NWH INC - 10-K Annual Report

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.

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

The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $49,220,639 as of January 26, 2004, based upon the last sales price per share of the Registrant's Common Stock, as reported on the Nasdaq National Market on such date. As of January 26, 2004, 2,924,631 shares of Common Stock, $.01 par value, of the Registrant were outstanding.

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

Part III of this Form 10-K is incorporated by reference to the proxy statement for the annual meeting of stockholders of the registrant to be filed on or before February 28, 2004.

NWH, Inc. ("NWH" or the "Company", formerly National Wireless Holdings Inc.) owns and operates Electronic Network Systems, Inc. ("ENS"), a payer services organization that connects healthcare payers and providers using state of the art proprietary software and telecommunications services for most healthcare payment and insurance validation transactions. The Company focuses its efforts on the development of ENS' business and continues its business of acquiring and disposing of interests in healthcare and other business areas.

The Company was organized in Delaware on August 31, 1993. The Company's executive offices are located at 156 West 56th Street, Suite 2001, New York, New York 10019, telephone: (212) 582-1212.

ENS is a payer services organization that connects payers (i.e., insurance companies and third party administrators) and providers (i.e., doctors, group practices and other healthcare providers) using state of the art proprietary software and telecommunications services for most healthcare payment and insurance validation transactions. ENS provides a state of the art technology platform for web based graphical user interfaces on a national basis, which enables its clients, both payers and providers, to comply fully with applicable regulatory requirements such as those imposed by HIPAA (as discussed in Industry below). ENS' service offerings address the full array of evolving industry needs in this focused area with a complete cycle of services from a single point of entry (a personal computer in the client's office) for both providers and payers, compatible with multiple system and database operating environments. These services include an Internet transactions portal, payer transactions hosting, electronic data interchange, Pre-adjudication software services (PASS™), scanning, optical character recognition and data entry of paper claims and correspondence and mailroom services. ENS generates revenue through recurring subscriptions, flat or per transaction fees and revenue sharing.

Over 32,000 providers are connected to ENS' e-commerce and Internet services and, through payer arrangements, ENS also currently conducts daily paper to e-commerce claim conversion for another 185,000 healthcare providers. As of January 26, 2004, ENS was connected to over 1,200 payers, including commercial healthcare plans, managed care organizations, Blue Cross/Blue Shield plans, Medicare, Medicaid and CHAMPUS.

ENS' primary strategy is to provide solutions and services in healthcare transaction processing that eliminate paper and manual processes and to enable real-time analysis of the transactions, thereby increasing the speed and efficiency of communications between healthcare payers and providers. These service offerings must be updated continually to enable existing clients to meet changing legislative compliance requirements, as well as matching competitive offerings. To enable efficient handling of payers' claims, ENS focuses on converting the provider's claims to an electronic format at the earliest stage and consequently markets directly to providers. Early and accurate conversion of paper transactions to an electronic format at the providers' site saves administrative dollars for both the

payers and providers. Early conversion to electronic format also enables provider e-commerce connectivity, processing and "cleaning" of claims for auto-adjudication by the payers, and facilitates the payers' compliance with regulatory electronic transaction requirements, for instance, under HIPAA.

Federal and state regulatory actions have contributed to the growth in the need for payer service organizations, with some HIPAA regulations going into effect in 2003 and new standards and regulations going into effect in 2004 through 2005. ENS is continually developing its service offerings to meet these regulatory needs.

In addition to enhancing its service objectives, ENS has sought to control its costs and maintain a stable employee base. From 2001 through early 2003, ENS restructured its operations to improve internal efficiency and profitability while ensuring better performance through better training and incentives for its personnel.

Healthcare communications is a dynamic area and ENS continually upgrades its service offerings. Key components of continuing product development include:

ENS developed a full national payer and vendor program based on HIPAA-compliant transaction architecture and Internet portal infrastructure. ENS was the first industry electronic data interchange clearinghouse to go live with a national payer for all provider-initiated HIPAA compliant transactions, including:

ENS was also the first clearinghouse to go live with all transactions in a web-hosted environment for a national payer. Recently, ENS underwent stress testing of its new real-time transactions engine, and, based on the testing, management believes ENS has the current capacity to process in excess of 3 million transactions a day.

ENS has focused on developing HIPAA compliance testing and payer implementations that satisfy not only the HIPAA regulations that went into effect in 2003 but also the new standards and

regulations which will take effect in 2004 through 2005. Because its services meet HIPAA standards, ENS has contracts with seventeen of the top twenty national payers and is currently in discussions with the remaining three of the top twenty payers.

ENS has also focused on the stability of its system environment and began rolling out its new integrated provider solutions through its Software Developer's Kit (SDK). As a result, ENS' provider site sales increased by 56% in fiscal 2003 as compared to the previous fiscal year.

ENS' Health-e Network® suite of services addresses all of the healthcare industry's administrative transaction processing needs, both e-commerce and paper. As a provider of a full-cycle payer and provider e-commerce services, ENS enhances the providers' and payers' administrative efficiency. The service offerings range from a front-end data capture/transmission software, to advanced pre-adjudication software, to simple mailroom services. ENS currently provides e-commerce connectivity to over 1,200 payers for the e-commerce claims component of Health-e Network® and provides several payers with connectivity for the entire suite of HIPAA-mandated administrative transactions between payers and providers.

As of January 26, 2004, in excess of 32,000 physicians were actively submitting electronic healthcare transactions via Health-e Network®suite of services with over an additional 2,200 contracted provider sites scheduled to be installed in 2004.

The Company has assembled an Advisory Board consisting of executives with knowledge of the medical data processing industry and general business trends in order to help the Company and ENS anticipate industry trends and develop strategies to meet the challenges of ENS' business. They will be compensated out of the incentive bonus program described below.

Although ENS faces competition from other industry players, none provide our complete-cycle proven solution that addresses all provider claim activity while enabling HIPAA required transactions, combined with a proven strategy of connecting providers and enabling them to do business

electronically with healthcare payers. Additionally, within today's healthcare environment, very few competitors are focused on an all-payer electronic solution for providers.

We believe that healthcare information services will continue to be one of the fastest growing segments within the healthcare industry, and the use of e-commerce and the Internet will dramatically increase over the next 3 to 5 years as a major component of daily operations for healthcare industry participants.

Demand for our services is driven by three factors. First, payer organizations, both commercial and governmental, continue to tighten their budgets and lower reimbursements to providers. Payers must secure outsourcing services that bring them greater efficiencies and support higher levels of electronic transaction processing between them and their respective provider networks. Second, the payer community is focusing on decreasing operating costs and increasing profit margins. Payers have an incentive to increase the use of e-commerce and the Internet because electronic transactions cost payers less to administer. By contracting with ENS for utilization of our services, payers have an opportunity for fixed cost pricing and significant levels of overhead reduction. Third, government and industry legislation and rulemaking, especially the Health Insurance Portability and Accountability Act (HIPAA), the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), industry accreditation groups such as the National Committee for Quality Assurance (NCQA) and organized lobbies representing provider groups are requiring the use of standard transactions, standard identifiers, security and other standards and requirements for the transmission of certain electronic health information. These regulations, which went into effect in 2003, are also driving the development and standardization of many other electronic healthcare transaction types for additional administrative simplification. As a result, payers are moving to outsource many primary transactions processing functions (i.e. paper claims, imaging/scanning, e-commerce implementation, pre-adjudication, mailroom services, etc.) to reduce their internal information technology staffing costs, meet government regulations, as well as partnering to achieve increased levels of provider connectivity.

Growing interest in electronic healthcare administrative and financial transactions has resulted from the anticipated lower costs of adopting and utilizing the Internet. The healthcare industry's continuing reliance on paper and manual processing is costly and inefficient, a status making it a prime target for many of the latest workflow technologies. The promise of the Internet has been met with a flurry of companies offering all levels of new Internet-based services to the healthcare industry. Although technically the efficiencies are clearly available, healthcare as an industry moves slowly and adoption and integration of these offerings into daily practice has so far been at a very low level.

The Administration Simplification Act, Section F of HIPAA, requires the adoption of eight standard financial and administrative formats to enable health information to be exchanged electronically, thus improving the efficiency and effectiveness of the health care system. HIPAA-AS should accelerate the number of electronic claims, and related transactions, such as eligibility, enrollments and disenrollments, etc. As payers must develop the capacity to accept or send HIPAA-AS mandated transaction sets, payers can look to third parties such as ENS' Health-e Network® to accept, send, host, and process transaction information on their behalf. In addition, ENS management believes that the combination of HIPAA, NCQA, and other healthcare lobbying groups should drive the growth of batch (medical) claims, real-time transactions, and claims outsourcing processes.

The healthcare industry continues to suffer from outdated paper and manual processing. Although technically the efficiencies from use of the internet and other e-commerce tools are clearly available, healthcare remains today less technically sophisticated for most of its transaction processing. Many competitors, such as WedMD, ProxyMed and others, offer all levels of new Internet-based services to the healthcare industry. To date, adoption and integration into daily practice of these offerings has been

at a very low level. ENS expects increasing levels of e-commerce application adoption by the healthcare industry's primary participants over the next three to five years. ENS competes against traditional claims clearinghouses, such as WebMD, McKesson/HBOC, Per-Se Technologies, ProxyMed, and others. ENS has in the past competed with legacy practice management systems vendors offering a claims processing component. However, in the past year, ENS began partnering with many new vendors by offering back-end processing, integrated and co-brandable solutions.

Factors influencing competition in the healthcare market include (i) compatibility with the provider's software and inclusion in practice management products and (ii) relationships with third-party payers, including managed care organizations. ENS believes that the most significant factors in developing and maintaining relationships with its customers are the breadth, price and quality of ENS' services, provider level support and ENS' ability to address its customers' current needs effectively while facilitating the transition to high levels of utilization of Internet and HIPAA supported transaction standards applications. We continue to establish a predictable recurring revenue stream by entering into multi-year agreements.

ENS develops and maintains payer, provider and vendor relationships through our sales and marketing personnel located in five geographic regions. Our sales and marketing strategy focuses on selling our services to providers directly through sales representatives and through organizations, such as healthcare finance consulting firms, practice management software firms, application service providers, and health care plan administrators, that have relationships with or access to a large number of providers. ENS develops long-term relationships with systems vendors, third party payers and other large submitters of healthcare transactions. In addition, we work closely with practice management system vendors to provide an integrated solution to providers.

Some of our payer clients co-sponsor marketing initiatives with healthcare provider groups to educate and help initiate the adoption of healthcare e-commerce utilizing ENS services. These initiatives have proven to be effective in driving the e-commerce connectivity of payer organizations with their provider base via ENS.

