NWH INC - 10-Q Quarterly Report

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

(Mark one)

ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended April 30, 2005

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		for the transition period from to

Commission file number: 0-23598

NWH, INC.

(Exact name of registrant as specified in its charter)

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

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

(212) 582 1212
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý No o

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

Yes o No ý

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

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

NWH, Inc.

Condensed Consolidated Balance Sheets

	April 30, 2005			October 31, 2004
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	23,698,860		$	12,137,155
Marketable securities	—			14,926,737
Trade and other receivables, net of allowances of $45,000 and $40,000	3,121,294			2,862,921
Prepaid expenses and other current assets	690,424			475,895
Deferred income taxes	138,200			—
Refundable income taxes	230,924			—
Total current assets	27,839,702			30,402,708
Property and equipment, net of accumulated depreciation of $3,279,245 and $3,054,359	785,414			750,474
Internally developed software, net of accumulated amortization of $2,707,379 and $2,195,888	2,310,336			2,313,785
Goodwill	3,762,187			3,762,187
Investments and other assets	1,040,193			1,065,453
Total assets	$	35,737,832		$	38,294,607

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	2,602,548		$	2,376,072
Current portion of long-term debt	3,856			11,494
Income taxes payable	—			147,035
Dividends payable	1,461,816			1,462,316
Total current liabilities	4,068,212			3,996,917

Note payable	140,000			140,000
Deferred income taxes	691,992			692,792
Total liabilities	4,900,212			4,829,709
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 shares issued	33,422			33,422
Additional paid-in capital	23,195,991			23,195,991
Retained earnings	12,714,446			15,327,119
Treasury stock, 418,600 and 417,600 shares, at cost	(5,106,239		)	(5,091,634		)
Total stockholders’ equity	30,837,620			33,464,898
Total liabilities and stockholders’ equity	$	35,737,832		$	38,294,607

See accompanying notes to unaudited condensed consolidated financial statements.

NWH, Inc.

Condensed Consolidated Statements of Income

	For the Three Months Ended April 30						For the Six Months Ended April 30
	2005			2004			2005			2004

Service Revenue	$	4,770,308		$	4,373,436		$	9,418,088		$	8,559,746

Cost of services	2,255,419			2,350,541			4,600,800			4,494,783
Professional fees	253,410			179,002			579,666			397,530
General and administrative	2,139,293			1,768,549			4,197,813			3,655,743
Depreciation and amortization	89,594			76,352			176,803			142,566

Total expenses	4,737,716			4,374,444			9,555,082			8,690,622
Income (loss) from operations	32,592			(1,008		)	(136,994		)	(130,876		)

Other income (expense):
Gain on securities transactions, net	—			738,015			—			558,458
Dividend income	137,551			56,035			137,551			124,571
Interest income	34,015			65,105			153,671			134,920
Interest expense	(3,093		)	(7,587		)	(6,766		)	(23,999		)
	168,473			851,568			284,456			793,950
Income before provision (benefit) for income taxes	201,065			850,560			147,462			663,074

Provision (benefit) for income taxes	74,000			321,000			(164,000		)	250,000

Net income	$	127,065		$	529,560		$	311,462		$	413,074

Net income per common share
Basic	$	.04		$	.18		$	.11		$	.14
Diluted	$	.04		$	.18		$	.11		$	.14
Weighted average number of common shared outstanding:
Basic	2,923,631			2,924,631			2,924,139			2,924,631
Diluted	2,926,954			2,924,657			2,927,624			2,924,657

See accompanying notes to unaudited condensed consolidated financial statements.

NWH, Inc.

Condensed Consolidated Statements of Comprehensive Income

	For the Three Months Ended April 30					For the Six Months Ended April 30
	2005		2004			2005		2004
(unaudited)

Net income (loss)	$	127,065	$	529,560		$	311,462	$	413,074
Other comprehensive income, net of tax:
Net unrealized holding gain on marketable securities arising during the period, net of income taxes of $ -0- and ($261,000), -0- and $52,457, respectively	—		(505,566		)	—		99,237
Reclassification adjustment for losses recognized in net income (loss), net of income tax benefit of $-0-, -0-,-0-, ($169,293), respectively	—		—			—		(507,215		)

Other comprehensive loss	—		(505,566		)	—		(407,978		)

Comprehensive income	$	127,065	$	23,994		$	311,462	$	5,096

See accompanying notes to unaudited condensed consolidated financial statements.

