		Bid Quotations ($)
Period
	High		Low
2004
First Quarter		4.60		3.20
2003
First Quarter		5.55		2.55
Second Quarter		3.50		1.75
Third Quarter		3.95		2.70
Fourth Quarter		3.84		3.10
2002
First Quarter		14.10		6.75
Second Quarter		7.50		2.40
Third Quarter		2.70		1.71
Fourth Quarter		6.60		1.95

	2003		2002		2001		2000		1999
			As restated		As restated
Operating revenues	$	276		$	82		$	225		$	514		$	—
Loss from continuing operations		(10,096	)		(98,834	)		(44,563	)		(7,551	)		(30	)
Loss from continuing operations per common share ($)		(0.45	)		(5.12	)		(2.40	)		(0.62	)		(0.00	)
Total Assets		17,649			15,430			87,920			30,497			2,754
Long term obligations		306			42			19			6,030			50
Dividends declared per common share ($)	$	0.00		$	0.00		$	..00		$	0.00		$	0.00

For the year ending December 31,	Property Leases	Total
	($'000)	($'000)
2004	463	463
2005	463	463
2006	458	458
2007	441	441
2008 and thereafter	110	110

Debt Holder		Facility		Draw Down		Interest rate		At December 31
Asia IT Capital Investments Ltd		$	20,000,000		$	2,880,000		US Libor + 2%		3.458	%
Asia IT Capital Investments Ltd		$	16,000,000		$	—		GBP Libor + 2%		6.434	%

Name	Age	Position
Stephen Forsyth	53	Chairman, Chief Executive Officer and Director
Paul Gothard	36	Chief Financial Officer and Director
Tim Paterson-Brown	43	Director
Professor Nadey Hakim	46	Director
Dr Allan Miller	68	Director

				Long-Term Compensation
	Annual Compensation	Awards	Payouts
Name and Principal Position	Year	Salary ($)	Bonus ($)	Securities Underlying Options (#)	Restricted Stock Awards (#)	LTIP Payouts ($)	All Other Compensation
Stephen Forsyth, Chairman and CEO (1)	2003	—	—	—	—	—	—
Simon Zuanic, CEO (1)	2003	131,560	—	—	—	—	100,315
Stefan Allesch-Taylor, Chairman and CEO (1)	2003 2002 2001	116,222 113,183 120,056	— — —	— — —	— — —	— — —	— — —
Paul Gothard, CFO (2)	2003 2002 2001	115,115 102,619 42,841	— — —	— — —	— — —	— — —	— — —
Jason Forsyth, CFO (2)	2001	90,788	—	—	—	—	—

Name of Beneficial Owner	Number of Shares Beneficially Owned	Percentage of Common Equity Beneficially Owned
5% Beneficial Owners
STG Holdings PLC (1) 46 Berkeley Square London, United Kingdom W1J 5AT	10,673,642	36.5%
General Mediterranean Holding SA Center Financier 29 Avenue de la Poste Neuve L-2227 Luxembourg	3,350,000	11.4%
Directors and Officers
Stephen Forsyth	—	*
Paul Gothard	—	*
Tim Paterson-Brown	—	*
Professor Nadey Hakim	—	*
Dr Allan Miller	—	*
Total Officers and Directors as a Group (5 persons)	—	*

Exhibit No.		Description
1.1		Underwriting Agreement between Internet Holdings, Inc. and Panther Capital Ltd., dated January 6, 2000(1)
2.1		Articles of Merger of Medicsight, Inc., a Utah corporation(2)
2.2		Certificate of Merger of Medicsight, Inc., a Delaware corporation(2)
2.3		Offering Document to acquire shares of Radical Technology PLC.(3)
3.1		Certificate of Incorporation of Medicsight, Inc. and amendments thereto(2)
3.2		By-Laws of Medicsight, Inc.(2)
4.1		Loan Note issued by HTTP Insights, Ltd. to Nightingale Technologies Ltd.(8)
10.1		Stock Purchase Agreement, dated as of September 7, 2000, between Troy Ventures Ltd. and Internet Holdings, Inc.(4)
10.2		Share Sale Agreement between Nightingale Technologies Limited and Medicsight, Inc.(5)
10.3		Letter Agreement between Asia IT Capital Investments, Ltd. and Medicsight, Inc.(7)
10.3		Letter Agreement between Asia IT Capital Investments, Ltd. and Medicsight PLC(8)
16.1		Letter from BDO Stoy Hayward regarding change in certifying accountant, dated November 14, 2003.(6)
21.1		Subsidiaries (filed herewith at page E-1).
31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer (filed herewith at page E-2).