Our principal customers consist of healthcare providers, such as physicians, hospitals, clinics and billing services, and third-party payers, such as indemnity insurers, managed care organizations, preferred provider organizations, claims submitters and state/federal governmental agencies. In addition, ENS markets its services indirectly to providers and payers through third party administrators, aggregators, consultants and accountants. Benesight and Lifeguard accounted for 31% and 11%, respectively, of total revenues during fiscal 2002. Benesight and its affiliates Harrington Benefits and Fiserv accounted for an aggregate of 39% of total revenues during fiscal 2003. The California State Department of Managed Health Care Operations (DMCO) conserved Lifeguard under receivership during fiscal 2002 and ordered Lifeguard to wind down its membership business by December 31, 2002. Therefore, Lifeguard has not continued as a significant customer. Hence, Benesight in combination with its sister organization, Harrington, accounted for a higher percentage of our revenues in fiscal 2003. ENS recently entered into a multi-year agreement with Pacificare Health Systems, one of the largest national consumer health organizations.

We typically provide real-time services to customers under contracts that are not exclusive and generally do not guarantee a specific transaction volume or revenue stream. The pricing of our services both on a monthly and per-claim basis is set under contracts typically having terms of one to seven years, subject to a variety of early cancellation arrangements.

We enter into contracts with providers, payers and other claim submitters, such as third party administrators, practice management system vendors, clearinghouses and billing services. Our claim submitter contracts often contain exclusivity provisions whereby the submitter agrees to process all claims through ENS, provided that ENS has network access to the payer.

We deliver our services via a state-of-the-art network comprised of multiple servers, a mixture of commercial and Health-e Network® proprietary software, high-speed Ethernet connections, and dial-up and private-line connections to/from customers.

Our computer network provides for multi-path host access with a high degree of accuracy and integrity. It was designed to operate continuously and was constructed and engineered with fault tolerance and redundancy in mind. Servers are typically configured with redundant hard drives, multiple power supplies, and multiple processors. Power is provided via uninterruptible power supply systems. The software and related data files that are maintained and processed on the network are backed up nightly and stored off-site from the data center. We outsource some of the data entry and programming functions. Recently, ENS underwent stress testing of our new real-time transaction engine and we believe ENS has the current capacity to process in excess of 3 million transactions a day.

Our communications network consists of redundant connections to the Internet as well as private, direct connections to payers ranging from DSO's to full T-1's. The communications network also includes expansive facilities for analog transfer of data to and from providers. The entire network is designed to facilitate secure, electronic, real-time communications among payers, providers and other users, of critical and sensitive healthcare information.

We own certain of the software and systems designs that we use and have a limited, perpetual, nonexclusive, royalty-free license to use other software and systems designs. We also license certain other software from third parties.

Our success is dependent in part upon electronic transaction processing technology developed by us. We have not sought patents or copyright protection for any of our software or related technology. A combination of trade secrets, service mark and contract protection is used to establish and protect that technology. There can be no assurance that these legal protections and the precautions will be adequate to prevent misappropriation of technology used by us. Furthermore, the legal protections do not prevent independent third-party development of competitive technology.

On December 3, 2001, ENS announced the change of its name from Electronic Data Submission Systems Inc. to Electronic Network Systems, Inc. in settlement of a trademark dispute. This name change and the accompanying change in logo reflect the expansion of our healthcare and e-commerce services.

The healthcare industry is highly regulated and subject to changing political, economic and regulatory influences that may affect the procurement practices and operation of healthcare organizations. Our services are designed to function within the structure of the healthcare financing and reimbursement system currently being used in the United States. Changes in such systems could result in the need for unplanned product enhancements, delays or cancellations of orders, or the revocation of endorsement of our services by hospital associations or other customers. Any of such

occurrences could have a materially adverse effect on our business, financial condition and results of operations.

During the past several years, the United States of America's healthcare industry has been subject to an increase in governmental regulation of, among other things, reimbursement rates. Certain proposals to reform the U.S. healthcare system are periodically considered by Congress and certain state legislatures. These programs may contain proposals to increase governmental involvement in healthcare or otherwise change the operating environment for our current and potential customers. Healthcare organizations may react to these proposals and the uncertainty surrounding such proposals by curtailing or deferring investments, including those for our services. On the other hand, changes in the regulatory environment have increased and may continue to increase the needs of healthcare organizations for cost-effective information management and thereby enhance the marketability of our services.

We cannot predict with any certainty what impact, if any, such proposals or reforms might have on ENS' business, results of operations and financial condition. In addition, many providers are consolidating to create integrated healthcare delivery systems with greater regional market power. As a result, these emerging systems could have greater bargaining power, which may lead to price erosion of our services. The failure of ENS to maintain adequate price levels would have a materially adverse effect on our business, financial condition and results of operations. Other legislative or market-driven reforms could have unpredictable effects on our business, financial condition and results of operations.

Recent government and industry legislation and rulemaking, especially the Health Insurance Portability and Accountability Act (HIPAA), the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), industry accreditation groups such as the National Committee for Quality Assurance (NCQA) and organized lobbies representing physician groups are requiring the use of standard transactions, standard identifiers, security and other standards and requirements for the transmission of certain electronic health information. HIPAA should accelerate the number of electronic claims and related real-time transactions, such as eligibility, verification, enrollment, etc. A section of HIPAA, the Administrative Simplification Act, requires payers to use eight standardized real-time transactions, including eligibility. On August 17, 2000, the U.S. Department of Health and Human Services published final regulations to govern these eight standardized real-time transactions involving health information, which required compliance by October 16, 2002 and which later allowed for an amendment to be filed extending compliance until October 16, 2003. Payers have been able to meet these requirements by outsourcing the claims processing function to third parties such as Health-e Network®.

The United States Food and Drug Administration (FDA) is responsible for assuring the safety and effectiveness of medical devices under the Federal Food, Drug and Cosmetic Act. Computer products and services are subject to regulation when they are used or are intended to be used in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment or prevention of disease, or are intended to affect the structure or function of the body. The FDA could determine in the future that any predictive aspects of our services make them clinical decision tools subject to FDA regulation. Compliance with these regulations could be burdensome, time-consuming and expensive. We also could become subject to future legislation and regulations concerning the development and marketing of healthcare software systems. These could increase the cost and time necessary to market new services and could affect us in other respects not presently foreseeable. We cannot predict the effect of possible future legislation and regulation.

The confidentiality of patient records and the circumstances under which such records may be released for inclusion in our databases are subject to substantial regulation by state and federal governments. These state laws and regulations govern both the disclosure and the use of confidential patient medical record information. Although compliance with these laws and regulations is at present

principally the responsibility of the hospital, physician or other provider, regulations governing patient confidentiality rights are evolving rapidly. Additional legislation governing the dissemination of medical record information has been proposed at both the state and federal level. This legislation may require holders of such information to implement security measures that may require substantial expenditures by ENS. There can be no assurance that changes to state or federal laws will not materially restrict the ability of providers to submit information from patient records using our services.

ENS' executive and corporate offices are located in Colorado Springs, Colorado in approximately 20,000 square feet of office space under a lease that expires June 14, 2006. ENS has a processing center in Pueblo, Colorado that occupies approximately 11,000 square feet. We believe that our facilities are adequate for our current operations.

As of January 26, 2004, ENS had 223 employees, including 84 salaried and 139 hourly employees (including temporary employees). None of these employees is represented by a union or other collective bargaining group. ENS believes its relationship with its employees is good.

In January 2003, the Company adopted an incentive bonus plan for executives and consultants of ENS and members of the Advisory Board providing for payment of approximately 5% of any gain to the Company in the event of a sale of ENS or a public offering by ENS.

We have sold or otherwise disposed of all our telecommunications assets, but we may continue to seek acquisitions in the area. Management believes that the prices of telecommunications businesses have been too volatile recently to present attractive opportunities. Some of our former telecommunications operations are described below.

In June 1997 the Company completed the sale of its subsidiary, South Florida Television Inc., which held its rights to provide wireless cable television service in Miami, to BellSouth Corporation (NYSE: BLS) for 1,048,321 shares of BellSouth common stock, based on a $48 million purchase price. We do not currently own any wireless cable systems or channels, and, while we continue to seek and review opportunities in this area, we have no specific agreements or understandings to acquire any such assets.

In April 2001, we closed the operations of our subsidiary TLC Productions, Inc. ("TLC"), a teleport and uplink facility located in North Miami, Florida, that provided satellite uplink services to clients who then are able to rebroadcast signals to video programming distributors.

In addition to ENS, the Company continues its business of acquiring or disposing of interests in healthcare and other business areas. The Company currently has no specific agreements or arrangements to acquire or dispose of any such businesses.

The Company is reviewing on a preliminary basis acquisitions of healthcare, telecommunications and strategically linked companies.

Anagram International Communications Ltd. ("Anagram") was organized in 1995 to engage in, among other things, the business of acquiring television programming for distribution in the United States and abroad. The Company invested an aggregate of $636,875 in Anagram. Anagram wound down most of its business in 2000 and is currently inactive.

On January 23, 2002, we changed the Company's name from National Wireless Holdings Inc. to NWH, Inc., reflecting its expansion as a holding company into healthcare e-commerce and its interest in acquisitions in other areas.

Our board of directors authorized the repurchase of up to 20% of our common shares because we believe, under current market conditions, that repurchase is a favorable investment. The repurchased shares will also be available for sale upon exercise of outstanding options. In fiscal 2002, we repurchased an aggregate of 371,900 shares for an aggregate cost of $4,529,075. In fiscal 2003 we repurchased an aggregate of 29,200 shares for an aggregate cost of $369,564.

Certain statements contained in this Annual Report on Form 10-K, 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 and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or 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 Network®; 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 Annual Report on Form 10-K. Certain of these factors are discussed in more detail elsewhere in this Annual Report on Form 10-K, including, without limitation, under the captions "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Business" and Exhibit 99.1 hereto. 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.

The Company generally leases the real estate where its business and offices are located. The Company leases office space for its offices in New York pursuant to a lease expiring January 31, 2007, at a rate per month of $14,917 plus escalation charges. ENS leases approximately 20,000 square feet of office space in Colorado Springs, Colorado under a lease that expires June 14, 2006. ENS also maintains an office in Pueblo, CO. The Company's subsidiary, TLC, had accrued liabilities for expenses on a terminated lease during the year ended October 31, 2001. This lease terminated during the year ended October 31, 2003. The Company's total lease expense for the year ended October 31, 2003 was approximately $660,000 (net of $36,000 of rental income) as compared to approximately $685,000 (net of $52,500 of rental income) for the year ended October 31, 2002. The Company believes its properties are adequate for its current needs.

The Company is a party to various claims in the ordinary course of business. Management believes that the aggregate impact of such claims, if any, will not have a material impact on the financial position, results of operations, or liquidity of the Company.

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. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock, $.01 par value, is traded on the Nasdaq National Market ("Nasdaq") under the symbol "NWIR". The following table sets forth the range of high and low sale price information for the Common Stock for each full fiscal quarterly period for the last two years as reported by Nasdaq.