NWH, Inc.

Condensed Consolidated Statements of Cash Flows

	For the Six Months Ended April 30,
	2005			2004
(unaudited)

Cash flows from operating activities
Net income	$	311,462		$	413,074
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	835,432			770,624
Accretion of interest	(61,274		)	—
Loss on securities transactions, net	—			(558,458		)
Deferred income taxes	(139,000		)	(700,000		)
Bad debt expense	23,572			—
Changes in assets and liabilities
Trade and other receivables	(281,945		)	(445,474		)
Refundable income taxes	(190,924		)	(45,053		)
Prepaid expenses and other current assets	(214,532		)	(82,788		)
Investments and other assets	(73,795		)	(48,718		)
Accounts payable and accrued expenses	226,476			(30,162		)
Income taxes payable	(147,035		)	(970,426		)
Net cash provided by (used in) operating activities	288,437			(1,672,740		)
Cash flows from investing activities
Acquisition of property and equipment	(259,826		)	(202,251		)
Increase in internally developed software	(508,042		)	(405,479		)
Proceeds from sale of marketable securities	14,988,011			4,144,783
Acquisition of written call options	—			(3,585,825		)
Proceeds from sale of written call options	—			1,469,400
Net cash provided by investing activities	14,220,143			1,420,628

Cash flows from financing activities
Proceeds of short term debt	—			100,000
Dividends paid	(2,924,632		)	(2,924,632		)
Principal payments of short-term and long-term debt	(7,638		)	(117,664		)
Acquisition of treasury stock	(14,605		)	—
Principal payments of capital leases	—			(70,946		)
Net cash used in financing activities	(2,946,875		)	(3,013,242		)

Net increase (decrease) in cash and cash equivalents	11,561,705			(3,265,354		)
Cash and cash equivalents
Beginning of period	12,137,155			29,309,192
End of period	$	23,698,860		$	26,043,838

See accompanying notes to unaudited condensed consolidated financial statements

NWH, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of NWH, Inc. (the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, consisting solely of normal recurring accruals necessary for a fair presentation of the financial statements for these interim periods, have been recorded. Operating results for the interim period are not necessarily indicative of the results that may be expected for a full year. These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2004.

2. Reclassification

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

3. Critical Accounting Policies

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 both the preliminary project stage is completed and Company management has authorized further funding for the project which it deems probable will be completed and used to perform the function intended. 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 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 flow benefit related to the asset falls below the unamortized cost.

4. Recently Issued Accounting Pronouncements

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

5. Stock Options

The Company adopted the disclosure-only provisions of SFAS 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 (loss) and earnings (loss) per share if the Company had applied the fair value recognition provisions of FAS 123 to stock-based employee compensation.

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

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

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

6. Earnings Per Share

Basic earnings per share is computed as net income divided by the weighted average number of common shares outstanding for the period. Diluted earnings per share includes the dilutive effect of the assumed exercise of stock options. Reconciliation of the weighted average shares outstanding for basic and diluted earnings per share are as follows:

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

7. Segment Information

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

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

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

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

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

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

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

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

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

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

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

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

8. Income Taxes

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

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

NWH, Inc. (“NWH” or the “Company”) 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 incorporated in Delaware under the name National Wireless Holdings Inc. on August 31, 1993. The Company’s fiscal year ends on October 31. ENS’ fiscal year ends on September 30.

ENS is a 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. 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^tm), 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 54,000 providers are connected to ENS’ e-commerce and Internet services which represents a 47% increase over the prior year. Through payer arrangements, ENS also currently conducts daily paper to e-commerce claim conversion for another 185,000 healthcare providers. ENS also experienced a 32.6% increase in contracted billable provider sites over the prior year. All of ENS’ growth was obtained through internal sales versus acquisition. As of June 7, 2005, ENS was connected to over 1,200 payers, including commercial healthcare plans, managed care organizations, Blue Cross/Blue Shield plans, Medicare, Medicaid and CHAMPUS. Nearly 90% of all electronic claims received by ENS are directly submitted to contracted payers.

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

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

ENS Services – Health-e Networkâ

ENS’ Health-e Networkâ suite of services addresses 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 Networkâ and provides several payers with connectivity for the entire suite of HIPAA-mandated administrative transactions between payers and providers.