Signature	Title	Date

/s/ STEPHEN FORSYTH Stephen Forsyth	Director	April 8, 2004
/s/ PAUL GOTHARD Paul Gothard	Director	April 8, 2004
/s/ TIM PATERSON-BROWN Tim Paterson-Brown	Director	April 8, 2004
/s/ NADEY HAKIM Nadey Hakim	Director	April 8, 2004
/s/ ALLAN MILLER Allan Miller	Director	April 8, 2004

For the year ending December 31,	Property Leases ($'000)	Total ($'000)
2004	488	488
2005	504	504
2006	509	509
2007	509	509
2008 and thereafter	197	197

	March 31, 2003		June 30, 2003		September 30, 2003		December 31, 2003
Revenues	$	9		$	44		$	88		$	135
Net loss	$	(2,678	)	$	(2,446	)	$	(2,015	)	$	(2,957	)
Basic and diluted loss per share	$	(0.13	)	$	(0.12	)	$	(0.08	)	$	(0.12	)

As reported	March 31, 2002		June 30, 2002		September 30, 2002		December 31, 2002
Revenues	$	16		$	21		$	42		$	3
Net loss	$	(2,299	)	$	(9,249	)	$	(1,847	)	$	(4,320	)
Basic and diluted loss per share	$	(0.12	)	$	(0.48	)	$	(0.09	)	$	(0.23	)

As restated	March 31, 2002		June 30, 2002		September 30, 2002		December 31, 2002
Revenues	$	16		$	21		$	42		$	3
Net loss	$	(2,299	)	$	(9,249	)	$	(1,847	)	$	(85,518	)
Basic and diluted loss per share	$	(0.12	)	$	(0.48	)	$	(0.09	)	$	(4.44	)

As reported	March 31, 2001		June 30, 2001		September 30, 2001		December 31, 2001
Revenues	$	74		$	69		$	16		$	66
Net loss	$	(5,846	)	$	(10,432	)	$	(10,081	)	$	(19,486	)
Basic and diluted loss per share	$	(0.36	)	$	(0.63	)	$	(0.54	)	$	(0.94	)

Name of Subsidiary		Jurisdiction of Organization
Medicsight Nominees Limited		England and Wales
Medicsight PLC		England and Wales
Lifesyne (UK) Limited		England and Wales
Medicsight Asset Management Limited		England and Wales
Medicsight International limited		Gibraltar
Medicsight Finance Limited		England and Wales
Medicsight Singapore Pte Limited		Singapore
HTTP Tech, Inc.		New York
Medical Vision Systems, Inc.		Delaware

Exhibit 99.1

Medicsight PLC

Insights Limited

Report on value of shares in Medicsight plc

9 January 2004

Intangible Business Limited

www.intangiblebusiness.com

Medicsight Inc		Strictly Private and Confidential
Share Valuation		9 January 2004

Contents

Sections

1	Introduction and summary

2	Governing guidelines

3	Standard of Value

4	Rights of the shares

5	General Valuation Methodologies

6	Income approach methodologies used

7	Market approach methodologies used

8	Cost approach methodologies used

9	Chronology of events

10	Valuations of shares in MS-plc

11	Shares in Insights

12	Signed certification

List of appendices

1 Intangible Business credentials

2 Explanation of discount rate methodology

3 Explanation of terminal value methodology

4 Discount rate calculations

1 Introduction and summary

Instructions

1.1 We have been asked by Medicsight, Inc (“MS-Inc) to give our opinion on the value of 15,000,000 Medicsight plc (“MS-plc”) shares issued to MS-Inc in November 2001 and applied in settling an outstanding purchase consideration due to Nightingale Technologies Limited (“Nightingale”).

Instructions

1.2 The author of this report is Thayne Forbes, who graduated in Mathematics from the University of Oxford in 1982 and qualified as a Chartered Accountant with Binder Hamlyn in 1986. He initially specialised on audit, accounting and business advisory services to owner managed businesses, and by 1988 specialised in special advisory and investigation projects, share and business valuations and litigation support. He became a member of the Academy of Experts and the Society of Expert Witnesses in 1996.

1.3 In 1997 Mr Forbes transferred as a senior manager to Arthur Andersen (Business Consulting) where he continued providing litigation and valuation services, and then developed a focus on intangible asset valuations. For each of these service lines he was a member of the senior team responsible for managing the practice areas. Mr Forbes subsequently joined Brand Finance plc as a brand valuation director in early 2000. He has since passed a diploma at the Chartered Institute of Marketing, and joined the Expert Witness Institute. In early 2001 he left Brand Finance plc and co founded Intangible Business Limited (www.intangiblebusiness.com) a consultancy specialising in advising on intangible asset valuations and business development.

1.4 Mr Forbes’ professional work has usually been needed for a sale, dispute, management information, reorganisation or for tax purposes. For disputes he has generally acted as expert witness and adviser for High Court proceedings, County Court proceedings, arbitrations, other tribunals, expert determinations and mediations. He has also acted as the expert for expert determinations, and is on the panel for expert determination appointments by the President of the Institute of Chartered Accountants in England and Wales. He has given evidence in court as expert witness and has attended court to give support and advice to counsel. He has also attended mediations as expert witness.

