment ~~received~~in ~~on BellSouth~~various ~~common~~preferred ~~stock~~index funds during 2005 as nocompared ~~short~~to ~~positions~~the ~~were~~dividends ~~maintained~~received from Bell South common stock in 2004.

Interest Expense:

Interest expense ~~decreased~~ decreased from $247,~~295~~587 in the three months ended ~~July 31~~April 30, ~~2002~~2004 to $93,~~954~~093 in the ~~three~~ three months ended ~~July 31~~April 30, ~~2003~~2005, primarily due to ~~lower~~a ~~debt~~decrease ~~under~~in ~~ENS~~the ~~capital~~average amount of debt and capital lease ~~obligations~~balances outstanding.

~~Income~~Other ~~before Provision for~~ Income ~~Taxes~~(Expense):

We realized ~~income~~$851,568 of ~~before~~other ~~provision for~~ income ~~taxes~~during ~~of $1,937,513 for~~ the three months ended ~~July 31~~April 30, ~~2002~~2004, aswhich ~~compared~~was primarily attributable to ~~income~~our ofgain ~~$43~~on securities transactions,~~276~~ ~~for~~net, while during the three months ended ~~July~~April 30, 312005, ~~2003,~~ ~~primarily~~we asrealized aother ~~result~~income of ~~lower~~$168,473, reflecting ~~gains~~our ondividend ~~options~~income and ~~short~~interest ~~positions~~income, ~~as described~~net ~~above~~of interest expense.

Income Before Provision (Benefit) for Income Taxes:

~~The~~We realized income before provision (benefit) for income taxes ~~was~~ of $~~500~~850,~~000~~560 for the three months ended ~~July 31~~April 30, ~~2002~~2004, primarily as ~~compared~~a result toof alosses/gains ~~provision~~on ~~for~~options ~~income~~and ~~taxes~~short positions and sales of ~~$126~~Bell South stock,~~000~~ while for the three months ended ~~July~~April 30, 312005, the income before provision (benefit) ~~2003~~for income taxes decreased to $201,065. These results are primarily attributable to higher interest rates and because there were no security transactions in 2005.

~~Net~~Provision ~~Income~~ (~~Loss~~Benefit) for Income Taxes:

~~Net~~The ~~income decreased~~provision ~~from~~for income oftaxes was $1321,~~437,513~~000 for the three months ended ~~July 31~~April 30, ~~2002 to~~ a2004, ~~net~~as ~~loss~~compared ofto ($8274,~~724)~~000 for the three months ended ~~July 31~~April 30, ~~2003, as a result of the foregoing events~~2005.

Net Income:

Net income decreased from $529,560 for the three months ended April 30, 2004 to $127,065 for the three months ended April 30, 2005 as a result of the foregoing events.

ENS—Results of Operations:

ENS - ~~Nine~~Six months ended ~~June 30~~March 31, ~~2003~~2005 as compared to ~~nine~~ six months ended ~~June 30~~March 31, ~~2002~~2004:

Services Revenue:

Services revenue increased from $8,~~933~~559,~~949~~746 ~~for~~in the ~~nine~~six months ended ~~June 30~~March 31, ~~2002~~2004 to $9,~~435~~418,~~558 for~~088 in the ~~nine~~six months ended ~~June 30~~March 31, ~~2003~~2005 (or approximately ~~5.6~~10%), ~~primarily~~ ~~reflecting~~primarily due to growth in sales to providers and related payer income ~~and revenues from new customers~~. During the nine month period ended June 30, 2003, ENS entered into claim service agreements with PacifiCare and Aetna and began implementations of two significant additions to an existing multi-service contract which will eventually replace the revenues lost from Lifeguard and Caterpillar. While two large customers temporarily reduced the amount of paper claims submitted, ENS has increased its number of direct e-commerce connections with payers and increased its number of direct provider connections by 28.4% from June 30, 2002 to June 30, 2003. We anticipate quarterly services revenue to increase in excess of 30% by the first quarter of fiscal 2004, ending December 31, 2003.

Cost of Services:

Cost of services increased from $4,~~221~~493,~~035~~091 in the ~~nine~~six months ended ~~June 30~~March 31, ~~2002~~2004 to $4,~~844~~600,~~338~~ 800 in the ~~nine~~six months ended ~~June 30~~March 31, ~~2003~~2005 (or approximately ~~14.8~~2%), ~~as a result of~~ ~~higher~~reflecting ~~levels~~costs ofrelated ~~amortization~~to ~~of capitalized software for revenue-producing projects,~~ increased ~~numbers~~sales ofto providers and ~~payers~~related ~~and implementations of two~~payer ~~significant~~income ~~additions~~which towas anoffset ~~existing~~by ~~multi-service~~additional ~~contract. Cost~~labor ofbeing ~~sales~~capitalized ~~increased~~for ~~at a greater~~software ~~percentage~~development ~~than~~projects ~~related~~and ~~sales~~lower ~~due~~benefit ~~to implementation~~ costs. Included ~~related~~in tocost ~~the additional~~of ~~paper~~services ~~claim~~for ~~business~~the ~~from~~six ~~our~~months ~~existing~~ended ~~Fiserv contract~~March 31, ~~which are~~2004 ~~incurred~~and ~~before revenues are earned.~~March ~~Development~~31, ~~costs~~2005 ~~capitalized~~is ~~for~~amortization ~~the~~of ~~Lifeguard~~software costs and ~~Caterpillar~~depreciation of ~~contracts~~equipment ~~were~~of ~~fully~~$628,058 ~~amortized~~and ~~during the quarter ended December 31~~$658,629, ~~2002 due to termination of these contracts~~respectively.

Professional Fees:

Professional fees increased from $69,800 in the six months ended March 31, 2004 to $187,700 in the six months ended March 31, 2005 (approximately 169%) as a result of arbitration proceedings with a major customer over additional business opportunities.