		2003		2002
Quarter
	High		Low		High		Low
First		15.37		11.80		12.45		11.30
Second		16.99		14.70		13.24		11.74
Third		19.00		15.53		14.20		12.45
Fourth		19.62		18.16		13.45		11.06

As of January 26, 2004, there were approximately 1,000 beneficial holders of Common Stock.

In June 2003, the Company announced a policy of paying regular quarterly dividends of $.30 per share. In August and November 2003, the Company paid the $.30 regular dividend and a special dividend of $.20 per share. In November 2003, the Company declared its $.30 regular dividend and a $.20 special dividend, payable in February 2004, and expects to continue paying cash dividends on the Common Stock in the foreseeable future. The payment of cash dividends on shares of Common Stock will be within the discretion of the Company's Board of Directors and will depend upon the earnings of the Company, the Company's capital requirements and other financial factors which are considered relevant by the Company's Board of Directors.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance equity compensation (excluding securities reflected in column (a))
	(a)	(b)	(c)
Equity Compensation Plans Approved by Security Holders	190,769	$15.76	90,000
Equity Compensation Plans Not Approved by Security Holders	0	N/A	N/A

The selected historical financial data for the Company presented below under the captions "Operating Data" and "Balance Sheet Data" as of October 31, 1999, 2000, 2001, 2002 and 2003, and for the years ended October 31, 1999, 2000, 2001, 2002, and 2003 are derived from the Company's consolidated financial statements. The selected financial data should be read in conjunction with "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."

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

The Company's fiscal year ends on October 31. ENS' fiscal year ends on September 30.

Certain statements contained in this Annual Report on Form 10-K 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 and unknown risks, uncertainties and other factors as described in Exhibit 99 to this Annual Report on Form 10-K that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. See "Business—Special Note Regarding Forward-Looking Statements".

Our discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements and Notes to Consolidated Financial Statements, which were prepared in conformity with accounting principles generally accepted in the United States. The preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. We base our estimates on historical experience, current business factors, and various other assumptions that we believe are necessary to form a basis for making judgments about the carrying values of assets and liabilities and disclosure of contingent assets and liabilities. Actual results could differ from these estimates.

We evaluate our estimates on an ongoing basis, including those related to revenue recognition, short-term and long-term investments, deferred tax assets, income taxes, collectibility of customer receivables, long-lived assets including goodwill, certain accrued expenses, and contingencies and litigation.

We believe the following reflect our critical accounting policies and our more significant judgments and estimates used in the preparation of our consolidated financial statements:

Transaction Services. Healthcare payers and providers pay us fees for our services, generally on a per transaction basis or monthly basis. We recognize revenue as we perform the service. Healthcare payers and providers also pay us one-time implementation and annual maintenance fees. We recognize revenue from these fees ratably over the term of the respective agreements.

Physician Services. Healthcare providers pay us one-time fees for the purchase of practice management software systems. We recognize revenue from these one-time fees when we enter into noncancelable agreements with our customers, the products have been delivered and there are no uncertainties regarding product acceptance and delivery and no significant future performance obligations and collectability is probable. Amounts received in advance of meeting these criteria are deferred until we meet these criteria. Revenue from multiple-element software arrangements is

recognized using the residual method as vendor specific objective evidence ("VSOE") of fair value exists for the undelivered elements, but not for all of the delivered elements. The residual method requires revenue to be allocated to the undelivered elements based on the fair value of such elements, as indicated by VSOE. VSOE is based on the price charged when an element is sold separately. Healthcare providers also pay us fees for maintenance and support of their practice management system, including the hardware and software. We recognize revenue from these fees ratably over the contract period, typically in one year or less. Healthcare providers also pay us fees for transmitting transactions to payers and patients. We recognize revenue from these fees, which are generally paid on a monthly or per transaction basis, as we provide the service.

Portal Service. Customers pay us for advertising, sponsorship, healthcare management tools, and e-commerce transactions related to our online distribution channels and the online and offline distribution channels of our strategic partners. Revenue from advertising is recognized as advertisements are delivered. Revenues from sponsorship arrangements and healthcare management tools are recognized ratably over the term of the applicable agreement. Revenue from fixed fee content license or carriage fees is recognized ratably over the term of the applicable agreement. E-commerce revenue is recognized when a subscriber or consumer utilizes our Internet-based services or purchases goods or services through our Web site or co-branded Web site with one of our strategic partners. Subscription revenue, including subscription revenue from sponsorship arrangements, is recognized over the subscription period. When contractual arrangements contain multiple elements, revenue is allocated to the elements based on their relative fair values, determined using prices charged when elements are sold separately.

Long-Lived Assets—Our long-lived assets consist of property and equipment, goodwill and internally developed software costs. Goodwill arises from the acquisitions we have made. Our long-lived assets, excluding goodwill, are amortized over their estimated useful lives, which we determined based on the consideration of several factors including the period of time the asset is expected to remain in service. We evaluate the carrying value and remaining useful lives of long-lived assets, excluding goodwill, whenever indicators of impairment are present. We evaluate the carrying value of goodwill annually. We use a discounted cash flow approach to determine the fair value of goodwill. There was no impairment of goodwill noted as a result of our impairment testing in 2003 or 2002.

Internally Developed Software—The Company 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. The Company capitalizes costs associated with software developed or obtained for internal use when both the preliminary project state is completed and the Company management has authorized further funding for the project which it deems probable will be completed and used to perform the function intended. Capitalized costs include only (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.

Research 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 flows benefit related to the asset falls below the unamortized costs.

Investments—Our investments at October 31, 2003, consist principally of an equity investment in a publicly traded company. The Company has liability for related options. Each reporting period we

evaluate the market of our investments and record a corresponding gain or loss on investments. Future changes in market or economic conditions or operating results of our investments could result in gains or losses or an inability to recover the carrying value of the investments that may not be reflected in an investment's carrying value.

The Company's written call options are measured at fair value on the balance sheet with unrealized gains and losses recognized in the statement of operations.

The following sets forth results of operations for the Company. See below for a more detailed discussion of ENS results of operations.

Fiscal year ended October 31, 2003 as compared to fiscal year ended October 31, 2002:

Services revenue increased from $11,930,646 for the fiscal year ended October 31, 2002 to $13,396,673 for the fiscal year ended October 31, 2003, primarily reflecting ENS' increased sales.

Cost of services increased from $5,600,431 for the fiscal year ended October 31, 2002 to $6,889,251 for the fiscal year ended October 31, 2003, reflecting costs related to increased sales at ENS and higher levels of amortization of capitalized software for revenue producing projects of 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 operations.

Professional fees increased from $693,110 in the fiscal year ended October 31, 2002 to $827,682 in the fiscal year ended October 31, 2003 as a result of higher levels of transaction activity and a greater number of compliance reviews and corporate matters related to the Sarbanes Oxley Act of 2002. The professional fees relating to the Company, independent of ENS' business, increased from $598,660 in the fiscal year ended October 31, 2002 to $721,332 in the fiscal year ended October 31, 2003, reflecting higher levels of transaction activity.

General and administrative expense increased from $5,875,099 in the fiscal year ended October 31, 2002 to $6,360,109 in the fiscal year ended October 31, 2003, reflecting increased marketing costs on the provider and payer side of ENS' business. The general and administrative expense relating to operations of the Company, independent of ENS' business, increased from $1,250,126 in the fiscal year ended October 31, 2002 to $1,433,627 in the fiscal year ended October 31, 2003.

Depreciation and amortization decreased slightly from $343,223 in the fiscal year ended October 31, 2002 to $316,214 in the fiscal year ended October 31, 2003, primarily due to fully depreciated assets being replaced with assets for less cost.

As a result of the foregoing events, loss from operations increased from ($581,217) for the fiscal year ended October 31, 2002 to ($996,583) for the fiscal year ended October 31, 2003.

Gain on securities transactions, net, decreased from gain of $5,322,634 for the fiscal year ended October 31, 2002 to gain of $1,002,793 for the fiscal year ended October 31, 2003, representing the net results of written call option and short sale liabilities and settlements and realized gains from the sale of BellSouth common stock. Under Financial Accounting Standards Board Statement No. 133 "Accounting for Derivative Instruments and Hedging Activities," unrealized gains and losses related to written call options and short sales are recorded in the Statement of Operations. Further, unrealized gains and losses on BellSouth common stock, are recorded through Other Comprehensive Income (Loss) and are only recorded in the Statement of Operations when realized upon ultimate sale. The realized and unrealized gain on derivative transactions decreased from $4,757,675 for the fiscal year ended October 31, 2002 to a gain of 583,687 for the fiscal year ended October 31, 2003. The unrealized loss on Bell South common stock, reflected in Other Comprehensive Loss, net of income taxes, for the fiscal year ended October 31, 2002 was ($3,909,775) as compared to an unrealized gain of $39,246 for the fiscal year ended October 31, 2003.

Interest income decreased from $438,263 for the fiscal year ended October 31, 2002 to $324,696 for the fiscal year ended October 31, 2003, primarily because high yielding investments matured and were reinvested at lower market interest rates. In addition, we reduced our cash investments because of the repurchase of our common stock, payment of dividends and changes in cash levels relating to written call option and short positions on BellSouth common stock. Dividend income increased from $403,841 in the fiscal year ended October 31, 2002 to $412,329 in the fiscal year ended October 31, 2003, due to higher dividends received on BellSouth common stock, and a lower short position maintained during the year.

Interest expense decreased from $97,813 in the fiscal year ended October 31, 2002 to $48,459 in the fiscal year ended October 31, 2003, primarily due to lower interest rates despite a small increase in the average amount of debt outstanding at ENS during the period. Capital lease obligations decreased during the period but were offset by an increase in other debt.

Income Before Provision for Income Taxes and Cumulative Effect of a Change in Accounting for Written Call Options:

We realized income before provision for income taxes and cumulative effect of a change in accounting for written call options of $5,485,708 for the fiscal year ended October 31, 2002, as compared to income before provision for income taxes and cumulative effect of a change in accounting for written call options of $1,116,029 for the fiscal year ended October 31, 2003, primarily as a result of the increase in the (Loss) from Operations and lower gains on options and short positions and sales and decreased interest income, as described above.

Provision for income taxes was $1,300,000 for the fiscal year ended October 31, 2002, as compared to a provision for income taxes of $676,000 for the fiscal year ended October 31, 2003.

Net Income and Income before Cumulative Effect of Change in Accounting for Written Call Options:

Net income and income before cumulative effect of change in accounting method decreased from $4,185,708 for the fiscal year ended October 31, 2002 to $440,029 for the fiscal year ended October 31, 2003, as a result of the foregoing events.