Health-e Networkâ includes the following:

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

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

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

services with the payer’s support. Utilization of Health-e Networkâ (which includes ADSÔ) provides a payer with the opportunity to have 100% e-commerce claims receipts. With ENS as their partner and core e-commerce strategy implementer, payers can increase e-commerce transactions from their provider constituency.

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

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

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

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

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

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

• Customer Service. As an adjunct to its transaction processing services, we maintain customer service facilities with help desks for real-time customer inquiries. We offer on-line

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

As of June 7, 2005, in excess of 54,000 physicians were actively submitting electronic healthcare transactions via Health-e Networkâ suite of services with an additional 227 contracted provider sites scheduled to be installed during the remainder of calendar 2005.

In addition to ENS, the Company may continue to seek acquisitions in telecommunications, healthcare and other strategically linked areas. The Company may acquire or invest in other businesses.

Forward-Looking Statements

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

Results of Operations

Six months ended April 30, 2005 as compared to six months ended April 30, 2004:

Services Revenue:

Services revenue increased from $8,559,746 for the six months ended April 30, 2004 to $9,418,088 for the six months ended April 30, 2005 (approximately 10%), reflecting ENS’ increased sales. See below for a discussion of ENS results of operations.

Cost of Services:

Cost of services increased from $4,494,783 for the six months ended April 30, 2004 to $4,600,800 for the six months ended April 30, 2005 (approximately 2%), reflecting costs related to increased sales at ENS. See below for a discussion of ENS’ results of operations.

Professional Fees:

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

General and Administrative:

General and administrative expense increased from $3,655,743 in the six months ended April 30, 2004 to $4,197,813 in the six months ended Apri1 30, 2005 (approximately15%), reflecting business growth in EDI transactions with providers and payers. The general and administrative expenses relating to the operations of the Company, independent of ENS’ business, increased from $660,170 in the six months ended April 30, 2004 to $752,093 in the six months ended April 30, 2005.

Depreciation and Amortization:

Depreciation and amortization increased from $142,566 in the six months ended April 30, 2004 to $176,803 in the six months ended April 30, 2005, primarily due to the amortization of additional software development projects.

Loss from Operations:

As a result of the foregoing events, loss from operations increased from a loss of ($130,876) in the six months ended April 30, 2004 to a loss of ($136,994) in the six months ended April 30, 2005.

Gain on Securities Transactions, Net:

We realized a net gain on securities transactions for the six months ended April 30, 2004 of $558,458 as compared to no net gain or loss for the six months ended April 30, 2005, as we had already disposed of our remaining holdings of BellSouth common stock prior to the start of fiscal 2005. 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 Income. Further, unrealized gains and losses on BellSouth common stock, are recorded through Other Comprehensive (Loss) Income and are only recorded in the Statement of Income when realized upon ultimate sale. The realized and unrealized gain on derivative transactions decreased from a loss of ($209,497) for the six months ended April 30, 2004 to no gain or loss for the six months ended April 30, 2005. The unrealized loss on Bell South common stock, reflected in Other Comprehensive Income, net of income taxes, for the six months ended April 30, 2004 was ($407,978) as compared to no gain or loss for the six months ended April 30, 2005.

Interest and Dividend Income:

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

Interest Expense:

Interest expense decreased from $23,999 in the six months ended April 30, 2004 to $6,766 in the six months ended April 30, 2005, primarily due to a decrease in the average amount of debt and capital lease balances outstanding.

Other Income (Expense):

We realized $793,950 of other income during the six months ended April 30, 2004, which was primarily attributable to our gain on securities transactions, net, while during the six months ended April 30, 2005, we realized other income of $284,456, reflecting our interest income and dividend income, net of interest expense.

Income Before Provision (Benefit) for Income Taxes:

We realized income before provision for income taxes of $663,074 for the six months ended April 30, 2004, primarily as a result of losses on options and gains on sales of Bell South stock, while for the six months ended April 30, 2005, the income before provision for income taxes decreased to $147,462. These results are primarily attributable to higher interest rates and because there were no securities transactions in 2005.

Provision (Benefit) for Income Taxes:

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

Net Income:

Net income decreased from $413,074 for the six months ended April 30, 2004 to $311,462 for the six months ended April 30, 2005 as a result of the foregoing events.