General and Administrative:

General and administrative expense increased from $32,~~497~~084,~~638~~402 in the ~~nine~~six months ended ~~June 30~~March 31, 2004 ~~2002~~ to $32,~~730~~271,~~382~~441 in the ~~nine~~six months ended ~~June 30~~March 31, ~~2003~~2005 (or approximately ~~6.7~~ 9%) reflecting asbusiness agrowth ~~result~~in ofEDI transactions with providers and payers and increased ~~marketing~~legal ~~costs~~fees onfrom ~~the~~arbitration ~~provider~~proceedings. This ~~and~~amount ~~payer~~excludes ~~side of~~selling ~~its~~and ~~business,~~advertising in ~~increased~~the ~~commissions~~amount onof ~~increased~~$982,663 ~~provider~~and ~~sales~~$1,361,979, and ~~increased~~ ~~usage~~includes professional fees of ~~consultants~~$69,800 and ~~required~~$187,700, for ~~HIPAA~~the ~~compliance. Professional~~six ~~fees~~months ~~are~~ended ~~included~~March 31, in2004 ~~general~~ and ~~administrative expense~~2005, respectively.

Depreciation and Amortization:

Depreciation and amortization ~~decreased~~increased from $~~251~~142,~~588~~066 in the ~~nine~~six months ended ~~June 30~~March 31, ~~2002 to~~2004 to $~~245~~170,~~628~~054 in the ~~nine~~six months ended ~~June 30~~March 31, ~~2003~~2005 (or approximately ~~2.4~~20%), primarily due to aamortization ~~reduction~~ of ~~equipment~~additional ~~purchased~~software bydevelopment ~~ENS~~projects.

Interest Expense:

Interest expense, exclusive of interest payable to NWH, decreased from $79,335 in the nine months ended June 30, 2002 to $41,320 (or approximately 47.9%) in the nine months ended June 30, 2003, primarily due to lower debt under capital lease obligations. For the nine months ended June 30, 2003, $238,449 of interest expense by ENS to NWH is eliminated in consolidation.

Income from Operations:

As a result of the foregoing events, income from operations ~~decreased~~increased from $~~963~~857,~~688~~524 ~~for~~in the ~~nine months~~six months ended ~~June 30~~March 31, ~~2002~~2004 to $~~615~~1,~~210~~013,814 ~~for~~in the ~~nine~~six months ended ~~June 30~~March 31, ~~2003~~ 2005. We believe ENS will continue profitable operations throughout 2005.

19Interest Expense:

~~ENS~~Interest ~~will~~expense, exclusive ~~improve~~of interest payable to NWH, decreased from $16,616 in the six months ~~its~~ended ~~performance~~March 31, ~~throughout~~2004 ~~2003~~to as$6,565 ~~revenue~~(approximately ~~ramps~~60%) upin ~~from~~the ~~new~~six ~~customers~~months ended March 31, 2005, primarily due to a decrease in the average debt and ~~current~~capital ~~implementations~~lease ~~are~~balances ~~completed~~outstanding during the six months ended March 31, 2005. For the six months ended March 31, 2004 and March 31, 2005, $161,418 and $120,740 respectively, of interest expensed by ENS to the Company was eliminated in consolidation.

EBITDA:

EBITDA ~~decreased~~increased from $1,~~782~~627,~~649~~648 for the ~~nine~~six months ended ~~June 30~~March 31, ~~2002~~2004 to $1,~~582~~842,~~894~~497 for the ~~nine~~six months ended ~~June~~March 31, 302005, ~~2003~~primarily as a result of ~~higher~~ ~~costs~~increased asbusiness ~~a percent of revenue, as discussed above~~levels. We provide EBITDA (earnings before interest, taxes, depreciation and amortization) information as a guide to the operating performance of ENS. EBITDA, which is not a term recognized under generally accepted accounting principles, is calculated as the ~~Income~~net ~~from~~income ~~Operations~~ plus ~~Depreciation and Amortization.~~ ~~Included~~net ~~in depreciation and amortization for the purpose of calculating EBITDA is depreciation of equipment and amortization of software costs of $567~~interest,373 for the nine months ended June 30, 2002 and $722,056 for the nine months ended June 30, 2003, which is included in Cost of Services as derived from segment information in Note 8 to the Financial Statements. EBITDA as calculated by the Company may not be comparable to calculations of similarly titled items reported by other companies. We anticipate quarterly EBITDA to increase in excess of 60% by the first quarter of fiscal 2004, ending December 31, 2003.

~~Three months ended June 30, 2002 as compared to three months ended June 30, 2003:~~20

income taxes (benefit), depreciation and amortization. Included in depreciation and amortization for the purpose of calculating EBITDA is depreciation of equipment and amortization of software costs. EBITDA as calculated by the Company may not be comparable to calculations of similarly titled items reported by other companies.

Interest receivable by the Company from ENS was $8,754 at April 30, 2005, for a total outstanding loan to the Company of $5,147,739, including accrued interest. During the quarters ending January 31, 2005 and April 30, 2005, $700,000 and $600,000, respectively, of the amount owed by ENS to the Company under these loans was paid. These payments are reflected in the total outstanding loan as of April 30, 2005. The outstanding balance under this loan agreement including interest has been eliminated from the consolidated Financial Statements.