Services revenue decreased from $12,183,824 for the fiscal year ended October 31, 2001 to $11,930,646 for the fiscal year ended October 31, 2002, primarily reflecting ENS' reduced volumes of paper processing, and related decrease in sales of those services, as we succeeded in shifting providers from paper claims to electronic submissions.

Cost of services decreased from $7,030,617 for the fiscal year ended October 31, 2001 to $5,600,431 for the fiscal year ended October 31, 2002 as a result of improved efficiency of operations at ENS and reduced paper claims operations. Depreciation of equipment and amortization of software costs in the amount of $819,156 is included in Cost of Services for the year ended October 31, 2002. Depreciation of equipment and amortization of software costs in the amount of $635,870 for the year ended October 31, 2001 was reclassified and is included in Cost of Services.

Professional fees increased from $586,640 in the fiscal year ended October 31, 2001 to $693,110 in the fiscal year ended October 31, 2002 as a result of additional compliance reviews and corporate matters.

General and administrative expense decreased from $7,530,421 in the fiscal year ended October 31, 2001 to $5,875,099 in the fiscal year ended October 31, 2002, primarily as a result of improved efficiency of operations and decrease in sales commissions relating to reductions in less profitable services at ENS.

Depreciation and amortization decreased from $756,759 in the fiscal year ended October 31, 2001 to $343,223 in the fiscal year ended October 31, 2002, primarily due to a reduction of approximately $315,000 in amortization of goodwill as compared to the prior period resulting from our adoption of SFAS No. 142 and a reduction of approximately $125,000 in depreciation and amortization of our former subsidiary TLC, which was closed during the quarter ending April 30, 2001. See Note 1 to the Consolidated Financial Statements.

As a result of the foregoing events, loss from operations decreased from ($3,720,613) for the fiscal year ended October 31, 2001 to ($581,217) for the fiscal year ended October 31, 2002.

Gain on securities transactions, net, decreased from gain of $8,614,811 for the fiscal year ended October 31, 2001 to gain of $5,322,634 for the fiscal year ended October 31, 2002, representing the net results of written call option and short sale liabilities and settlements and realized gains from the sale of BellSouth common stock. Under Financial Accounting Standards Board Statement No. 133 "Accounting for Derivative Instruments and Hedging Activities," unrealized gains and losses related to written call options and short sales are recorded in the Statement of Operations. Further, unrealized gains and losses on BellSouth common stock, are recorded through Other Comprehensive Income (Loss) and are only recorded in the Statement of Operations when realized upon ultimate sale. The unrealized gain on derivative transactions decreased from $7,048,814 for the fiscal year ended October 31, 2001 to a gain of $4,757,675 for the fiscal year ended October 31, 2002. The unrealized loss on Bell South common stock, reflected in Other Comprehensive Loss, net of income taxes, for the

fiscal year ended October 31, 2001 was ($4,062,105) as compared to ($3,909,775) for the fiscal year ended October 31, 2002.

Interest income decreased from $1,897,846 for the fiscal year ended October 31, 2001 to $438,263 for the fiscal year ended October 31, 2002, primarily because high yielding investments matured and were reinvested at lower market interest rates. In addition, we reduced our cash investments because of the repurchase of our common stock and changes in cash levels relating to written call option and short positions on BellSouth common stock. Dividend income increased from $396,068 in the fiscal year ended October 31, 2001 to $403,841 in the fiscal year ended October 31, 2002, due to higher dividends received on BellSouth common stock, and a lower short position maintained during the year.

Interest expense decreased from $123,673 in the fiscal year ended October 31, 2001 to $97,813 in the fiscal year ended October 31, 2002, primarily due to lower interest rates despite a small increase in the average amount of debt outstanding at ENS during the period. Capital lease obligations decreased during the period but were offset by an increase in other debt.

Income Before Provision for Income Taxes and Cumulative Effect of a Change in Accounting for Written Call Options:

We realized income before provision for income taxes and cumulative effect of a change in accounting for written call options of $5,485,708 for the fiscal year ended October 31, 2002, as compared to income before provision for income taxes and cumulative effect of a change in accounting for written call options of $7,064,439 for the fiscal year ended October 31, 2001, primarily as a result of the decrease in the (Loss) from Operations offset by lower gains on options and short positions and sales and decreased interest income, as described above.

Provision for income taxes was $1,300,000 for the fiscal year ended October 31, 2002, as compared to a provision for income taxes of $2,100,000 for the fiscal year ended October 31, 2001.

Income before Cumulative Effect of Change in Accounting for Written Call Options:

Income before cumulative effect of change in accounting method decreased from $4,964,439 for the fiscal year ended October 31, 2001 to $4,185,708 for the fiscal year ended October 31, 2002, as a result of the foregoing events.

Cumulative effect of a change in accounting for written call options net of taxes of $1,514,667 was ($2,812,000) for 2001 as a result of the adoption of FAS 133 in 2001.

Net income increased from $2,152,439 for the fiscal year ended October 31, 2001 to $4,185,708 for the fiscal year ended October 31, 2002 as a result of the foregoing events.

See Note 18 to the Consolidated Financial Statements for segment information concerning ENS.

ENS—fiscal year ended September 30, 2003 as compared to fiscal year ended September 30, 2002:

Services revenue increased from $11,930,646 for the fiscal year ended September 30, 2002 to $13,396,673 for the fiscal year ended September 30, 2003 (or approximately 12.3%), primarily reflecting growth in sales to providers and related payer income and revenues from new customers. During the fiscal year ended September 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 replaces the revenues lost from Lifeguard and Caterpillar. While the loss in 2002 of these 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 36.9% from September 30, 2002 to September 30, 2003.

Cost of services increased from $5,600,431 in the fiscal year ended September 30, 2002 to $6,889,251 in the fiscal year ended September 30, 2003 (or approximately 23.0%), as a result of increased business levels of ENS and the continuing implementations of two significant additions to an existing multi-service contract. Included in cost of services for the fiscal year ended September 30, 2002 and September 30, 2003 is amortization of software costs and depreciation of equipment of $819,156 and $926,370 respectively.

General and administrative expense increased from $3,677,097 in the fiscal year ended September 30, 2002 to $3,723,383 in the fiscal year ended September 30, 2003 (or approximately 1.3%) as a result of business growth and implementations combined with cost containment measures. This amount excludes selling and advertising in the amount of $1,042,326 and $1,309,449 and includes professional fees of $94,450 and $106,350 as of September 30, 2002 and 2003, respectively.

Depreciation and amortization decreased from $334,201 in the fiscal year ended September 30, 2002 to $313,191 in the fiscal year ended September 30, 2003 (or approximately 6.3%), primarily due to increasing levels of fixed assets being fully depreciated during the year, because of full depreciation of certain fixed assets.

As a result of the foregoing, income from operations decreased from $1,276,591 for the fiscal year ended September 30, 2002 to $1,161,399 for the fiscal year ended September 30, 2003.

Interest expense, exclusive of interest payable to NWH, decreased from $97,813 in the fiscal year ended September 30, 2002 to $48,459 (or approximately 50.5%) in the fiscal year ended September 30, 2003, primarily due to a decrease in the average capital lease balances at ENS during the period. For the fiscal year ended September 30, 2003, $316,647 of interest expense was payable by ENS to NWH and was eliminated in consolidation.

EBITDA decreased from $2,429,948 for the fiscal year ended September 30, 2002 to $2,400,960 for the fiscal year ended September 30, 2003 as a result of higher costs as a percent of revenue, 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 (loss) 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, which is included in cost of services. EBITDA as calculated by the Company may not be comparable to calculations of similarly titled items reported by other companies.

ENS—fiscal year ended September 30, 2002 as compared to fiscal year ended September 30, 2001:

Services revenue decreased from $12,153,746 for the fiscal year ended September 30, 2001 to $11,930,646 for the fiscal year ended September 30, 2002 (or approximately 1.8%), primarily reflecting ENS' reduced volumes of paper processing on all of its major contracts due primarily to the shift of providers from submitting paper claims to electronic submissions, the loss in 2002 of Lifeguard and Caterpillar as customers. Shifting claims from paper to e-commerce reduces overall revenue as the revenue per claim for e-commerce is less than paper; however, the shift from paper claims increases efficiency for both payers and providers and, for ENS, generates significantly higher gross profit per claim. While two large customers 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 28.7% from September 30, 2001 to September 30, 2002.

Cost of services decreased from $7,027,736 in the fiscal year ended September 30, 2001 to $5,600,431 in the fiscal year ended September 30, 2002 (or approximately 20.3%), as a result of cost containment measures, increased electronic claim processing and reduced ADS paper claims operations. The decrease was substantially higher, in proportion, than the decrease in services revenue because of implementation of our business model, including a controlled growth program, with most of the decrease in costs concentrated in less profitable services. Included in cost of services for the fiscal year ended September 30, 2002 and September 30, 2001 is amortization of software costs and depreciation of equipment of $819,156 and $635,870 respectively.

General and administrative expense decreased from $4,365,607 in the fiscal year ended September 30, 2001 to $3,677,097 in the fiscal year ended September 30, 2002 (or approximately 15.8%) as a result of cost containment measures. This amount excludes selling and advertising in the amount of $1,335,738 and $1,042,326 and includes professional fees of $118,780 and $94,450 as of September 30, 2001 and 2002, respectively.

Depreciation and amortization increased from $285,417 in the fiscal year ended September 30, 2001 to $334,201 in the fiscal year ended September 30, 2002 (or approximately 17.1%), due to higher levels of fixed asset purchases.

As a result of the foregoing, income from operations increased from a loss of ($860,752) for the fiscal year ended September 30, 2001 to income of $1,276,591 for the fiscal year ended September 30, 2002, reflecting the full implementation of our business model, including cost containment and related reduction of less profitable lines of business.

Interest expense, exclusive of interest payable to NWH, decreased from $122,432 in the fiscal year ended September 30, 2001 to $97,813 in the fiscal year ended September 30, 2002 (or approximately 20.1%), primarily due to a decrease in the average amount of debt outstanding at ENS during the

period. Capital lease obligations decreased during the period but were offset by an increase in other debt. For the fiscal year ended September 30, 2002, $474,723 of interest expense was payable by ENS to NWH and was eliminated in consolidation.

EBITDA increased from $60,535 for the fiscal year ended September 30, 2001 to $2,429,948 for the fiscal year ended September 30, 2002 as a result of lower costs as a percent of revenue, 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 (loss) 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, which is included in cost of services. EBITDA as calculated by the Company may not be comparable to calculations of similarly titled items reported by other companies.

Certain disclosures in this document include "non-GAAP Generally Accepted Accounting Principles) financial measures." A non-GAAP financial measure is defined as a numerical measure of a company's financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented 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:

We define EBITDA as earnings from operations before extraordinary items, before net interest and related expenses (primarily amortization of debt issuance costs), income taxes, depreciation and amortization. We believe that the most directly comparable GAAP financial measure to EBITDA is income from operations. In the discussion of ENS' EBITDA above, the difference between EBITDA and ENS' income from operations (which does not include provision for taxes) for the fiscal year ended September 30, 2003 ($2,400,960 and $1,161,399, respectively) consisted primarily of $926,370 of amortization of software costs and depreciation of equipment included in costs of services and $313,191 of depreciation and amortization.