Three months ended April 30, 2005 as compared to three months ended April 30, 2004:

Services Revenue:

Services revenue increased from $4,373,436 for the three months ended April 30, 2004 to $4,770,308 for the three months ended April 30, 2005 (approximately 9%), reflecting ENS’ increased sales. See below for a discussion of ENS results of operations.

Cost of Services:

Cost of services decreased from $2,350,541 for the three months ended April 30, 2004 to $2,255,419 for the three months ended April 30, 2005 (approximately 4%), due to additional labor being capitalized for software development projects. See below for a discussion of ENS’ results of operations.

Professional Fees:

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

General and Administrative:

General and administrative expense increased from $1,768,549 in the three months ended April 30, 2004 to $2,139,293 in the three months ended April 30, 2005 (approximately 21%), reflecting business growth in EDI transactions with providers and payers. The general and administrative expenses relating to the operations of the Company, independent of ENS’ business, increased from $341,235 in the three months ended April 30, 2004 to $406,444 in the three months ended April 30, 2005.

Depreciation and Amortization:

Depreciation and amortization increased from $76,352 in the three months ended April 30, 2004 to $89,594 in the three months ended April 30, 2005, primarily due to the amortization of additional software development projects.

Income (Loss) from Operations:

As a result of the foregoing events, income from operations increased from a loss of ($1,008) in the three months ended April 30, 2004 to income of $32,592 in the three months ended April 30, 2005.

Gain (Loss) on Securities Transactions, Net:

We realized a gain on securities transactions for the three months ended April 30, 2004 of $738,015 as compared to no net gain or loss for the three months ended April 30, 2005, as we had already disposed of our remaining holdings of BellSouth common stock prior to the start of fiscal 2005. 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 Income. Further, unrealized gains and losses on BellSouth common stock, are recorded through Other Comprehensive (Loss) Income and are only recorded in the Statement of Income when realized upon ultimate sale. The realized and unrealized gain on derivative transactions decreased from a gain of $738,015 for the three months ended April 30, 2004 to no gain or loss for the three months ended April 30, 2005.

The unrealized loss on Bell South common stock, reflected in Other Comprehensive Income, net of income taxes, for the three months ended April 30, 2004 was a loss of ($505,566) as compared to no gain or loss for the three months ended April 30, 2005.

Interest and Dividend Income:

Interest income decreased from $65,105 for the three months ended April 30, 2004 to $34,015 for the three months ended April 30, 2005, primarily as a result of liquidating our investment in treasury bills in 2005. Dividend income increased from $56,035 for the three months ended April 30, 2004 to $137,551 for the three months ended April 30, 2005, due to our investment in various preferred index funds during 2005 as compared to the dividends received from Bell South common stock in 2004.

Interest Expense:

Interest expense decreased from $7,587 in the three months ended April 30, 2004 to $3,093 in the three months ended April 30, 2005, primarily due to a decrease in the average amount of debt and capital lease balances outstanding.

Other Income (Expense):

We realized $851,568 of other income during the three months ended April 30, 2004, which was primarily attributable to our gain on securities transactions, net, while during the three months ended April 30, 2005, we realized other income of $168,473, reflecting our dividend income and interest income, net of interest expense.

Income Before Provision (Benefit) for Income Taxes:

We realized income before provision (benefit) for income taxes of $850,560 for the three months ended April 30, 2004, primarily as a result of losses/gains on options and short positions and sales of Bell South stock, while for the three months ended April 30, 2005, the income before provision (benefit) for income taxes decreased to $201,065. These results are primarily attributable to higher interest rates and because there were no security transactions in 2005.

Provision (Benefit) for Income Taxes:

The provision for income taxes was $321,000 for the three months ended April 30, 2004, as compared to $74,000 for the three months ended April 30, 2005.

Net Income:

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

ENS—Results of Operations:

ENS - Six months ended March 31, 2005 as compared to six months ended March 31, 2004:

Services Revenue:

Services revenue increased from $8,559,746 in the six months ended March 31, 2004 to $9,418,088 in the six months ended March 31, 2005 (approximately 10%), primarily due to growth in sales to providers and related payer income.

Cost of Services:

Cost of services increased from $4,493,091 in the six months ended March 31, 2004 to $4,600,800 in the six months ended March 31, 2005 (approximately 2%), reflecting costs related to increased sales to providers and related payer income which was offset by additional labor being capitalized for software development projects and lower benefit costs. Included in cost of services for the six months ended March 31, 2004 and March 31, 2005 is amortization of software costs and depreciation of equipment of $628,058 and $658,629, respectively.