ENS - Three months ended March 31, 2005 as compared to three months ended March 31, 2004:

Services Revenue:

Services revenue increased from $24,~~961~~373,~~599~~436 in the three months ended ~~June 30~~March 31, ~~2002~~2004 to $34,~~498~~770,~~567~~ 308 in the three months ended ~~June 30~~March 31, ~~2003~~2005 (or approximately ~~18.1~~9%), ~~primarily~~ ~~reflecting~~primarily due to growth in sales to providers and related payer income ~~and revenues from new customers~~. During the three month period ended June 30, 2003, ENS entered into claim service agreements with PacifiCare and Aetna and began implementations of two significant additions to an existing multi-service contract which will replace the revenues lost from Lifeguard and Caterpillar. While two large customers temporarily reduced the amount of paper claims submitted, ENS has increased its number of direct e-commerce connections with payers and increased its number of direct provider connections by 28.4% from June 30, 2002 to June 30, 2003. We anticipate quarterly services revenue to increase in excess of 30% by the first quarter of fiscal 2004, ending December 31, 2003.

Cost of Services:

Cost of services ~~increased~~decreased from $12,~~362~~266,~~553~~042 in the three months ended ~~June 30~~March 31, ~~2002~~2004 to $12,~~859~~255,~~045~~419 in the three months ended ~~June 30~~March 31, ~~2003~~2005 (or approximately ~~36.4~~5%), asdue ~~a result~~to ofadditional ~~implementations~~labor ofbeing ~~two~~capitalized ~~significant~~for ~~additions~~software todevelopment anprojects ~~existing~~and ~~multi-service~~lower ~~contract~~benefit ~~and increased numbers of providers and payers~~costs. ~~Cost~~Included ofin ~~sales~~cost ~~increased at a greater~~of ~~percentage~~services ~~than~~for ~~related~~the ~~sales~~three ~~due~~months toended ~~implementation~~March 31, ~~costs~~2004 ~~related~~and toMarch 31, ~~the~~2005 ~~additional~~is ~~paper~~amortization ~~claim~~of ~~business~~software ~~from~~costs ~~our~~and ~~existing~~depreciation ~~Fiserv~~of ~~contract,~~equipment ~~which~~of ~~are~~$310,602 and ~~incurred~~$339,313, ~~before revenues are earned~~respectively.

Professional Fees:

Professional fees increased from $35,100 in the three months ended March 31, 2004 to $96,700 in the three months ended March 31, 2005 (approximately 175%) as a result of arbitration proceedings with a major customer over additional business opportunities.

General and Administrative:

General and administrative expense increased from $1,~~138~~051,~~716~~219 in the three months ended ~~June 30~~March 31, 2004 ~~2002~~ to $1,~~251~~144,~~869~~771 in the three months ended ~~June 30~~March 31, ~~2003~~2005 (or approximately 9.9%) reflecting business growth in EDI transactions with providers and payers and increased ~~sales~~legal fees from the arbitration proceedings. This amount excludes selling and ~~marketing~~advertising in ~~activities~~the amount of $495,694 and $684,778, and includes professional fees of $35,100 ~~increased~~and ~~commissions~~$96,700, onfor ~~increased~~the three months ended March 31, 2004 and 2005, respectively.

provider sales. Professional fees are included in general and administrative expense.

Depreciation and Amortization:

Depreciation and amortization ~~decreased~~increased from $8476,~~718~~352 in the three months ended ~~June 30~~March 31, ~~2002 to~~2004 to $7885,~~536~~653 in the three months ended ~~June 30~~March 31, ~~2003~~2005 (or approximately ~~7.3~~12%), primarily due to aamortization ~~reduction~~ of ~~equipment~~additional ~~purchased~~software bydevelopment ~~ENS~~projects.

Interest Expense:

Interest expense, exclusive of interest payable to NWH, decreased from $24,295 in the three months ended June 30, 2002 to $9,954 (or approximately 59.0%) in the three months ended June 30, 2003, due to a lower debt under capital lease obligations. For the three months ended June 30, 2003, $80,015 of interest expense by ENS to NWH is eliminated in consolidation.

Income from Operations:

As a result of the foregoing events, income from operations ~~decreased~~increased from ~~income of~~ $~~375~~484,~~611~~129 in the three months ended ~~June 30~~March 31, ~~2002~~2004 to ~~income from operations of~~ $~~309~~599,~~117~~687 in the three months ended ~~June 30~~March 31, ~~2003~~2005. We ~~believe ENS will improve its performance throughout 2003 as revenue ramps up from new customers and current implementations are completed.~~

EBITDA:

EBITDA decreased from $663,965 for the three months ended June 30, 2002 to $587,431 for the three months ended June 30, 2003, primarily as a result of higher cost of services and increased marketing, as discussed above. We provide EBITDA (earnings before interest, taxes, depreciation and amortization) information as a guide to the operating performance of ENS. EBITDA, which is not a term recognized under generally accepted accounting principles, is calculated as the Income from Operations plus Depreciation and Amortization. Included in depreciation and amortization for the purpose of calculating EBITDA is depreciation of equipment and amortization of software costs of $203,636 for the three months ended June 30, 2002 and $199,778 for the three months ended June 30, 2003, which is included in Cost of Services as derived from segment information in Note 8 to the Financial Statements. EBITDA as calculated by the Company may not be comparable to calculations of similarly titled items reported by other companies. We anticipate quarterly EBITDA to increase in excess of 60% by the first quarter of fiscal 2004, ending December 31, 2003.

LIQUIDITY AND CAPITAL RESOURCES

As of July 31, 2003, we had approximately $40.4 million in cash and marketable securities, as well as our interest in ENS and other investments. Our assets have been used for, and are currently reserved to fund acquisitions of healthcare e-commerce businesses, telecommunications assets, media businesses, development of our current businesses and development and acquisition of new technologies and businesses in other areas. Such amount, with earnings thereon including proceeds from sale of BellSouth common stock and related derivatives, is expected to be sufficient to implement this business plan through April 2004, or for a shorter period if we determine to invest a substantial portion of our assets in major acquisitions, equity investments or stock repurchases. We actively seek to acquire or invest in healthcare e-commerce or other businesses in telecommunications, media or in unrelated areas.