EBITDA is presented as additional information because we believe it is a useful indicator of an entity's debt capacity and its ability to service its debt. EBITDA is not a substitute for operating income, net earnings or cash flows from operating activities, as determined in accordance with 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, fund its working capital and capital expenditures, and pay its income taxes. EBITDA is not a complete measure of an entity's profitability because it does not include costs and expenses for interest and income taxes and depreciation and amortization. Rather EBITDA is a potential indicator of an entity's ability to fund these cash requirements. EBITDA, as we define it may differ from similarly named measures used by other entities and, consequently, could be misleading unless all entities calculate and define EBITDA in the same manner.

As of October 31, 2003, we had approximately $39.1 million in cash and marketable securities, as well as our interest in ENS. Our assets have been used for, and are currently reserved to fund development of our healthcare e-commerce business 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 October 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 and other businesses in telecommunications, media or in unrelated areas. We may also dispose of assets from time to time. We have no specific arrangements with respect to any such acquisitions, dispositions or investments at the present time. There can be no assurance that any such acquisitions, dispositions or investments will be made.

Our 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. Through October 31, 2003, we repurchased 417,600 shares for an aggregate cost of $5,091,634.

During the fiscal year ended October 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 derivatives 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.

Interest receivable by the Company from ENS remained at $1,286,329 at October 31, 2003, for a total outstanding loan to the Company of $6,466,329, including accrued interest. The outstanding balance under this loan agreement including interest has been eliminated from the consolidated Financial Statements. During fiscal year 2003, the Company spent $1,462,683 on fixed assets, including $1,066,121 for internally developed software and $396,562 for computer equipment required for increased claims processing and the development of Xpedite, our provider targeting and tracking system.

ENS has been operating profitably, allowing ENS to sustain itself on cash flows from its operations without further investment from NWH.

ENS' losses were financed principally through equity investments by the Company and loans from the Company, which loans aggregated $6,438,985 through September 30, 2003 (including accrued interest of $1,258,985). ENS plans additional investment in its technology enhancements, including further development and implementation of Xpedite, its full contact management operating system; its Internet claims processing system; Web Enrollment, a remote Internet based technology to enroll customers at time of sale; ECT, an Internet based full claims tracking system; additional payer connectivity; and enhancements to broaden the 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 2004.

In the opinion of management, inflation has not had a material effect on the operations of the Company.

In November 2002, the FASB released Interpretation No. 45, 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 period 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.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN 46"). FIN 46 requires variable interest entities be consolidated by their primary beneficiaries. A primary beneficiary is the party that absorbs a majority of the entity expected losses or residual benefits. FIN 46 applies immediately to variable interest entities created after January 31, 2003. For variable interest entities created before February 1, 2003, the provisions of the interpretation are effective for financial statements for the first period ending after December 15, 2003 or March 15, 2004, depending on the nature of the variable interest entity. The adoption of FIN 46 for VIE's created prior to February 1, 2003 is not expected to have a material effect on the Company's consolidated financial position or results of operations.

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 adoption of FAS 149 did not have any impact on the Company's consolidated financial position or results of operations.

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 statement of financial position certain financial instruments with characteristics of both liabilities and equity. In accordance with the standard, financial instruments that embody obligations for the issuer are required to be classified as liabilities. FAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the first interim period beginning after June 15, 2003. In November 2003, the FASB decided to defer the effective date of certain provisions of FAS 150. The Company does not expect adoption of this pronouncement to have a material impact on the consolidated financial statements.

On December 17, 2003, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 104 ("SAB 104"), Revenue Recognition, which supersedes SAB 101, Revenue Recognition in Financial Statements. SAB 104's primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements. The Company has not yet determined whether SAB 104 will have any impact on the Financial Statements.

	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	17,664	17,664	—	—	—

Capital Lease Obligations	68,436	53,414	15,022	—	—

Operating Lease Obligations	1,134,733	391,462	698,520	44,751	—

Purchase Obligations	—	—	—	—	—

Other Long-Term Liabilities Reflected on the Registrant's Balance Sheet under GAAP	—	—	—	—	—

Total	1,220,833	462,540	713,542	44,751	—

The primary objective of our investment activities, other than activities relating to ENS and potential acquisitions, is to preserve principal and maintain liquidity, while at the same time maximizing the yield we receive from our investment portfolio. We also utilize options and short sales to protect our position in BellSouth common stock, preserve its tax basis and reduce equity price risk.

Changes in prevailing interest rates and stock price of BellSouth 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 (other than BellSouth common stock and related shorts and options) 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. We view these high grade securities within our portfolio as having similar market risk characteristics. The weighted-average interest rate of the portfolio was .8% at October 31, 2003.

Currently almost all our revenues and expenses 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.

Information with respect to this item is contained in the financial statements appearing in Item 15 of this report. Such information is incorporated by reference.

As of October 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 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 October 31, 2003. There have been no changes in the Company's internal control over financial reporting during the fiscal year ended October 31, 2003 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Information concerning the directors of the Company will be set forth in the section entitled "Election of Directors" in the Proxy Statement of the Company for the Annual Meeting of Stockholders to be held in April, 2004, which section is incorporated herein by reference. Information concerning the officers of the Company will be set forth in the section entitled "Executive Officers of the Company" in the Proxy statement for the Annual Meeting of Stockholders to be filed by February 28, 2004. Information concerning compliance with Section 16(a) of the Exchange Act will be set forth in the section entitled "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement of the Company for the Annual Meeting of Stockholders to be filed by February 28, 2004, which section is incorporated by reference. The information concerning the Code of Ethics of the

Company will be set forth in the section entitled "Code of Ethics" in the Proxy Statement of the Company for the Annual Meeting of Stockholders to be filed by February 28, 2004, which section is incorporated by reference.

Information for this item will be set forth in the section entitled "Executive Officers of the Company" in the Proxy Statement of the Company for the Annual Meeting of Stockholders to be filed by February 28, 2004, which section is incorporated herein by reference.

Information for this item will be set forth in the section entitled "Security Ownership of Officers, Directors and 5% Owners" in the Proxy Statement of the Company for the Annual Meeting of Stockholders to be filed by February 28, 2004, which section is incorporated herein by reference.

Information for this item will be set forth in the section entitled "Certain Relationships and Related Transactions" in the Proxy Statement of the Company for the Annual Meeting of Stockholders to be filed by February 28, 2004, which section is incorporated herein by reference.

Information for this item will be set forth in the section entitled "Ratification of the Company's Selection of its Auditors" in the Proxy Statement of the Company for the Annual Meeting of Stockholders to be filed by February 28, 2004, which section is incorporated herein by reference.

		Page(s)
Report of Independent Auditors		F-2
Financial Statements
Consolidated Balance Sheets		F-3
Consolidated Statements of Income		F-4
Consolidated Statements of Comprehensive Income (Loss)		F-5
Consolidated Statements of Stockholders' Equity		F-6
Consolidated Statements of Cash Flows		F-7
Notes to Consolidated Financial Statements		F-8

In our opinion, the consolidated financial statements listed in the accompanying index appearing under item 15(a)(1) present fairly, in all material respects, the financial position of NWH, Inc. and its subsidiaries at October 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended October 31, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

NWH, Inc.

Consolidated Statements of Income

Years Ended October 31, 2003, 2002 and 2001

NWH, Inc.

Consolidated Statements of Comprehensive Income (Loss)

Years Ended October 31, 2003, 2002 and 2001

NWH, Inc.

Consolidated Statements of Stockholders' Equity

Years Ended October 31, 2003, 2002 and 2001

NWH, Inc.

Consolidated Statements of Cash Flows

Years Ended October 31, 2003, 2002 and 2001

NWH, Inc. ("the Company") formerly known as National Wireless Holdings Inc., a Delaware corporation organized on August 31, 1993, is an electronic commerce and communications company. The Company currently owns substantially all of Electronic Network Systems Inc., ("ENS") formerly known as Electronic Data Submission Systems, Inc., a payer services organization that connects healthcare payers and providers using state of the art proprietary software and telecommunications services for most healthcare payment and insurance validation transactions. In addition to this business, the Company continues to pursue acquisitions of interests in healthcare and other strategically linked areas. The Company may acquire or invest in other businesses. In June 1997, the Company sold its wireless cable assets in Miami, Florida in exchange for common stock of BellSouth Corporation.

In April 2001, the Company decided to exit its satellite programming uplink operations. The effect of this decision was a net charge of $524,645, representing the write-down of assets, included in general and administrative expenses.

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. ENS fiscal year end is September 30, and as such elimination of intercompany transactions were made accordingly.

Cash and cash equivalents include all highly liquid investments with original maturities of three months or less. The Company routinely invests all surplus operating funds in various money market funds. These funds generally invest in highly liquid U.S. government and agency obligations.

Marketable securities consist of an investment in BellSouth Corporation ("BellSouth") common stock. The marketable securities are classified as available for sale, and are measured at fair value on the balance sheet. Investment income or loss including realized gains and losses on investments, interest and dividends is included in the statement of operations. Unrealized gains and losses on investments are recorded, net of tax, as a separate component of stockholders' equity. Gains and losses on securities sold are determined based on the specific identification method.

Effective November 1, 2001, the Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. Under the pronouncement, written call options are measured at fair value on the balance sheet with unrealized gains and losses recognized in the statement of operations. Previously, written call options were measured at fair value on the balance sheet, however, unrealized gains and losses were not recognized in the statement of operations until settlement. The unrealized loss on written call options, which was balanced by a rise in the market value of the underlying stock, was approximately $4,327,000 on November 1, 2000 and was recorded as a cumulative effect. The tax effect of this unrealized loss was approximately $1,515,000.

The Company utilizes written call options to protect its position in BellSouth common stock, preserve its tax basis and reduce equity price risk.

The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make payments when due or within a reasonable period of time thereafter. Estimates are based on experience, current trends, credit policy and a percentage of accounts receivable by aging category. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to make required payments, additional allowances may be required.

Property and equipment purchases are recorded at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets as follows:


Computer equipment		3 years
Furniture, fixtures and equipment		5 years
Scanning equipment		5 years

Leasehold improvements are recorded at cost. Amortization is provided using the straight-line method over the shorter of the life of the improvements or the related lease term.

The Company 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 the both the preliminary project state is completed and the Company management has authorized further funding for the project which it deems probable will be completed and used to perform the function intended. Capitalized costs include only (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.

Research 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 flows related to the asset falls below the unamortized costs. Amortization expense was $612,246, $410,763 and $224,642 for the years ended October 31, 2003, 2002 and 2001, respectively.