Professional Fees:

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

General and Administrative:

General and administrative expense increased from $2,084,402 in the six months ended March 31, 2004 to $2,271,441 in the six months ended March 31, 2005 (approximately 9%) reflecting business growth in EDI transactions with providers and payers and increased legal fees from arbitration proceedings. This amount excludes selling and advertising in the amount of $982,663 and $1,361,979, and includes professional fees of $69,800 and $187,700, for the six months ended March 31, 2004 and 2005, respectively.

Depreciation and Amortization:

Depreciation and amortization increased from $142,066 in the six months ended March 31, 2004 to $170,054 in the six months ended March 31, 2005 (approximately 20%), primarily due to amortization of additional software development projects.

Income from Operations:

As a result of the foregoing events, income from operations increased from $857,524 in the six months ended March 31, 2004 to $1,013,814 in the six months ended March 31, 2005. We believe ENS will continue profitable operations throughout 2005.

Interest Expense:

Interest expense, exclusive of interest payable to NWH, decreased from $16,616 in the six months ended March 31, 2004 to $6,565 (approximately 60%) in the six months ended March 31, 2005, primarily due to a decrease in the average debt and capital lease balances outstanding during the six months ended March 31, 2005. For the six months ended March 31, 2004 and March 31, 2005, $161,418 and $120,740 respectively, of interest expensed by ENS to the Company was eliminated in consolidation.

EBITDA:

EBITDA increased from $1,627,648 for the six months ended March 31, 2004 to $1,842,497 for the six months ended March 31, 2005, primarily as a result of increased business levels. We provide EBITDA (earnings before interest, taxes, depreciation and amortization) information as a guide to the operating performance of ENS. EBITDA, which is not a term recognized under generally accepted accounting principles, is calculated as the net income plus net interest,

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

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

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

Services Revenue:

Services revenue increased from $4,373,436 in the three months ended March 31, 2004 to $4,770,308 in the three months ended March 31, 2005 (approximately 9%), primarily due to growth in sales to providers and related payer income.

Cost of Services:

Cost of services decreased from $2,266,042 in the three months ended March 31, 2004 to $2,255,419 in the three months ended March 31, 2005 (approximately 5%), due to additional labor being capitalized for software development projects and lower benefit costs. Included in cost of services for the three months ended March 31, 2004 and March 31, 2005 is amortization of software costs and depreciation of equipment of $310,602 and $339,313, respectively.

Professional Fees:

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

General and Administrative:

General and administrative expense increased from $1,051,219 in the three months ended March 31, 2004 to $1,144,771 in the three months ended March 31, 2005 (approximately 9%) reflecting business growth in EDI transactions with providers and payers and increased legal fees from the arbitration proceedings. This amount excludes selling and advertising in the amount of $495,694 and $684,778, and includes professional fees of $35,100 and $96,700, for the three months ended March 31, 2004 and 2005, respectively.

Depreciation and Amortization:

Depreciation and amortization increased from $76,352 in the three months ended March 31, 2004 to $85,653 in the three months ended March 31, 2005 (approximately 12%), primarily due to amortization of additional software development projects.

Income from Operations:

As a result of the foregoing events, income from operations increased from $484,129 in the three months ended March 31, 2004 to $599,687 in the three months ended March 31, 2005. We

believe ENS will continue profitable operations throughout 2005.

Interest Expense:

Interest expense, exclusive of interest payable to NWH, decreased from $8,210 in the three months ended March 31, 2004 to $3,093 (approximately 62%) in the three months ended March 31, 2005, primarily due to a decrease in the average debt outstanding during the quarter ended March 31, 2005. For the three months ended March 31, 2004 and March 31, 2005, $81,262 and $41,714, respectively, of interest expensed by ENS to the Company was eliminated in consolidation.

EBITDA:

EBITDA increased from $871,083 for the three months ended March 31, 2004 to $1,024,653 for the three months ended March 31, 2005, primarily as a result of increased business levels. We provide EBITDA (earnings before interest, taxes, depreciation and amortization) information as a guide to the operating performance of ENS. EBITDA, which is not a term recognized under generally accepted accounting principles, is calculated as the net income plus net interest, income taxes (benefit), depreciation and amortization. Included in depreciation and amortization for the purpose of calculating EBITDA is depreciation of equipment and amortization of software costs. EBITDA as calculated by the Company may not be comparable to calculations of similarly titled items reported by other companies.