Webelieve ~~may~~ENS ~~also dispose of assets from time to time. We have no specific arrangements with~~will ~~respect~~continue toprofitable ~~any~~operations ~~such~~throughout ~~acquisitions, dispositions or investments at the present time~~2005. ~~There can be no assurance that any such acquisitions, dispositions or investments will be made.~~

~~Our~~Interest board of directors authorized the repurchase of up to 20% of our common stock because we believe, under current market conditions, the repurchase is a favorable investment. The repurchased shares will also be available for issuance upon exercise of outstanding options. Between September, 2001 and July 31, 2003, we repurchased 417,600 shares for an aggregate cost of $5,091,634 including 2,900 shares repurchased during the three months ended July 31, 2003 for an aggregate cost of $46,458.Expense:

OnInterest ~~June 10~~expense, ~~2003,~~ ~~the~~exclusive ~~Company~~of ~~announced~~interest apayable ~~program~~to ofNWH, ~~quarterly~~decreased ~~dividends~~from of $~~0.30~~8,210 ~~per~~in ~~share. The Board of Directors of~~ the ~~Company~~three ~~plans~~months toended ~~review dividends on a quarterly basis.~~March On31, ~~June~~2004 ~~10,~~to ~~2003~~$3, ~~the~~093 ~~Board~~(approximately of62%) ~~Directors~~in of the ~~Company~~three ~~declared a quarterly dividend of $0.30~~months ~~per~~ended ~~share~~March 31, ~~plus a special dividend of $0.20 per share~~2005, ~~aggregating~~primarily ~~$0.50~~due ~~per share. The~~to ~~dividend~~a ~~was~~decrease ~~paid~~ in ~~cash~~the onaverage debt ~~August~~outstanding 1,during ~~2003 to stockholders of record at~~ the ~~close~~quarter ofended ~~business on July 18~~March 31, ~~2003. The~~ ~~aggregate amount paid was $1,462,316~~2005. OnFor ~~July 18, 2003,~~ the ~~Board~~three ofmonths ~~Directors~~ended ofMarch 31, ~~the Company declared~~2004 aand ~~quarterly~~March 31, ~~dividend~~2005, of $~~0.30 per share~~81,262 ~~plus~~and ~~a special dividend of~~ $~~0.20~~41,714, ~~per share. The dividend~~respectively, ~~aggregating~~of ~~$0.50~~interest ~~per~~expensed ~~share,~~by ~~will~~ENS ~~be payable in cash on November 3, 2003~~ to ~~stockholders of record at~~ the ~~close~~Company ofwas ~~business~~eliminated onin ~~October 20, 2003~~consolidation.

During the three months ended July 31, 2003, we settled part of our option liabilities on BellSouth common stock. While we continue to review our holdings of BellSouth common stock and from time to time have sold and purchased shares and options of these holdings, we have not yet determined whether we will sell or hedge our remaining BellSouth securities in the near future or how we will invest the proceeds of any such transaction.EBITDA:

~~Interest receivable~~EBITDA byincreased from $871,083 for the ~~Company~~three ~~from~~months ~~ENS~~ended ~~increased~~March 31, 2004 to $1,~~311~~024,~~955~~653 atfor ~~July~~the three months ended March 31, ~~2003~~2005, ~~for~~ primarily as a ~~total~~result ~~outstanding~~of ~~loan~~increased tobusiness ~~the~~levels. We ~~Company~~provide ofEBITDA $6(earnings before interest,~~491~~ taxes,~~955,~~ ~~including~~depreciation ~~accrued~~and ~~interest.~~amortization) Ininformation ~~July~~as ~~2003~~a ~~ENS~~guide ~~borrowed~~to anthe ~~additional~~operating ~~$100,000~~performance of ~~the outstanding loan balance~~ENS. ~~The~~EBITDA, ~~outstanding~~which ~~balance under~~is ~~this~~not ~~loan~~a ~~agreement~~term ~~including~~recognized ~~interest~~under generally ~~has~~accepted ~~been~~accounting ~~eliminated~~principles, ~~from~~is ~~the consolidated~~calculated ~~financial~~as ~~statements. During~~ the ~~third~~net ~~quarter~~income ofplus net ~~2003~~interest, ~~the~~income ~~Company~~taxes ~~spent $388~~(benefit),~~415~~ ondepreciation ~~fixed~~and amortization. Included ~~assets,~~in ~~including~~depreciation ~~$293,774~~and amortization for ~~internally~~the ~~developed~~purpose ~~software~~of ~~and~~calculating ~~$94,641~~EBITDA ~~for~~is ~~computer~~depreciation of equipment ~~required~~and ~~for~~amortization ~~increased~~of ~~claims~~software ~~processing~~costs. EBITDA ~~and~~as calculated by the ~~development~~Company may not ofbe ~~XpediteTM,~~comparable ~~our~~to ~~provider~~calculations ~~targeting~~of ~~and~~similarly ~~tracking~~titled ~~system~~items reported by other companies.

~~Operating~~Interest ~~overhead costs~~receivable ofby the Company from ENS ~~have~~was $8,754 ~~decreased~~at asApril 30, 2005, for a ~~result~~total ofoutstanding ~~cost~~loan ~~cutting~~to ~~measures~~the ~~and~~Company ~~production~~of ~~efficiencies~~$5,147,739, ~~gained~~including accrued interest. During the Wequarter ~~anticipate~~ending ~~increased~~April 30, ~~revenues~~2005, in$600,000 of the ~~near~~amount ~~future. The~~owed ~~combination~~by ofENS to the Company under these ~~factors~~loans ~~going~~was ~~forward~~paid. ~~will~~These ~~improve~~payments ~~overall~~are ~~profitability,~~reflected ~~allowing~~in ~~ENS~~the tototal ~~sustain~~outstanding ~~itself~~loan onas ~~cash~~of April 30, ~~flows~~2005. ~~from~~The ~~its~~outstanding ~~operations~~balance ~~without~~under ~~further~~this ~~investment~~loan agreement including interest has been eliminated from ~~NWH~~the consolidated Financial Statements.