The Company investigates potential impairments of its long-lived assets when evidence exists that events or changes in circumstances may have made recovery of an asset's carrying value unlikely. An impairment loss is recognized when the sum of the expected undiscounted future net cash flows is less than the carrying amount of the asset. No such losses have been identified.

Goodwill represents the excess of the purchase price over the net assets of acquired companies. Effective November 1, 2001, the Company adopted Statement of Financial Accounting Standard ("SFAS") No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." Under the new pronouncements, goodwill and intangible assets that have an indefinite life will no longer be amortized, but will be subject to at least an annual impairment test in accordance with the statement. Other intangible assets that have finite useful lives will continue to be amortized over their useful life. Prior to adoption, goodwill was amortized on the straight-line method over 15 years. Such amortization is included in depreciation and amortization in the financial statements for the year ended October 31, 2001.

Financial instruments which potentially subject the Company to concentrations of credit risk include cash and cash equivalents and accounts receivable. The Company holds no collateral for accounts receivable. Cash is placed into financial institutions with high credit ratings. Concentration of risks with respect to receivables is mitigated based on the number of customers and ongoing credit evaluations of existing customers.

Cash equivalents comprise money market funds whose carrying amounts approximate fair value due to the short-term maturity of the instruments.

Marketable securities, Call options written, and Securities sold short are reflected at fair value on the accompanying consolidated balance sheet at October 31, 2003.

Long-term debt relates principally to equipment lease obligations and a note payable to a related party. Interest rates on the debt approximate the rates available at October 31, 2003 and the Company believes that their carrying value of debt at October 31, 2003 approximates fair value.

Service revenue and revenue associated with electronic transactions to and from physicians, hospital networks and health insurance carriers is recognized as earned in the period the services are provided. Installation revenue and the related costs are deferred when received or incurred and recognized over a twelve month period corresponding with the term of the service contract. Development fees and the related costs are deferred when received and recognized over the period corresponding with the term of the related contract (four to seven years).

The Company had one customer that made up 39% of service revenues and 36% of trade and other receivables, as of October 31, 2003, respectively. The Company had two customers that made up 31% and 11% of service revenues and 23% and 8% of trade and other receivables as of October 31, 2002, respectively. The Company had two customers that made up 30% and 12% of service revenues and 18% and 9% of trade and other receivables as of October 31, 2001, respectively.

During fiscal 2002, the Company amended its service agreement with the largest customer in fiscal 2002 noted above. The amendment increases the potential revenue by providing services to an entity related to that customer. Also during fiscal 2002, two payer contracts, one of which was the second largest customer in fiscal 2002, were terminated during the first quarter of fiscal 2003. The combination of these changes has resulted in an increased reliance by the Company on its largest customer.

Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

At October 31, 2003, the Company has stock-based compensation plans, which are described more fully in Note 15. The Company adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 148, "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 and earnings per share if the Company had applied the fair value recognition provisions of FAS 123 to stock-based employee compensation.

	2003		2002		2001
Net income
As reported	$	440,029	$	4,185,708	$	2,152,439
Pro forma	$	312,044	$	3,719,133	$	2,069,553
Earnings per share
Basic—as reported	$	0.15	$	1.35	$	0.65
Basic—pro forma	$	0.11	$	1.20	$	0.62
Diluted—as reported	$	0.15	$	1.35	$	0.65
Diluted—pro forma	$	0.11	$	1.20	$	0.62

These pro forma adjustments to net income and net income per common share assume fair values of each option grant estimated using the Black-Scholes option pricing formula. The more significant assumptions underlying the determination of such fair value for options granted 2003, 2002 and 2001, respectively include: (i) weighted average risk-free interest rates of 2.93%, 2.93% and 3.6%; (ii) weighted average expected option life of 5 years; (iii) an expected volatility of 45%, 45% and 40%, and (iv) an expected dividend yield of 0%. The per share weighted average fair value at the dates of grant for options awarded for the year ended October 31, 2003 was $7.41 and the weighted average exercise price was $17.22.

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the sum of the weighted average number of common shares outstanding plus the dilutive potential common shares.

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

In November 2002, the FASB released Interpretation No. 45, 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 period 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.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). FIN 46 requires variable interest entities be consolidated by their primary beneficiaries. A primary beneficiary is the party that absorbs a majority of the entity expected losses or residual benefits. FIN 46 applies immediately to variable interest entities created after January 31, 2003. For variable interest entities created before February 1, 2003, the provisions of the interpretation are effective for financial statements for the first period ending after June 15, 2003 or March 15, 2004, depending on the nature of the variable interest entity. The adoption of FIN 46 for VIE's created prior to February 1, 2003 is not expected to have a material effect on the Company's consolidated financial position or results of operations.

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 adoption of FAS 149 did not have any impact on the Company's consolidated financial position or results of operations.

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 statement of financial position certain financial instruments with characteristics of both liabilities and equity. In accordance with the standard, financial instruments that embody obligations for the issuer are required to be classified as liabilities. FAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the first interim period beginning after June 15, 2003. In November 2003, the FASB decided to defer the effective date of certain provisions of FAS 150. The Company does not expect adoption of this pronouncement to have a material impact on the consolidated financial statements.

On December 17, 2003, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 104 ("SAB" 104) Revenue Recognition, which supersedes SAB 101, Revenue Recognition in Financial Statements. SAB 104's primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements. The Company has not yet determined whether SAB 104 will have any impact on the financial statements.

Certain prior year amounts have been reclassified to conform to fiscal 2003 presentation.

In 1996, the Company acquired a controlling interest in ENS and, by July 1998, the Company increased its interest in ENS from 50% to 58% of the outstanding common stock and, with additional voting rights, 82% control of ENS, all for an aggregate investment of $3,837,420 (including $1,749,920 paid to a stockholder). In July 1999, the Company purchased from a stockholder an additional 6.4% of the common stock for $513,450. In a capital call on October 20, 2000, the Company purchased from ENS $1,000,000 of common stock, which when combined with its existing share ownership represented 80% of the outstanding common stock and, with additional voting rights, 97% control of ENS. In August 2001, the Company purchased an additional 2.8% of the common stock of ENS for $513,450 from a stockholder.

The acquisitions have been accounted for under the purchase method of accounting and the results of operations from the date of purchase have been reflected in the consolidated statement of operations. The purchase price in excess of the fair value of the assets acquired and liabilities assumed has been allocated to goodwill.

On December 7, 2001, the Company acquired 1,774,333 shares of the voting common stock of ENS from a stockholder for $500,000 in cash and $200,000 in the form of a contingent note, payable only in the event of sale of ENS. This increased the Company's ownership to 91% of the outstanding common stock (assuming conversion of its preferred stock), and with additional voting rights, 98.5% control of ENS.

On June 27, 2002, the Company acquired 586,000 shares of the voting common stock of ENS from two shareholders for a total of $290,070 in cash. This increases the Company's ownership to 94% of the outstanding common stock (assuming conversion of its preferred stock), and with additional voting rights, 99% control of ENS.

On September 30, 2003, ENS amended its Loan Agreement with the Company to amend the repayment terms such that all balances outstanding will become due and payable on December 31, 2005. The Company had outstanding loans to ENS of $6,466,329, including accrued interest, as of October 31, 2003 and 2002, respectively. These balances are eliminated upon consolidation.

Included on the balance sheet are call options written on BellSouth, common stock as of October 31, 2003 and 2002 at a fair value of $2,148,928 and $4,592,925 reflecting contracts for 367,500 and 483,000 shares with a weighted average price of $5.85 and $9.51 and exercise ranges of November 19, 2003 to January 20, 2004 and November 15, 2002 to December 20, 2002, respectively. Short sales of BellSouth common stock are also reflected on the balance sheet as of October 31, 2002 at a fair value of $1,307,500, representing 50,000 shares. There were no short sales outstanding at October 31, 2003.

On February 26, 1997, the Company and its wholly-owned subsidiary, entered into an agreement with BellSouth whereby a wholly-owned subsidiary of the Company was exchanged for Bell South common stock. The transaction amounted to $48,000,000 and was treated as a tax-free reorganization. The BellSouth common stock is reflected as available for sale marketable securities.

Depreciation and amortization expense was $1,242,584, $1,162,379 and $1,392,629 for the years ended October 31, 2003, 2002 and 2001, respectively. Depreciation and amortization included in cost of sales is as follows:

There were no changes in the carrying amount of goodwill for the years ended October 31, 2003 and 2002.

As required by SFAS 142, the Company assessed the carrying value of goodwill as of October 31, 2003 and 2002 and did not record an impairment charge as a result.

In accordance with SFAS 142, a reconciliation of the previously reported net income and net income per share amounts adjusted for the exclusion of goodwill amortization, net of any related income tax effect, is as follows:

		For the years ended
		2003		2002		2001
Reported net income		$	440,029	$	4,185,708	$	2,152,439
Goodwill amortization, net of tax			—		—		184,966

	Adjusted net income		440,029		4,185,708		2,337,405
Basic weighted average common shares outstanding			2,921,830		3,094,724		3,333,000

Basic net income per common share:
Reported net income			0.15		1.35		0.65
Goodwill amortization, net of tax			—		—		0.06

	Adjusted net income		0.15		1.35		0.70

Diluted weighted average common shares outstanding			2,938,396		3,094,724		3,333,000
Diluted net income per common share:
Reported net income			0.15		1.35		0.65
Goodwill amortization, net of tax			—		—		0.06

	Adjusted net income		0.15		1.35		0.70

The Company's long-term debt is comprised of capital lease obligations of $68,436 with interest rates ranging from 10.5% to 8.9%, expiring through 2006 and a term loan of $17,664 with interest of 4.85% expiring in March 2004. Current maturities of capital lease obligations and the term loan are $53,414 and $17,664, respectively. The term loan is collateralized by other assets held by the Company. Included in property and equipment, net, are assets held under capital leases of $146,913.

In March 2001, the Company entered into a $100,000 revolving line of credit agreement with a bank expiring April 30, 2004 and collateralized by cash of the Company included in investment and

other assets. Borrowings under the line bear interest at the one month reserve adjusted London Interbank Offered Rate (1.121% at September 30, 2003) plus 1.5%. There were no borrowings outstanding under this line at October 31, 2003.

		2003			2002
Deferred tax assets
Net operating loss carryforwards		$	506,000		$	506,000
Depreciable assets			27,024			240,803
Other			9,520			11,220

	Total deferred tax assets		542,544			758,023
Deferred tax liabilities
Capitalized software		$	(852,233	)	$	(690,113	)
Marketable securities and call options			(2,783,103	)		(4,128,673	)
Other			—			(168,570	)

	Total deferred tax liabilities		(3,635,336	)		(4,987,356	)

	Net deferred tax liability before valuation allowance		(3,092,792	)		(4,229,333	)
Valuation allowance			(506,000	)		(506,000	)

	Net deferred income tax liability	$	(3,598,792	)	$	(4,735,333	)

As of October 31, 2003, there are approximately $1,496,000 of net operating loss carryforwards for tax purposes. These net operating losses will expire between 2011 and 2019. Due to the federal consolidated returns regulations, the separate Company net operating loss carryforwards of ENS are not anticipated to be utilized by the group for federal income tax purposes and therefore a valuation allowance has been recorded.