1.5 Mr Forbes has managed over 100 valuation assignments and 50 litigation support assignments of varying size and complexity. The following recent assignments give an indication of relevant experience.

• Valuation of the global wine and spirits brands of a FTSE100 UK listed company, for inclusion in its filing information under US GAAP supporting a successful application to list its shares on the New York Stock Exchange.

• Valuation of intangible assets acquired by a travel company listed on NASDAQ for SEC filings under US GAAP.

• Expert advice, to the international section of the New York branch of the US Internal Revenue Service, on the contribution of business intangibles to the value of ancillary sales for delivery services in the US, and on the commercial arrangements behind sales distribution contracts for an entertainment group.

• Evaluation of the value of a patent for a space saving device for the apparel trade in North America.

• Evaluation of the opportunities to a Charitable Memorial Fund (for an extremely well known deceased celebrity) for licensing glassware, fine writing instruments, personal stationery, holiday ornaments and diamond jewellery in North America.

• Advice to the US owner of a mobile telephone operator in the UK on its intangible operating asset value for US tax purposes.

• Advice to a Yellow Pages group on UK, US and internet brand valuations for inter group transfers prior to planned flotation.

• Advice to the target of a hostile takeover bid on the value of five of its brands in ladies’ intimate apparel and fashion (in the UK and France) for inclusion in a day 39 defence document.

• Strategic advice on business development, fund raising and business/share sale for a chain of ladies’ apparel shops in the UK.

• Advice in connection with the negotiation of the purchase of a children’s clothing brand to a major UK retailer seeking to acquire the brand.

• Advice to a Japanese sports brand owner in dispute with a licensee in the UK over the terms of the license for branded apparel in the UK.

• Advice on the value of intangible assets to a well known London retailer for use in connection with competing hostile takeover bids.

• Preparation of a model to track brand and business value in test markets for the retail fuels division of a major international oil company.

• Advice to a Norwegian client on intangible asset value for a digital broadcast equipment business acquisition in the UK.

• Advice to the buyer of a national car and van rental company in the UK on breaches of warranty on acquisition, and the resulting effect on the value of the business.

1.6 The overall credentials of Intangible Business are attached as appendix 1

Purpose of valuation work

1.7 MS-Inc requires this work to assess the value of these shares, which has already been included in its annual report which has been filed with the Securities and Exchange Commission as a form 10-K. Page 4 of this form 10-K identifies that the 15,000,000 shares were issued on 22 November 2001 and valued at $21,832,000 based on the share price of stock being placed on behalf of MS-plc during the period March to December 2002.

1.8 In a letter dated 27 May 2003 BDO stated that in order to audit the fair value of MS-plc shares, because the shares were not quoted on a securities exchange, they took into account management representations, forecasted cashflows prepared by management, and the price third parties were willing to pay for the MS-plc shares.

The shares to be valued

1.9 The shares to be valued were issued as the second tranche of an agreement between MS-Inc and Nightingale dated 29 December 2000 for the acquisition of HTTP Insights Limited (“Insights”).

1.10 MS-Inc prepares its accounts under US accounting standards, the relevant parts of which are summarised in section 2 below. BDO confirmed that the key standard applying to this transaction is APB 16. We have read this standard, and the main paragraph which applies is paragraph 67:

“…………..

c. An asset acquired by issuing shares of stock of the acquiring corporation is recorded at the fair value of the asset [An asset acquired may be an entire entity which may have intangible assets, including goodwill] – that is, shares of stock issued are recorded at the fair value of the consideration received for the stock.

The general principles must be supplemented to apply them in certain transactions. For example, the fair value of an asset received for stock issued may not be reliably determinable, or the fair value of an asset acquired in an exchange may be more reliably determinable than the fair value of a noncash asset given up. Restraints on measurement have led to the practical rule that assets acquired for other than cash, including shares of stock issued, should be stated at “cost” when they are acquired and “cost may be determined rather by the fair value of the consideration given or by the fair value of the property acquired, whichever is the more clearly evident. “Cost” in accounting often means the amount at which an entity records an asset at the date it is acquired whatever its manner of acquisition and that “cost” forms the basis for historical-cost accounting.”

1.11 APB 16 also comments on the defects of the method which requires this (the purchase method) on paragraphs 22 to 26. Paragraph 22 is particularly relevant:

22. “However, the fair value of stock issued is not always objectively determinable. A market price may not be available for a newly issued security or securities of a closely held corporation. Even an available quoted market price may not always be a reliable indicator of fair value of consideration received because the number of shares issued is relatively large, the market for the security is thin, the stock price is volatile, or other uncertainties influence the quoted price. Further the determinable value of one security may not necessarily indicate the fair value of another similar, but not identical, security because their differences affect the value-for example the absence of registration or an agreement which restricts a holder’s ability to sell a security may significantly affect its value.”