~~ENS~~Use of Non-GAAP ~~Liquidity and Capital Resources~~Financial Measures:

~~ENS~~Certain disclosures in this document include “non-Generally Accepted Accounting Principles “non-GAAP”) financial measures.” A non-GAAP financial measure is defined as a numerical measure of a company’s ~~losses~~financial performance ~~have~~that excludes or includes amounts so as to be different than the ~~been~~most ~~financed~~directly ~~principally~~comparable ~~through~~measure ~~equity~~calculated ~~investments~~and bypresented in accordance with GAAP in the Consolidated Statements of Earnings, Balance Sheets or Statements of Cash Flows of the Company. As required by the SEC’s recently issued Regulation G, a reconciliation of EBITDA (earnings before interest, taxes, depreciation and amortization) with the most directly comparable GAAP measure follows:

EBITDA:

We define EBITDA as net income plus net interest, income taxes (benefit), depreciation and amortization. We believe that the most directly comparable GAAP financial measure to EBITDA is net income. In the discussion of ENS’ EBITDA above, the difference between EBITDA and ENS’ net income (which does not include provision for taxes) (i) for the three months ended March 31, 2005, $1,024,653 and $607,803, respectively, consisted of $8,116 of net interest, $339,313 of depreciation and amortization of software costs and depreciation of equipment included in costs of services and $85,653 of depreciation and amortization and (ii) for

~~and loans from~~ the ~~Company,~~ ~~which~~six ~~loans~~months ~~aggregated~~ended $6March 31,~~365,036~~ ~~through June 30~~2005, ~~2003 (including~~$1,842,497 ~~accrued~~and ~~interest of~~ $1,~~285~~027,~~036). ENS plans~~245, ~~additional investment in its technology enhancements~~respectively, ~~including~~consisted ~~further development~~primarily ~~and implementation~~ of ~~XpediteTM~~$13, ~~its full contact~~431 ~~management~~of ~~operating~~net ~~system;~~interest, ~~its~~$658,629 ~~Internet~~of ~~claims~~depreciation ~~processing~~and ~~system;~~amortization ~~hosting~~ of ~~new~~ ~~HIPAA~~software ~~transactions; ECT, an~~costs ~~Internet~~and ~~based~~depreciation ~~full~~of ~~claims~~equipment ~~tracking~~included ~~system;~~in ~~additional~~costs ~~payer~~of ~~connectivity;~~services and ~~enhancements~~ to$170,054 ~~broaden~~of ~~the~~depreciation ~~transactions~~and ~~processing infrastructure~~amortization.

~~Although~~EBITDA weis presented as additional information because we believe ~~that~~it ~~ENS~~is ~~may~~a ~~need~~useful toindicator ~~obtain~~of ~~additional~~an ~~financing~~entity’s debt capacity and its ability to ~~accelerate~~service its debt. EBITDA ~~strategic~~is ~~business~~not ~~plan~~a substitute for operating income, ~~based~~net ~~upon~~earnings ~~existing~~or ~~contracts~~cash flows from operating activities, as determined in accordance with ~~physicians~~generally accepted accounting principles. EBITDA is not a complete net cash flow measure because it is a financial performance measure that does not include reductions for cash payments for an entity’s obligation to service its debt, ~~other~~fund ~~providers~~its working capital and capital expenditures, and pay ~~payers~~its income taxes. EBITDA is not a complete measure of an entity’s profitability because it does not include costs and ~~management~~expenses ~~companies~~for interest and ~~current~~income ~~expense~~taxes ~~levels,~~and ~~management~~depreciation ~~expects~~and ~~ENS~~amortization. Rather EBITDA is a potential indicator of an entity’s ability to ~~continue~~fund ~~profitable~~these ~~operations~~cash requirements. EBITDA, ~~established~~as inwe ~~the~~define ~~third~~it ~~quarter~~may ofdiffer from ~~fiscal~~similarly ~~2001~~named measures used by other entities and, ~~through~~consequently, ~~fiscal~~could ~~2003~~be misleading unless all entities calculate and define EBITDA in the same manner.