Reconciliation of the statutory federal income tax rate to the Company's effective tax rate is as follows:

	2003		2002		2001
US statutory rate	34.0	%	34.0	%	34.0	%
State taxes, net of federal benefit	7.3		0.9		—
Goodwill amortization and other permanent differences	2.7		(5.5	)	0.4
Utilization of net operating loss carryforward	—		(5.7	)	(4.7	)
Revision of prior year tax estimates	16.6		—		—
Effective tax rate	60.6	%	23.7	%	29.7	%

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.

The Company leases administrative facilities and office equipment under operating leases that expire between 2004 and 2007. Certain of the leases contain escalation clauses providing for increased rentals based on operating expenses or the consumer price index. Rent expense, net of rental income, under operating leases was approximately $660,000, $685,000 and $750,000 for the years ended October 31, 2003, 2002 and 2001, respectively.

Future annual minimum rental payments as of October 31, 2003 under noncancellable operating leases for the next four years are as follows:

The Company is authorized to issue 1,000,000 shares of Serial Preferred Stock, par value $.01 per share with dividend and liquidation preferences over the Common Stock. Stockholders of the Company have the right to purchase Serial Preferred Stock upon certain changes in the Company's ownership.

The Company acquired 29,200, 371,900, and 16,500 shares of its common stock for $369,564, $4,529,075 and $192,995 for the years ended October 31, 2003, 2002 and 2001, respectively, under a plan that permits the acquisition of up to 20% of the Company's stock.

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 year ended October 31, 2003, the Company sold such investment for cash proceeds of $1,421,283 and recognized a gain of $421,253, which is included in other income.

On June 26, 2000, the Company amended its employment agreement with Terrence S. Cassidy, President and Chief Executive Officer of the Company, to increase his compensation to $260,000 per year, with a 15% raise after two years, and to provide for an initial term of three years, commencing as of June 26, 2000, with automatic extensions at the end of each year for additional one-year periods unless either party gives notice of termination prior to the end of such year.

Certain options to purchase 75,000 shares of common stock, outstanding during the year ended October 31, 2003, 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.

For 2001, the Company recorded the cumulative effect of change in accounting for written call options. Its effect on earnings per share is as follows:

The 1993 Stock Option Plans, as amended, and the 1997 Equity Incentive Plan (collectively, the "Plans") have participants which include key employees (including officers), directors, advisors, and independent consultants to the Company or to any of its subsidiaries. The Company has authorized 80,000 and 170,000 shares of Common Stock for options under the 1993 and 1997 Plans, respectively. Options granted to employees may be designated as incentive stock options ("ISO's") or non-qualified stock options ("NQSO's"), as defined by the Internal Revenue Service. Options granted to independent consultants and other non-employees may only be designated NQSO's.

The exercise price of options granted under the Plans may not be less than 100% of the fair market value of the Common Stock on the date of grant. Generally, options will be exercisable for a term that will not exceed ten years from the date of grant.

During 2003 and 2002, the Company granted -0- and 105,000 options under the Plans, respectively. These options have a five year life. The vesting period is at the discretion of the Board of Directors. Options granted during 2002 vested immediately. In July 2002, 50,000 of the options granted in 1997 expired.

In March 2000, the Company adopted the 2000 Director Option Plan covering an aggregate of up to 70,000 shares of Common Stock, pursuant to which the Company shall grant 5 year options for 5,000 shares upon the appointment of an outside director and 2,500 shares annually to each outside director on the date of the annual stockholders meeting. Options granted under this plan are exercisable at the

fair market value of the Common Stock at the date of the grant. In accordance with this plan the Company granted 10,000 options during 2003 and 2002. These options have a five year life. Options granted upon appointment vest ratably over three years beginning the grant date. Options granted annually vest immediately.

	ISO's		NQSO's		Weighted Average Price Per Share
Balance, October 31, 2000	5,865		174,135		$	27.24
Granted	16,667		58,333		$	17.30
Surrendered	—		(130,000	)	$	31.15

Balance, October 31, 2001	22,532		102,468		$	17.20
Granted	6,729		108,271		$	14.44
Expired	(11,422	)	(38,578	)	$	17.05

Balance, October 31, 2002	17,839		172,161		$	15.57
Granted	—		10,000		$	17.22
Exercised	—		(9,231	)	$	13.37

Balance, October 31, 2003	17,839		172,930		$	15.76
Exercisable, October 31, 2003	17,839		172,930		$	15.76

The following table summarizes information about stock options outstanding and exercisable at October 31, 2003:

The remaining weighted average contractual life of options outstanding at October 31, 2003 was 3.28 years.

The Company has a defined contribution plan under Section 401(k) of the Internal Revenue Code covering substantially all employees. The plan allows employees to make contributions up to a specified percentage of their compensation. The Company's matching of contributions is discretionary. The Company contributed $32,165 and $21, 466 to the plan during the years ended October 31, 2003 and 2002, respectively. No contributions were made by the Company in 2001.

On March 13, 2002, the Company loaned $200,000 to an employee of ENS under a promissory note bearing interest of 5%, due March 13, 2007. This balance is included in investments and other assets.

The Company also subleases office space in New York to a company owned by a director of the Company. The sublease, which commenced December 1, 1994, is on a month-to-month basis. Rental income related to this sublease was $36,000, $52,500 and $30,000 for the years ended October 31, 2003, 2002 and 2001, respectively.

Segments were determined based on products and services provided by each segment. Accounting policies of the segments are the same as those described in the summary of significant accounting policies. Performance of the segments is evaluated on operating income before income taxes.

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

		NWH and Other			ENS			Total
Year-ended October 31, 2003
Revenues
	Service	$	—		$	13,396,673		$	13,396,673
Expenses									—
	Cost of services, professional fees, and general and administrative		(2,154,959	)		(11,922,083	)		(14,077,042	)
	Depreciation and amortization		(3,023	)		(313,191	)		(316,214	)
(Loss) income from operations			(2,157,982	)		1,161,399			(996,583	)

Total assets		$	40,014,937		$	9,861,636		$	49,876,573

Capital expenditure for property and equipment and internally developed software		$	33,693		$	1,428,990		$	1,462,683

Year-ended October 31, 2002
Revenues
	Service	$	—		$	11,930,646		$	11,930,646
Expenses
	Cost of services, professional fees, and general and administrative		(1,848,786	)		(10,319,854	)		(12,168,640	)
	Depreciation and amortization		(9,022	)		(334,201	)		(343,223	)

(Loss) income from operations			(1,857,808	)		1,276,591			(581,217	)

Total assets		$	47,328,605		$	8,937,764		$	56,266,369

Capital expenditure for property and equipment and internally developed software		$	1,894		$	1,150,788		$	1,152,682

Year-ended October 31, 2001
Revenues
	Service	$	30,078		$	12,153,746		$	12,183,824
Expenses
	Cost of services, professional fees, and general and administrative		(2,418,597	)		(12,729,081	)		(15,147,678	)
	Depreciation and amortization		(471,342	)		(285,417	)		(756,759	)
Loss from operations			(2,859,861	)		(860,752	)		(3,720,613	)

Total assets		$	56,287,773		$	7,731,557		$	64,019,330

Capital expenditure for property and equipment and internally developed software		$	—		$	1,833,277		$	1,833,277

		Quarter Ended
		January 31			April 30			July 31			October 31
2003
Revenue		$	3,046,090		$	2,890,901		$	3,498,567		$	3,961,115
Net income (loss)			1,484,201			(679,072	)		(82,724	)		(282,376	)
Net (loss) income per common share
	Basic		0.51			(0.23	)		(0.03	)		(0.10	)
	Diluted		0.51			(0.23	)		(0.03	)		(0.10	)
2002
Revenue		$	2,970,844		$	3,003,711		$	2,961,599		$	2,994,492
Net income (loss)			(720,863	)		2,956,162			1,437,513			512,896
Net (loss) income per common share
	Basic		(0.22	)		0.95			0.47			0.17
	Diluted		(0.22	)		0.95			0.47			0.17

The sum of the quarterly net income (loss) per common share amounts do not necessarily equal the amount for the fiscal year primarily because the earnings per share for each quarter is computed using the weighted-average number of shares outstanding during that quarter, while earnings per share for the fiscal year is computed using the weighted-average number of shares outstanding during the year.

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

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 2003
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Delaware		13-3735316
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)
156 West 56th Street, Suite 2001, New York, New York 10019 (Address of principal executive offices and zip code)
(212) 582-1212 (Registrant's telephone number, including area code)
Securities registered pursuant to section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: Common Stock, $.01 Par Value Rights to Purchase Series A Junior Preferred Stock

PART I
	ITEM 1.	BUSINESS	2
	ITEM 2.	PROPERTIES	12
	ITEM 3.	LEGAL PROCEEDINGS	12
	ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	12
PART II
	ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	13
	ITEM 6.	SELECTED FINANCIAL DATA	14
	ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL	15
	ITEM 7A	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	27
	ITEM 8.	CONSOLIDATED FINANCIAL STATEMENTS	27
	ITEM 9.	CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	27
	ITEM 9A.	CONTROLS AND PROCEDURES	27
PART III
	ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	27
	ITEM 11.	EXECUTIVE COMPENSATION	28
	ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	28
	ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	28
	ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	28
PART IV			28
	ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K	28

		Year Ended October 31, 2003		Year Ended October 31, 2002		Year Ended October 31, 2001		Year Ended October 31, 2000		Year Ended October 31, 1999
Operating Data:
	Services Revenue	$	13,396,673	$	11,930,646	$	12,183,824	$	9,031,402	$	5,325,505
	Other Income (Loss)(1)		2,112,612		6,066,925		10,785,052		6,147,638		313,744
	Net Income (Loss)(2)		440,029		4,185,708		2,152,439		1,782,612		(1,376,263	)
	Net Income (Loss) per common share—Basic(3)		0.15		1.35		0.65		0.53		(0.42	)
	Weighted average number of common Shares outstanding—Basic(3)		2,921,830		3,094,724		3,333,000		3,333,000		3,293,274
Balance Sheet Data:
	Cash and cash equivalents	$	29,309,192	$	31,498,217	$	19,231,683	$	11,520,876	$	24,754,663
	Marketable securities	$	9,777,901		13,954,738		34,794,641		51,476,079		30,988,890
	Total assets	$	49,876,573		56,266,369		64,019,330		72,549,284		64,226,219
	Long-term obligations	$	155,022		226,121		488,662		370,658		342,646
	Total liabilities	$	10,523,443		13,885,244		17,099,510		25,262,484		16,898,016
	Total stockholders' equity	$	39,353,130		42,381,125		46,919,820		47,286,800		47,328,203
	Cash dividends declared per Common share	$	1.00		0		0		0		0

3.1(a)¹		Certificate of Incorporation and By-laws of Company.
3.1(b)⁵		Amendment to Certificate of Incorporation, dated June 10, 1997.
3.2(a)³		Amendment, dated June 29, 1995, to the Company's By-Laws.
3.1(b)⁵		Amendment to Company's By-laws, dated June 10, 1997.
3.1(c)⁷		Amendment to Company's By-laws, dated June 2, 2000.
3.1(d)¹⁴		Amendment to Company's By-laws, dated March 31, 2003.