1.12 Many of these comments apply to the MS-plc shares being valued in this report. They were newly issued shares and at November 2001 there was no market for the shares. Subsequently small parcels of shares were issued at £1 per share. These share issues were in an extremely thin market with a relatively small number of transactions for small parcels of shares at relatively low values (compared with the US and international capital markets).

Standard of value

1.13 The shares are to be valued on the basis of a fair value, as required by US accounting standards. Guidance on the meaning of fair value is contained in section 3 below. In the context of this report fair value is taken as the amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.

Date of valuation

1.14 The shares are to be valued at 22 November 2001.

Rationale for valuation methods used

1.15 There are a number of valuation methodologies used in practice for valuing shares, which are grouped under the income, cost and market headings. We have considered these methodologies and concluded that our valuations should be based on all of these approaches, but with most emphasis on the income approach as it is the method most closely aligned with the future economic benefits which are derived from ownership of the shares.

Information, analysis and reasoning

1.16 The information relied on has been a mixture of information maintained by MS-plc and market research. This has been analysed to estimate the future economic returns generated by the shares as at the point in time when the transaction occurred without recourse to hindsight. The key information used has been discussed and agreed with current Medicsight management.

Hindsight

1.17 Some of the information was produced after 22 November 2001. To the extent practicable we have used information which was available then. However in some instances we have used information prepared afterwards for the following reasons:

a) It contains information which was available at 22 November 2001.

b) Where it is impractical or no longer possible (due to passage of time) to obtain contemporaneous information we have used more current information reasonably consistent with that we expect was available at 22 November 2001. We have been careful not to rely on information which could not have been available at 22 November 2001.

c) It contains information which corroborates information which would have been available at 22 November 2001.

d) It contains information about relevant events where it is better to know the information rather than not to know and to guess at it.

Assumptions and limiting conditions

1.18 We have also assumed that all relevant information has been made available to us for this report and that the information can be relied on without verification.

Valuation conclusion

1.19 We have concluded that a fair value of 15,000,000 shares in MS-plc (a 20.3% shareholding) at 22 November 2001 was £750,000 in total or £0.05 per share.

1.20 The underlying economic reality was that in November 2001 MS-plc was a new venture, which had not demonstrated the ability to generate significant economic value. In these circumstances a valuer should exercise caution before concluding that a minority holding of MS-plc shares had significant value.

Disclaimer

1.21 This report has been prepared for MS-Inc solely for the purpose described in paragraph 1.1 above. It should not be relied on for any other purpose nor should it be relied on by any other party for any purpose whatsoever.

2 Governing guidelines

SEC guidelines

2.1 We have carried out our valuations on the basis that the US Securities and Exchange Commission will require as an overriding concept that the valuations reflect underlying economic reality. Therefore the reality underlying the shares should be consistently reflected in the share valuations.

US accounting practice

2.2 The key US accounting standards governing the requirement for the share and intangible asset valuations are as follows:

• Accounting Principles Board Opinion 16 - Business Combinations (APB 16)

• Accounting Principles Board Opinion 17 - Intangible Assets (APB 17)

• Statement of Financial Accounting Concepts No 5 - Recognition and Measurement in Financial Statements of Business Enterprises

• Statement of Financial Accounting Concepts No. 7 - Using Cash Flow Information and Present Value in Accounting Measurements

• Statement of Financial Accounting Standards No. 121 - Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of (FAS 121)

• Statement of Financial Accounting Standards No. 131 - Disclosures about Segments of an Enterprise and Related Information (FAS 131)

• Statement of Financial Accounting Standards No. 141 - Business Combinations (FAS 141)

• Statement of Financial Accounting Standards No. 142 - Goodwill and Other Intangible Assets (FAS 142)

• Statement of Financial Accounting Standards No. 144 - Accounting for the Impairment or Disposal of Long-Lived Assets (FAS 144).

Uniform Standards of Professional Appraisal Practice

2.3 The Appraisal Standards Board (part of The Appraisal Foundation, authorised by Congress as the Source of Appraisal Standards and Appraiser Qualification) has published Uniform Standards of Professional Appraisal Practice. We have followed those standards in this report.

Other guidelines

2.4 The Internal Revenue Service in the US has issued guidelines for the valuations of businesses and intangible assets. Although these guidelines do not directly govern this work we have followed them in this valuation report to the extent they contain relevant material.

2.5 We do not believe that the UK tax authorities have issued any guidelines for the valuations of businesses and intangible assets. The general requirement is for shares to be valued at market value, which is broadly the same as the standard of value as the fair value as defined in section 3 below).