~~RECENT~~LIQUIDITY ~~ACCOUNTING~~AND ~~PRONOUNCEMENTS~~CAPITAL RESOURCES

InAs ~~November~~of ~~2002~~April 30, ~~the Financial~~2005 ~~Accounting~~we ~~Standards~~had ~~Board~~approximately ~~(the “FASB”) released Interpretation No~~$23.7 ~~45, Guarantor’s~~million ~~Accounting~~in cash and ~~Disclosure~~cash ~~Requirements~~equivalents, ~~for~~as ~~Guarantees,~~well ~~Including~~as our ~~Indirect~~interest ~~Guarantees~~in ofENS. Our ~~Indebtedness~~assets ofhave ~~Others~~been used (for, ~~FIN~~and ~~45).~~are ~~This~~currently ~~Interpretation elaborates~~reserved onto ~~the~~fund ~~disclosures~~development toof beour ~~made~~current businesses, byacquisitions aof ~~guarantor~~healthcare ine-commerce ~~its~~businesses, ~~financial~~and development ~~statements~~and ~~about~~acquisition ~~its~~of ~~obligations~~new ~~under~~technologies ~~certain~~and ~~guarantees~~businesses itin ~~has~~other ~~issued~~areas. Such ~~The Interpretation~~amount, ~~also~~with ~~clarifies~~earnings ~~that~~thereon, ais expected ~~guarantor~~to isbe ~~required~~sufficient to ~~recognize,~~implement atthis ~~the inception~~business ofplan athrough ~~guarantee~~October 2005, or for ~~guarantees~~a ~~issued~~shorter orperiod ~~modified~~if ~~after~~we ~~December~~determine ~~31, 2002,~~to invest a ~~liability~~substantial ~~for~~portion ~~the~~of ~~fair~~our assets ~~value~~in ofmajor ~~the~~acquisitions, ~~obligation~~equity ~~undertaken~~investments inor ~~issuing the~~stock ~~guarantee~~repurchases. ~~The~~We ~~disclosure requirements~~actively ~~are~~seek ~~effective~~to ~~for~~acquire ~~financial~~or ~~statements~~invest ~~of periods ending after~~in ~~December~~healthcare ~~15,~~e-commerce ~~2002.~~or ~~The~~other ~~initial~~businesses ~~measurement~~in ~~and~~telecommunications, ~~recognition~~media ~~provisions~~or ~~are~~in ~~required~~unrelated toareas. We bemay ~~applied~~also ondispose aof assets ~~prospective~~from ~~basis~~time to ~~guarantees~~time. We ~~issued~~have ~~or modified~~no ~~after~~specific ~~December~~arrangements ~~31,~~with ~~2002.~~respect ~~The~~to ~~adoption~~any ofsuch ~~FIN~~acquisitions, 45dispositions ~~did~~or investments ~~not~~at ~~have~~the ~~any~~present ~~impact~~time. There can onbe ~~the Company~~no sassurance ~~consolidated~~that ~~financial~~any ~~position~~such acquisitions, dispositions or ~~results~~investments will ofbe ~~operations~~made.

InOur board ~~January~~of ~~2003,~~directors authorized the ~~FASB~~repurchase ~~issued~~of ~~Interpretation~~up ~~No.~~to ~~46,~~20% ~~Consolidation~~ of ~~Variable~~our ~~Interest~~common ~~Entities~~stock because ~~(FIN~~we ~~46).~~believe, ~~FIN~~under 46current ~~requires~~market ~~variable~~conditions, ~~interest entities~~the berepurchase ~~consolidated~~is bya favorable ~~their primary beneficiaries~~investment. Through ~~A primary beneficiary~~April 30, is2005, the ~~party~~Company ~~that~~has ~~absorbs~~repurchased aan ~~majority~~aggregate of ~~the~~418,600 ~~entity’s~~shares ~~expected~~for ~~losses~~a ortotal ~~residual~~cost ~~benefits~~of $5,106,239. The ~~FIN~~repurchased shares 46will ~~applies~~also ~~immediately~~be toavailable ~~variable~~for ~~interest~~issuance ~~entities created~~upon ~~after~~exercise ~~January~~of ~~31,~~outstanding options. We ~~2003~~did ~~and~~not torepurchase ~~existing~~any shares ~~variable~~in ~~interest~~fiscal ~~entities~~2004 in or the ~~periods~~first ~~beginning~~quarter ~~after~~of ~~June~~fiscal 152005, ~~2003.~~but ~~The~~did ~~Company does not expect the~~repurchase ~~adoption~~1,000 shares of ~~this~~treasury ~~FIN~~stock ~~will~~during ~~have a material impact on~~ the ~~consolidated~~second ~~operations~~quarter ~~or financial condition~~ of ~~the~~fiscal ~~Company~~2005.

In April 2003, the FASB issued Statement No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities ( FAS 149 ). FAS 149 amends FAS 133 for certain decisions made by the FASB as part of the Derivatives Implementation Group process. FAS 149 also amends FAS 133 to incorporate clarifications of the definition of a derivative. FAS 149 is effective for contracts entered into or modified after June 30, 2003, with certain exceptions, and requires prospective application. The Company does not expect FAS 149 will have a significant impact on their results of operations or financial condition.

In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, (“ FAS 150”). This statement establishes standards for how an issuer classifies and measures in

~~its~~In each of the previous seven ~~statement~~quarters (commencing in July 2003), the Board of ~~financial~~Directors ~~position~~of ~~certain~~the ~~financial~~Company ~~instruments~~declared ~~with characteristics~~a quarterly dividend of ~~both~~$0.30 ~~liabilities~~per ~~and~~share ~~equity~~plus a special dividend of $0.20 Inper ~~accordance~~share, with ~~the~~each such ~~standard,~~dividend ~~financial~~being ~~instruments~~paid ~~that~~in ~~embody~~cash ~~obligations~~to ~~for~~all holders of record as of the ~~issuer~~close ~~are~~of ~~required~~business toon bea ~~classified~~specific ~~as liabilities~~date. On ~~This~~February 7, 2005, ~~Statement~~the ~~shall~~Board beof ~~effective~~Directors ~~for~~of the Company declared a quarterly dividend of ~~financial~~$0.30 ~~instruments~~per ~~entered~~share ~~into~~plus ora ~~modified~~special ~~after~~dividend ~~May~~of ~~31,~~$0.20 ~~2003~~per share. The dividend, ~~and~~aggregating $0.50 per share, ~~otherwise~~was ~~shall~~paid bein ~~effective~~cash aton ~~the~~May 4, ~~beginning~~2005, to holders of ~~the~~record ~~first~~at ~~interim~~the ~~period~~close ~~beginning~~of ~~after~~business ~~June~~on 15April 29, ~~2003~~2005. On ~~The~~May 2, 2005, ~~Company~~the ~~does~~Board ~~not~~of ~~expect~~Directors of the ~~provision~~Company ofdeclared ~~this~~a quarterly dividend of ~~statement~~$0.30 toper ~~have~~share plus a ~~significant~~special ~~impact~~dividend of $0.20 per share. The dividend, aggregating $0.50 per share, will be payable in cash on ~~the~~August 4, ~~Company’s~~2005, ~~results~~to holders of ~~operations~~record at the orclose ~~financial~~of ~~position~~business on July 29, 2005. The Company reviews its dividend policy on a quarterly basis.