4⁴	Rights Agreement, dated as of December 12, 1996, between National Wireless Holdings Inc. and Continental Stock Transfer and Trust Company, as Rights Agent, which includes as Exhibit A the Form of Certificate of Designations designating the relative rights, preferences and limitations of the Series A Junior Preferred Stock, as Exhibit B the Form of Right Certificate, and as Exhibit C the Summary of Rights to Purchase Preferred Shares.
4(a)⁷	Amendment to Rights Agreement, dated as of December 12, 1996.
4.1²	Specimen of Common Stock Certificate.
10.1⁸	Restated and Amended Employment Agreement with Terrence S. Cassidy, dated June 26, 2000
10.40⁵	Form of Director Indemnification Agreement.
10.42⁵	1997 Equity Incentive Plan.
10.47	Loan Documentation relating to the ENS Credit Facility.
	(a)	Restated Loan Agreement⁶.
	(b)	Note⁶.
	(c)	Bridge Note⁹.
	(d)	Additional Note¹².
	(e)	Amendment No 8¹⁵.
10.48	2000 Non Employee Directors Stock Option Plan¹¹.
21	Subsidiaries of the registrant¹⁵.
31	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002¹⁵.
32	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002¹⁵.
99.1	Factors That May Affect Future Results of Operation¹⁵.

			2003			2002
Assets
Current assets
	Cash and cash equivalents		$	29,309,192		$	31,498,217
	Marketable securities			9,777,901			13,954,738
	Trade and other receivables, net of allowance of $40,000 and $45,446 as of October 31, 2003 and 2002, respectively			2,419,797			2,083,653
	Prepaid expenses and other current assets			456,794			1,285,420

		Total current assets		41,963,684			48,822,028
Property and equipment, net of accumulated depreciation and amortization of $2,865,039 and $2,258,673 as of October 31, 2003 and 2002, respectively				703,739			937,995
Internally developed software, net of accumulated amortization of $1,238,812 and $649,513 as of October 31, 2003 and 2002, respectively				2,489,215			2,015,746
Goodwill				3,762,187			3,762,187
Investments and other assets				957,748			728,413

		Total assets	$	49,876,573		$	56,266,369

Liabilities and stockholders' equity
Current liabilities
	Accounts payable and accrued expenses		$	2,116,881		$	1,794,443
	Call options written, at fair value			2,148,928			4,592,925
	Securities sold short, at fair value			—			1,307,500
	Current portion of long-term debt			71,078			270,792
	Current income taxes			970,426			958,130
	Deferred income taxes			3,598,792			4,735,333
	Dividends payable			1,462,316			—

		Total current liabilities		10,368,421			13,659,123
Notes payable				140,000			140,000
Long-term debt				15,022			86,121

		Total liabilities		10,523,443			13,885,244

Commitments and contingencies (Note 10)
Stockholders' equity
	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
	Additional paid-in capital			23,195,991			23,071,872
	Retained earnings			20,375,719			22,860,321
	Accumulated other comprehensive income			839,632			1,137,672
	Treasury stock, 417,600 and 388,400 shares, respectively, at cost			(5,091,634	)		(4,722,070	)

		Total stockholders' equity		39,353,130			42,381,125

		Total liabilities and stockholders' equity	$	49,876,573		$	56,266,369

			2003			2002			2001
Net income			$	440,029		$	4,185,708		$	2,152,439

Other comprehensive income (loss), net of tax
	Cumulative effect of a change in accounting for written call options, net of income taxes of $1,514,667			—			—			2,812,000
	Net unrealized holding gain (loss) on marketable securities arising during the period, net of income taxes of $20,217, ($2,146,240) and ($1,421,737), respectively			39,246			(3,909,775	)		(4,062,105	)
	Reclassification adjustment for gains recognized in net income, net of income taxes of ($190,227), ($153,760), and ($376,712), respectively			(337,286	)		(285,553	)		(1,076,319	)

		Other comprehensive loss		(298,040	)		(4,195,328	)		(2,326,424	)

		Comprehensive income (loss)	$	141,989		$	(9,620	)	$	(173,985	)

				2003			2002			2001
Cash flows from operating activities
Net income				$	440,029		$	4,185,708		$	2,152,439
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
		Depreciation and amortization			1,242,584			1,162,379			1,392,629
		Gain on sale of partnership investment			(421,253	)		—			—
		Loss on exiting satellite programming uplink operations			—			—			524,645
		(Accretion) amortization of interest			—			(8,562	)		32,685
		Gain on security transactions, net			(1,591,397	)		(5,691,462	)		(3,009,807	)
		Unrealized loss (gain) on marketable securities			588,604			368,828			(1,278,338	)
		Deferred income taxes			(977,000	)		(1,100,000	)		548,536
		Bad debt expense			48,920			28,843			29,082
Change in assets and liabilities
	Trade and other receivables				(385,064	)		133,396			(407,736	)
	Prepaid expenses and other current assets				(180,019	)		(38,724	)		148,508
	Investments and other assets				(229,335	)		(163,550	)		87,544
	Accounts payable and accrued expenses				322,438			(260,787	)		52,664
	Current income taxes payable				12,296			900,000			(220,000	)

			Net cash (used in) provided by operating activities		(1,129,197	)		(483,931	)		52,851

Cash flows from investing activities
Acquisition of property and equipment					(396,562	)		(169,101	)		(526,066	)
Increase in internally developed software					(1,066,121	)		(983,581	)		(1,307,211	)
Proceeds from sale of property and equipment					—			—			209,822
Acquisition of marketable securities					—			—			(23,232,572	)
Proceeds from sale of marketable securities					4,127,894			14,918,097			33,065,559
Proceeds from sale of marketable securities—short sale					1,309,805			2,006,967			4,109,479
Acquisition of marketable securities—short sale					(2,566,701	)		(3,966,003	)		(4,611,442	)
Acquisition of written call options					(13,595,055	)		(10,735,427	)		(19,533,500	)
Proceeds from sale of written call options					11,684,140			17,254,771			20,059,023
Acquisition of common stock of ENS					—			(790,070	)		(100,000	)
Proceeds from sale of partnership investment					1,421,253			—			—

			Net cash provided by investing activities		918,653			17,535,653			8,133,092

Cash flows from financing activities
Proceeds from short-term debt					100,000			100,000			—
Acquisition of treasury stock					(369,564	)		(4,529,075	)		(192,995	)
Dividends paid					(1,462,315	)		—			—
Principal payments of short term and long term debt					(134,134	)		(128,698	)		(105,817	)
Principal payments of capital leases					(236,679	)		(227,415	)		(176,324	)
Proceeds from exercise of stock options					124,211			—			—

			Net cash used in financing activities		(1,978,481	)		(4,785,188	)		(475,136	)

			Net increase (decrease) in cash and cash equivalents		(2,189,025	)		12,266,534			7,710,807

Cash and cash equivalents
Beginning of year					31,498,217			19,231,683			11,520,876

End of year				$	29,309,192		$	31,498,217		$	19,231,683

Supplemental disclosure of cash flow information
Cash paid for interest				$	48,459		$	97,813		$	126,253
Cash paid for taxes					1,640,704			1,500,000			302,500
Capital lease assets acquired and obligations incurred					—			13,686			305,631
Dividends declared					1,462,316			—			—
Accounts payable transferred to capital lease					—			—			49,857

	Cost		Unrealized Holding Gains		Fair Value
As of October 31, 2003
BellSouth common stock	$	8,508,279	$	1,269,622	$	9,777,901

As of October 31, 2002
BellSouth common stock	$	12,217,067	$	1,737,671	$	13,954,738

		October 31,
		2003			2002
Property and Equipment
Computer equipment		$	2,244,044		$	1,849,360
Scanning equipment			747,251			744,915
Leasehold improvements, office equipment and service vehicles			577,483			602,393

	Total property and equipment		3,568,778			3,196,668
Less: Accumulated depreciation and amortization			(2,865,039	)		(2,258,673	)

	Total property and equipment, net	$	703,739		$	937,995

Internally Developed Software
Internally developed software		$	3,728,027		$	2,665,259
Less: Accumulated amortization			(1,238,812	)		(649,513	)

	Total internally developed software, net	$	2,489,215		$	2,015,746

	2003			2002			2001
Federal
Current	$	1,529,000		$	2,350,000		$	400,000
Deferred		(977,000	)		(1,100,000	)		1,700,000
State and local
Current		124,000			50,000			—
Deferred		—			—			—

	$	676,000		$	1,300,000		$	2,100,000

					Per Share
					Per Share
					Basic			Diluted
Income before cumulative effect of change in accounting for written call options		$	4,964,439		$	1.22		$	1.22
Cumulative effect of change in accounting for written call options, net of taxes			(2,812,000	)		(.83	)		(.83	)

	Net income	$	2,152,439		$	(.65	)	$	(.65	)

	Number Outstanding at October 31, 2003	Weighted Average Years Remaining Contractual Life
12.06	7,500	3.75
12.75	7,500	3.42
14.50	50,769	3.33
14.86	50,000	3.71
17.22	10,000	4.67

18.00	65,000	2.63
	190,769

	NWH, INC. (Registrant)
Date: January 29, 2004	By:		/s/ TERRENCE S. CASSIDY Terrence S. Cassidy, Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer

	Year Ending October 31,
	2003		2002		2001
Depreciation	$	414,650	$	486,334	$	443,704
Amortization		511,720		332,822		192,166

	$	926,370	$	819,156	$	635,870

Signature	Title	Date
/s/ TERRENCE S. CASSIDY Terrence S. Cassidy	Director	January 29, 2004
/s/ THOMAS R. DIBENEDETTO Thomas R. DiBenedetto	Director	January 29, 2004
/s/ LOUIS B. LLOYD Louis B. Lloyd	Director	January 29, 2004
/s/ MICHAEL A. MCMANUS, JR. Michael A. McManus, Jr.	Director	January 29, 2004
/s/ VINCENT TESE Vincent Tese	Director	January 29, 2004