2.6 Whilst we have followed the guidelines indicated by the US and UK tax authorities for carrying out a valuation we cannot say whether our valuation approach will be accepted by them or not. In addition the basis of valuation we have adopted may not be the appropriate one for some tax circumstances.

3 Standard of Value

3.1 It is necessary to consider the standard of value, and its meaning. Value can mean many different things to different people in different circumstances. There should be no misunderstanding about the meaning of value in these circumstances.

US Accounting Standards

3.2 US accounting standards generally require the standard of value to be “fair value”. We set out below a discussion of fair value contained in pages 32 and 33 of “Valuing a Business – Fourth Edition – The Analysis and Appraisal of Closely Held Companies” by Shannon P. Pratt, Robert F. Reilly and Robert P. Schweihs:

“To understand what the expression fair value means, you have to know the context of its use. For certain bookkeeping applications, fair value is defined in the relevant accounting literature. In business valuation, the term fair value is usually a legally created standard of value that applies to certain specific transactions.”

3.3 There is some guidance in FAS 141 (Appendix F) for the meaning of “fair value”:

“The amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.”

Published guidance

3.4 This tends to imply that the discussion of fair market value contained in pages 28 and 29 of “Valuing a Business – Fourth Edition – The Analysis and Appraisal of Closely Held Companies” by Shannon P. Pratt, Robert F. Reilly and Robert P. Schweihs is relevant to the standard of value which should be used:

“In the United States, the most widely recognized and accepted standard of value related to business valuations is fair market value. With regard to business valuations, it is the standard that applies to virtually all federal and state tax matters, such as estate taxes, gift taxes, inheritance taxes, income taxes, and ad valorem taxes. It is also the legal standard of value in many other-though not all-valuation situations.

Fair market value is defined by the ASA as “the amount at which property would change hands between a willing seller and a willing buyer when neither is acting under compulsion and both have reasonable knowledge of the relevant facts” This definition comports to that found in the Internal Revenue Code and Revenue Ruling 59-60.

In most interpretations of fair market value, the willing buyer and willing seller are hypothetical persons dealing at arm’s length, rather than any particular buyer or seller. In other words, a price would not be considered representative of fair market value if influenced by special motivations not characteristic of a typical buyer seller.

There is also general agreement that the definition implies that the parties have the ability as well as the willingness to buy or to sell. The market in this definition can be thought of as all the potential buyers and sellers of like businesses or practices.

The concept of fair market value also assumes prevalent economic and market conditions at the date of the particular valuation. You have probably heard someone say “I couldn’t get anywhere near the value of my house if I put it on the market today” or, “The value of XYZ Company stock is really much more (or less) that the price it’s selling for on the New York Stock Exchange today.” The standard of value that those people have in mind is some standard other than fair market value, since the concept of fair market value means the price at which a transaction could be expected to take place under conditions existing at the valuation date.

The terms market value and cash value are frequently used interchangeably with the term fair market value. The use of these essentially synonymous standard of value terms is often influenced by the type of asset, property, or business interest subject to valuation.

In the United States, the most widely recognized and accepted standard of value related to real estate appraisals is market value. The Appraisal Foundation defines market value as follows:

MARKET VALUE: Market value is the major focus of most real property appraisal assignments. Both economic and legal definitions of market value have been developed and refined. A current economic definition agreed upon by agencies that regulate federal financial institutions in the United States of America is:

The most probable price which a property should bring in a competition and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

1. buyer and seller are typically motivated;

2. both parties are well informed or well advised, and acting in what they consider their best interests;

3. a reasonable time is allowed for exposure in the open market;

4. payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and

5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

Substitution of another currency for United States dollars in fourth condition is appropriate in other countries or in reports addressed to clients from other countries.

Persons performing appraisal services that may be subject to litigation are cautioned to seek the exact legal definition of market value in the jurisdiction in which the services are being performed.

The most salient change in the above definition of market value compared with definitions widely accepted a few years ago is the phrase “the most probable price” in substitution for “the highest price”.

Conclusion

3.5 In the context of this report “fair value” is taken as the amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.

4 Rights of the shares

General

4.1 The rights of the shares give rise to their value, and these rights are contained in the Articles of Association of MS-plc. We have reviewed those articles and note that there is only one class of shares, ordinary shares. The rights of the shares in MS-plc are reasonably typical and do not contain any terms which would have an unusual effect on their value.

4.2 The 15,000,000 MS-plc shares issued on 22 November 2001 then represented 20.3% of the issued share capital, with the remaining shares held by one shareholder. Such a shareholding, although substantial, would not have the ability to direct MS-plc strategy, direct its resources or dividend policy. In other words it suffers from all the disadvantages of being a minority interest. In addition the shares of MS-plc were not traded on any stock exchange and so they were not readily marketable.