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

Use of Non-GAAP Financial Measures:

Certain disclosures in this document include “non-Generally Accepted Accounting Principles “non-GAAP”) financial measures.” A non-GAAP financial measure is defined as a numerical measure of a company’s 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:

EBITDA:

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

the six months ended March 31, 2005, $1,842,497 and $1,027,245, respectively, consisted primarily of $13,431 of net interest, $658,629 of depreciation and amortization of software costs and depreciation of equipment included in costs of services and $170,054 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.

LIQUIDITY AND CAPITAL RESOURCES

As of April 30, 2005 we had approximately $23.7 million in cash and cash equivalents, as well as our interest in ENS. Our assets have been used for, and are currently reserved to fund development of our current businesses, acquisitions of healthcare e-commerce businesses, and development and acquisition of new technologies and businesses in other areas. Such amount, with earnings thereon, is expected to be sufficient to implement this business plan through October 2005, or for a shorter period if we determine to invest a substantial portion of our assets in major acquisitions, equity investments or stock repurchases. We actively seek to acquire or invest in healthcare e-commerce or other businesses in telecommunications, media or in unrelated areas. 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. Through April 30, 2005, the Company has repurchased an aggregate of 418,600 shares for a total cost of $5,106,239. The repurchased shares will also be available for issuance upon exercise of outstanding options. We did not repurchase any shares in fiscal 2004 or the first quarter of fiscal 2005, but did repurchase 1,000 shares of treasury stock during the second quarter of fiscal 2005.

In each of the previous seven quarters (commencing in July 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, with each such dividend being paid in cash to all holders of record as of the close of business on a specific date. On February 7, 2005, the Board of Directors of the Company declared a quarterly dividend of $0.30 per share plus a special dividend of $0.20 per share. The dividend, aggregating $0.50 per share, was paid in cash on May 4, 2005, to holders of record at the close of business on April 29, 2005. On May 2, 2005, the Board of Directors of the Company declared a quarterly dividend of $0.30 per share plus a special dividend of $0.20 per share. The dividend, aggregating $0.50 per share, will be payable in cash on August 4, 2005, to holders of record at the close of business on July 29, 2005. The Company reviews its dividend policy on a quarterly basis.

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

During the first two quarters of 2005, the Company spent $767,868 on fixed assets, including $508,042 for internally developed software and $259,826 for computer and office equipment required for increased claims processing, new payer contracts and other business growth.

Operating overhead costs of ENS have increased at a slower rate than revenue as a result of cost cutting measures and production efficiencies gained. We anticipate increased revenues in the near future. The combination of these factors going forward will improve overall profitability, allowing ENS to sustain itself on cash flows from its operations without further investment from NWH.

ENS - Liquidity and Capital Resources:

ENS’ historical losses were financed principally through equity investments by the Company and loans from the Company, and these loans totaled $5,538,985 through March 31, 2005 (including previously accrued interest that had been converted to principal). ENS plans additional investment in its technology enhancements, including further development and implementation of Xpedite^TM, its full contact management operating system; its Internet claims processing system; hosting of new HIPAA transactions; ECT, an Internet based full claims tracking system; additional payer connectivity; and enhancements to broaden the transactions processing infrastructure.

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

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

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

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

CRITICAL ACCOUNTING POLICIES

ENS capitalizes purchased software which is ready for service and development costs for software incurred from the time the preliminary project stage is completed until the software is ready for use. Under the provisions of Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use (SOP 98-1), the Company capitalizes costs associated with software developed or obtained for internal use when both the preliminary project stage is completed and Company management has authorized further funding for the project which it deems probable will be completed and used to perform the function intended. 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.

RECENT ACCOUNTING PRONOUNCEMENTS

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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.

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

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.

ITEM 4. CONTROLS AND PROCEDURES

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

PART II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

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

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

Not applicable.

Item 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

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

1. Election of Directors:

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

	Number of Votes For	Number of Votes Withheld

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

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

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

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

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

Date: June 13, 2005


	NWH, INC.
	(Registrant)


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

Part I – Financial Information

Item 1. Unaudited Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Income

Condensed Consolidated Statements of Comprehensive Income

Condensed Consolidated Statements of Cash Flows

Notes to Condensed Consolidated Financial Statements

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

10019