~~ITEM~~During the 3fiscal year ended October 31, 2004, we settled our option liabilities on BellSouth common stock, sold our remaining holdings of BellSouth common stock and invested cash in U. ~~QUANTITATIVE~~S. ~~AND~~government treasury bills. During the quarter ended April 30, 2004, ~~QUALITATIVE~~we ~~DISCLOSURES~~liquidated ~~ABOUT~~our ~~MARKET~~investment ~~RISK~~in U.S. government treasury bills and invested the cash liquidated thereby, along with additional cash, in preferred index funds.

~~The~~During ~~primary objective~~the offirst ~~our~~two ~~investment~~quarters of ~~activities~~2005, ~~other~~the ~~than~~Company ~~activities~~spent ~~relating~~$767,868 toon ~~ENS and~~fixed ~~potential acquisitions~~assets, isincluding ~~to preserve principal and maintain liquidity~~$508, ~~while~~042 ~~at the same time maximizing the yield we receive from our investment~~for ~~portfolio. We~~internally ~~also~~developed ~~utilize~~software ~~options~~ and ~~short~~ ~~sales~~$259,826 tofor ~~protect~~computer ~~our~~and ~~position~~office inequipment required ~~BellSouth~~for ~~common~~increased ~~stock~~claims processing, ~~preserve~~new ~~its~~payer ~~tax basis~~contracts and ~~reduce~~other business ~~equity price risk~~growth.

~~Changes~~Operating inoverhead costs ~~prevailing~~of ~~interest~~ENS ~~rates~~have ~~and~~increased ~~stock~~at ~~price~~a ofslower ~~BellSouth~~rate ~~will~~than ~~cause~~revenue ~~the~~as ~~yield~~a ~~on our~~result ~~investments and the costs~~ of ~~shorts~~cost ~~and options to fluctuate. To minimize this risk, we maintain our~~cutting ~~portfolio~~measures ~~of cash equivalents~~ and ~~short-term~~production ~~investments~~efficiencies ~~in commercial paper, money market funds, highly liquid U~~gained.S. ~~Treasury~~We ~~notes~~anticipate ~~and~~increased ~~federal agency notes~~revenues ~~and~~in ~~other~~the ~~low~~near ~~risk investments~~future. WeThe ~~view~~combination of these ~~high~~factors ~~grade~~going ~~securities~~forward ~~within~~will ~~our~~improve ~~portfolio~~overall asprofitability, ~~having~~allowing ~~similar~~ENS ~~market risk~~to ~~characteristics.~~sustain ~~The~~itself ~~weighted-average~~on ~~interest~~cash ~~rate~~flows offrom ~~the~~its ~~portfolio~~operations ~~was~~without ~~0.8%~~further investment atfrom ~~July 31, 2003~~NWH.

~~Currently~~ENS ~~almost~~- ~~all~~Liquidity ~~our revenues~~ and ~~expenses~~Capital are denominated in U.S. dollars and, as a result, we have experienced no significant foreign exchange gains and losses to date. We conduct only limited transactions in foreign currencies, and we do not anticipate that foreign exchange gains or losses will be significant in the foreseeable future. We have not engaged in foreign currency hedging activities to date.Resources:

InENS’ historical losses were financed principally through equity investments by the Company ~~opinion~~and ofloans ~~management~~from the Company, ~~inflation~~and ~~has~~these ~~not~~loans totaled $5,538,985 through March 31, 2005 (including previously accrued interest that had abeen ~~material~~converted ~~effect~~to onprincipal). ENS ~~the~~plans ~~operations~~additional investment in its technology enhancements, including further development and implementation of XpediteTM, its full contact management operating system; its Internet claims processing system; hosting of new HIPAA transactions; ECT, an Internet based full claims tracking system; additional payer connectivity; and enhancements to broaden the ~~Company~~transactions processing infrastructure.

Although we believe that ENS may need to obtain additional financing to accelerate its strategic business plan, based upon existing contracts with physicians, other providers, payers and management companies and current expense levels, management expects ENS to continue profitable operations, established in the third quarter of fiscal 2001, through fiscal 2005.

~~ITEM~~TABULAR ~~4. CONTROLS~~DISCLOSURE ~~AND PROCEDURES~~OF CONTRACTUAL OBLIGATIONS

As of July 31, 2003, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures was carried out under the supervision and with the participation of the Company’s management. Based on that evaluation, management concluded that the Company’s disclosure controls and procedures were effective to ensure that material information relating to the Company and its consolidated subsidiaries is made known to them, as of July 31, 2003. There have been no changes in the Company’s internal control over financial reporting during the fiscal quarter ended July 31, 2003 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

	Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years	More than 5 years
Long-Term Debt Obligations	—		—		—		—	—
Capital Lease Obligations	$	3,856	$	3,856	—		—	—
Operating Lease Obligations	$	703,030	$	423,516	$	279,514	—	—
Purchase Obligations	—		—		—		—	—
Other Long-Term Liabilities Reflected on the Registrant’s Balance Sheet under GAAP	—		—		—		—	—

Total	$	706,886	$	427,372	$	279,514	—	—

~~PART~~CRITICAL IIACCOUNTING ~~- OTHER INFORMATION~~POLICIES

~~Item~~ENS capitalizes purchased software which is ready for service and development costs for software incurred from the time the preliminary project stage is completed until the software is ready for use. Under the provisions of Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use (SOP 98-1), the Company capitalizes costs associated with software developed or obtained for internal use when both the preliminary project stage is completed and Company management has authorized further funding for the project which it deems probable will be completed and used to perform the function intended. ~~Legal~~ Capitalized costs include only ~~Proceedings~~(1) external direct costs of materials and services consumed in developing or obtaining internal-use software, (2) payroll and payroll-related costs for employees who are directly associated with and who devote time to the internal-use software project, and (3) interest costs incurred, when material, while developing internal-use software. Capitalization of such costs ceases no later than the point at which the project is substantially complete and ready for its intended purpose.