4.3 Where the rights of shares have disadvantages such as being a minority interest and/or a lack of marketability then this needs to be reflected in their value. In practice this often leads to discounts for such disadvantages.

5 General Valuation Methodologies

General

5.1 There are three general approaches to quantifying value, summarised as follows:

• Income (Income Based) Approach - a general way of determining a value indication of a business, business ownership interest, security, or intangible asset using one or more methods that convert anticipated economic benefits into a present single amount.

• Market (Market Based) Approach – a general way of determining a value indication of a business, business ownership interest, security, or intangible asset using one or more methods that compare the subject to similar businesses, business ownership interests, securities, or intangible assets which have been sold.

• Cost Approach – a general way of determining a value indication of an individual asset by quantifying the amount of money required to replace the future service capability of that asset.

Income Approach

5.2 The income approach is based on anticipated future returns discounted back at some appropriate discount rate to a present value. For shares and businesses there are a variety of income based approaches. In economic terms the value of an asset is equal to the present value of the future returns which it is projected to generate.

Market Approach

5.3 The market based approach is based on identifying comparable transactions in the market and analysing key components or measures which drive or measure value. These can then be adjusted for any differences in circumstances and can be applied to arrive at a valuation based on market transactions.

5.4 There are also some aspects of the market approach that can be utilised in the income approach. Data obtained in the markets might be used, for example, in arriving at sales forecasts, royalty rates and discount rates.

Cost based approach

5.5 There are two aspects to cost:

• historic cost; and

• replacement cost.

5.6 Historic cost is not generally relevant as a share valuation methodology. It can however give some background or context to value, and might give information on a past market transaction (ie cost might represent the historic exchange value of an asset in the market).

5.7 Replacement cost can be more directly relevant. Building a comparable asset can be a relevant consideration for a buyer. A buyer can always consider building an asset as an alternative to buying it.

Appropriate methodology

5.8 In these circumstances, we have considered all approaches, however in our opinion the income method gives the best basis for valuing these shares. It incorporates elements from the market based and cost based approaches and is therefore a rounded methodology. Given that this is a minority interest it should be primarily on a dividend yield basis as this method is directly aligned with the economic rights of the shares and how they could and would be exploited for value by an investor. Other income based approaches, discounted cash flow, multiples of sales and profits and relief from royalty will also be used as cross checks.

5.9 We also regard market transactions of some relevance, and have looked for properly comparable transactions as a means of quantifying the value of the shares. Such information is difficult to obtain because it is not generally made available by the parties to the transaction for a variety of reasons.

5.10 In our view historic cost is of background relevance. What has been paid to develop an asset should be influential to a buyer, although in these circumstances obtaining this information is not practicable or cost effective. We consider replacement cost to be more relevant, as a buyer can look to the cost of building equivalent investments rather than buying them.

6 Income approach methodologies used

Methodologies used

6.1 We consider the following income based methodologies to be the most relevant in these circumstances:

• Gross dividend yield;

• Discounted cash flow;

• Multiples of annual profits or sales; and

• Relief from royalty.

*Gross d**ividend yield*

6.2 The gross dividend yield method is based on forecast future gross dividends which the shareholder would anticipate for the shareholding. These are then discounted to a present value using a required rate of return or gross dividend yield.

Discounted cash flow

6.3 The discounted cash flow method is based on forecast free cash flows for MS-plc as a whole. These are then discounted to a present value using a required rate of return or discount rate. This value can then be attributed to the shareholding after adjusting for further relevant factors such as for the disadvantages of a minority interest and lack of marketability.

6.4 Two specific areas of the discounted cash flow method, the discount rate and the terminal value calculation are explained in appendices 2 and 3 respectively.

Multiples of annual profits or sales

6.5 The multiples method estimates the future maintainable annual profits or sales and applies a multiple in order to arrive at a value. It has the advantage that some comparison is possible both internally and externally with other valuations or transactions. The main disadvantages lie with the method being too simplistic and the usual inability to obtain sufficiently meaningful information for comparison.

Relief from royalty

6.6 As the value of the company lies predominantly in its intellectual property then the value of shares can be estimated by valuing the intellectual property itself. Valuing the intellectual property would be primarily on the relief from royalty method, which

estimates the future royalties which the owner is relieved from paying by virtue of owning the intellectual property. The costs associated with owning the intellectual property are also estimated together with tax on the net profits. The net returns are then discounted to a value using a discount rate which reflects both the time value of money and the risk associated with the cash flows.

6.7 The relief from royalty method has the advantage that it is the method most closely aligned with licensing, which is a usual form of practical exploitation of pure intellectual property. This allows for practical sense checks and comparisons, and minimises confusion with other issues impacting on business returns together with the intellectual property. It has become the most mainstream method for valuing intellectual property in practice.

6.8 Once the intellectual property has been valued, it can then be combined with the value of the other assets and liabilities in the company to give a value of the company itself. This value can then be attributed to the shareholding after adjusting for further relevant factors such as for the disadvantages of a minority interest and lack of marketability.

7 Market approach methodologies used

Information

7.1 For these shares there are severe limitations on the availability of directly relevant market information. We have however looked for market information which is as comparable as possible to the shares being valued.

Basis of comparison

7.2 The best available measures for using market data for this valuation are:

• Transactions in MS-plc shares

• Transactions in MS-Inc shares

• Listed company share prices

• Unlisted company transactions

7.3 Comparisons are often carried out by using ratios or multiples such as:

• By reference to a multiple of sales - sales times multiple equals value

• By reference to a multiple of Earnings Before Interest and Tax (EBIT) - EBIT times multiple equals value

• By reference to a multiple of Earnings Before Interest and Tax Depreciation and Amortization (EBITDA) - EBITDA times multiple equals value

• By reference to a price earnings ratio – earnings per share times P/E ratio equals value per share.

8 Cost approach methodologies used

Use of cost approach

8.1 The two potential ways of estimating costs in these circumstances are:

• The historic cost of establishing the shares.

• The anticipated cost of replacing the shares, or building new comparable shares.

8.2 The rationale for this is that a potential buyer of the shares may look to these either as a consideration or as an alternative when making such an investment. Both of these are not particularly realistic considerations in these circumstances.

8.3 Also the values in the balance sheet of a company are generally at cost, and this may have some relevance to share value. However the cost of an asset may not be its value and a minority shareholder has no access to or control over the use of assets owned by the company so it has limited application.

8.4 So whilst we have referred to certain cost aspects, it is not particularly relevant to this valuation.

9 Chronology of events

9.1 In this section we summarise a chronology of relevant events.

29 December 2000 Share Sale Agreement between Nightingale and MS-Inc

9.2 Consideration stated as 30 million (15 million before 2 for 1 share split) MS-Inc shares. No reference was made to value, only to the quantities of shares to be issued in consideration.

9.3 Consideration payable as follows:

• 15m once DERA validation report satisfactory

• 15m upon first trial in medical imaging or DERA report on commercial viability of same

Incorporation of MS-plc

9.4 MS-plc was incorporated in August 2001.

*9 November 2001 m**inutes of MS-plc*

9.5 Board resolves to acquire part of Insights business for £3,659,104, financed by the assumption of a matching indebtedness due to MS-Inc.

9.6 Board resolves to increase its authorised share capital and sub divide its shares into 5p shares.

Minutes of MS-Inc 22 November 2001

9.7 Board approves the sale of part of Insights business by Insights to MS-plc, with MS-plc assuming liability due by Insights to MS-Inc, (being £3.65m and equivalent to the valuation placed on the assets acquired) as consideration for the business acquired.

9.8 Board agrees novation of £3.65m debt from Insights to MS-plc.

9.9 Board approves resolutions by MS-plc to increase its authorised share capital and sub divide shares into 5p shares.

9.10 Board notes MS-plc will repay the £3,659,104 loan by issuing 72,868,582 new 5p shares (resulting in a small share premium of £15,674.90) and resolves to request MS-plc to issue 15,000,000 of these in the name of Nightingale Technologies Limited in order to satisfy MS-Inc’s final obligation under the 29 December 2000 agreement (as renegotiated in November 2001).

9.11 MS-Inc resolves to apply for further 1m shares in MS-plc at 5p each – subscribing £50,000 in cash.

22 November 2001 letter from MS-Inc to Nightingale

9.12 Records the countersigned agreement of Nightingale to accept a variation to the 29December 2000 agreement, substituting 15m MS-plc shares in lieu of 15m Inc shares.

Minutes of MS-plc dated 22 November 2001

9.13 Capitalisation of £3.65m debt due to MS-Inc by issue of 57,868,582 shares and, at specific request of MS-Inc., 15m in the name of Nightingale.

9.14 MS-Inc subscription of £50,000 cash for 1m fully paid 5p shares

9.15 Allotment and issue of 73,868,582 shares credited as fully paid at a price of 5p each.

15 February 2002 Underwriting Agreement between Asia IT Capital and MS-plc

9.16 Underwriting Agreement for allotment of shares to subscribers for £1 each, closing date 31 December 2002 – to be accepted within 21 days (i.e. 8 March 2002).

Share issues

9.17 Issues of shares in MS-plc are summarised below:

			Amount paid
Date	Number	Nominal value	per share	total

09/08/01	20	0.05	0.05	1
22/11/01	57,868,582	0.05	0.05	2,893,429		*78.3*	%
22/11/01	1,000,000	0.05	0.05	50,000		*1.4*	%
22/11/01	15,000,000	0.05	0.05	750,000		*20.3*	%
Total	73,868,602			*3,693,430*		*100.0*	%

14/08/02 -15/02/03	7,126,418	0.05	1.00	7,126,418	(1)

Total	80,995,020			14,513,277

(1) In small parcels of shares of up to 250,000 shares

10 Valuations of shares in MS-plc

10.1 We have carried out several alternative valuations of shares in MS-plc on an income basis, which we use for comparison and cross checking.