~~Not~~Research ~~applicable~~and development costs and computer software maintenance costs related to software development are expensed as incurred. Capitalized software development costs are amortized using the straight-line method generally over four years, not to exceed the expected life of the product. The carrying value of capitalized software development costs is regularly reviewed by the Company, and a loss is recognized if the value of estimated undiscounted cash flow benefit related to the asset falls below the unamortized cost.

Item 2. Changes in Securities.

Not applicable.

Item 3. Defaults Upon Senior Securities.

Not applicable.

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

Part II, Item 4 of the Company’s Form 10-Q for the fiscal quarter ended April 30, 2003 is incorporated by reference.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits and Reports on Form 8-K.

		(a)	Exhibits:
			Exhibit 99.1:	Certification of Periodic Report by Principal Executive Officer and Principal Financial Officer under Section 302 of the Sarbanes Oxley Act of 2002

	Exhibit 99.2:	Certification of Periodic Report by Principal Executive Officer and Principal Financial Officer under Section 906 of the Sarbanes Oxley Act of 2002
	Reports on Form 8-K:
(b)	None.

RECENT ACCOUNTING PRONOUNCEMENTS

26In December, 2004, the FASB issued FASB statement No. 123R, “Share-Based Payment” (FAS 123R), a revision of FASB statement No. 123, “Accounting for Stock-Based Compensation” which addresses financial accounting and reporting for costs accounted with stock-based compensation. FAS 123R addresses all forms of share-based payment (“SBP”) awards, including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights. FAS 123R requires the Company to adopt the new accounting provisions beginning in our fourth quarter of 2005. Under the Modified Prospective Method, we do not anticipate recording any compensation expense at time of adoption since all options granted were fully vested.

~~SIGNATURES~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Pursuant~~The primary toobjective ~~the requirements~~ of ~~the~~our ~~Securities~~investment ~~Exchange Act~~activities, ofother ~~1934,~~than ~~the~~activities ~~registrant~~relating to ~~has~~ENS ~~duly~~and ~~caused~~potential ~~this~~acquisitions, ~~report~~is to bepreserve ~~signed~~principal onand ~~its~~maintain ~~behalf~~liquidity, bywhile at the ~~undersigned~~same ~~thereunto~~time ~~duly~~maximizing ~~authorized~~the yield we receive from our investment portfolio.

~~Date:~~Changes in prevailing interest rates will cause the yield on our investments and the costs of shorts and options to fluctuate. To minimize this risk, we maintain our portfolio of cash equivalents, short-term investments and marketable securities in commercial paper, non-government debt securities, money market funds, highly liquid U.S. Treasury notes and federal agency notes and other low risk investments. ~~September~~We 15view these high grade securities within our portfolio as having similar market risk characteristics. The weighted-average interest rate of the portfolio was 3.4% at April 30, ~~2003~~2005.

~~NWH,~~Currently almost ~~INC.~~all ~~(Registrant)~~our ~~By:~~revenues ~~/s/~~and ~~Terrence~~expenses S.are ~~Cassidy~~denominated ~~Terrence~~in U.S. ~~Cassidy~~dollars and, ~~President~~as a result, we have experienced no significant foreign exchange gains and ~~Principal~~losses ~~Accounting~~to date. We ~~Officer~~conduct only limited transactions in foreign currencies, and we do not anticipate that foreign exchange gains or losses will be significant in the foreseeable future. We have not engaged in foreign currency hedging activities to date.

27ITEM 4. CONTROLS AND PROCEDURES

As of April 30, 2005, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures was carried out under the supervision and with the participation of the Company’s management. Based on that evaluation, management has concluded that the Company’s disclosure controls and procedures are effective to ensure that material information relating to the Company and its consolidated subsidiaries is made known to them, as of April 30, 2005. There have been no changes in the Company’s internal control over financial reporting during the fiscal quarter ended April 30, 2005 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

The Company is engaged in an arbitration with a major customer over additional business opportunities.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

Item 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

At its Annual Meeting of Stockholders held on May 2, 2005, the Company’s stockholders approved and ratified the following actions:

1. Election of Directors:

The following individuals were re-elected as Class II directors of the Company:

	Number of Votes For	Number of Votes Withheld

Michael A. McManus, Jr.	2,441,046	88,205
Vincent Tese	2,517,620	11,631

to serve until the 2008 Annual Meeting of Stockholders and until their respective successors have been elected and qualified.

2. 2,517,620 shares were voted in favor of the appointment of McGladrey & Pullen, LLP as independent auditors of the Company until the next Annual Meeting of Stockholders, 11,631 shares were voted against, and there were no abstentions.

Item 5. OTHER INFORMATION

Not applicable.

Item 6. EXHIBITS

(a)	Exhibits:
	Exhibit 31:	Certification of Periodic Report by Principal Executive Officer and Principal Financial Officer under Section 302 of the Sarbanes Oxley Act of 2002

	Exhibit 32:	Certification of Periodic Report by Principal Executive Officer and Principal Financial Officer under Section 906 of the Sarbanes Oxley Act of 2002

SIGNATURE

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.

Date: June 13, 2005


	NWH, INC.
	(Registrant)


	By:	/s/ Terrence S. Cassidy
	Terrence S. Cassidy, President and Principal Accounting Officer

156 West 56 Street, Suite 2001, New York, NY

10019

Filing Compare · NWH INC