10.2 We calculated a value on a gross dividend yield basis, which anticipates the future gross dividends attributable to the shares. This is the method most closely aligned with the rights of the shares, and is summarised as follows:

Required dividend yield

10.00

Tax rate for grossing up dividends

10.0

Dividend cover

4.0

New product probability of success

10.0

Dividend growth rate 2005 to 2007

238.81

Dividend growth rate after 2007

4.0

		2002		2003		2004		2005		2006		2007
Revenue £m		0.000		6.080		20.060		37.210		47.530		52.120
Operating costs		0.000		(1.730	)	(4.440	)	(6.620	)	(7.010	)	(7.140	)
Gross profit		0.000		4.350		15.620		30.590		40.520		44.980
Discount to more realistic levels	50.0%	0.000		(2.175	)	(7.810	)	(15.295	)	(20.260	)	(22.490	)
Adjusted gross profit		0.000		2.175		7.810		15.295		20.260		22.490
Overheads		(2.000	)	(4.210	)	(4.670	)	(4.890	)	(5.070	)	(5.190	)
EBITDA		(2.000	)	(2.035	)	3.140		10.405		15.190		17.300
Amortisation and depreciation		(0.500	)	(1.000	)	(1.210	)	(1.610	)	(1.940	)	(2.000	)
EBIT		(2.500	)	(3.035	)	1.930		8.795		13.250		15.300
Interest receivable/(payable)		0.000		0.000		0.000		0.000		0.000		0.000
Profit before taxation		(2.500	)	(3.035	)	1.930		8.795		13.250		15.300
Taxation						0.000		(1.557	)	(3.975	)	(4.590	)
Profit after taxation £m		(2.500	)	(3.035	)	1.930		7.238		9.275		10.710
Retained profits/(losses) brought forward		(2.700	)	(5.200	)	(8.235	)	(6.305	)	0.933		10.208
Retained profits/(losses) carried forward		(5.200	)	(8.235	)	(6.305	)	0.933		10.208		20.918
Dividend cover								4.0		4.0		4.0
Net dividend								0.233		2.319		2.678
Shares in issue (m)		80.995		80.995		80.995		80.995		80.995		80.995
Net dividend per share		0.000		0.000		0.000		0.003		0.029		0.033
Gross dividend per share £		0.000		0.000		0.000		0.003		0.032		0.037
Discount Factor		1.100		1.210		1.331		1.464		1.611		1.772
Present value per share £		0.000		0.000		0.000		0.002		0.020		0.021

		VALUE CALCULATION	£
Value as % of 2007 profit after tax	3.0	Value per share to 2007	0.04
Value as multiple of 2007 sales	1.2	Value per share after 2007	0.36
		Total value per share	0.40
		New product probability of success	10	%
		Probability weighted value per share	0.040

10.3 We have also estimated a value of the company’s business, and attributed it to the underlying shares. Although this is not directly in accordance with the share rights it gives some useful insight and comparison, summarised as follows:

Discount rate

10.53

New product probability of success

10.0

Free cash flow growth rate 2005 to 2007

29.22

Profit growth rate after 2007

4.0

		2002		2003		2004		2005		2006		2007
Revenue £m		0.000		6.080		20.060		37.210		47.530		52.120
Operating costs		0.000		(1.730	)	(4.440	)	(6.620	)	(7.010	)	(7.140	)
Gross profit		0.000		4.350		15.620		30.590		40.520		44.980
Discount to more realistic levels	50.0%	0.000		(2.175	)	(7.810	)	(15.295	)	(20.260	)	(22.490	)
Adjusted gross profit		0.000		2.175		7.810		15.295		20.260		22.490
Overheads		(2.000	)	(4.210	)	(4.670	)	(4.890	)	(5.070	)	(5.190	)
EBITDA		(2.000	)	(2.035	)	3.140		10.405		15.190		17.300
Capital expenditure		(0.500	)	(1.910	)	(1.830	)	(1.500	)	(1.500	)	(1.500	)
Working capital movement				(0.544	)	(1.409	)	(2.415	)	(2.650	)	(2.973	)
Operating cash flow		(2.500	)	(4.489	)	(0.099	)	6.490		11.040		12.828
Interest receivable/(payable)		0.000		0.000		0.000		0.000		0.000		0.000
		(2.500	)	(4.489	)	(0.099	)	6.490		11.040		12.828
Taxation						0.000		(1.557	)	(3.975	)	(4.590	)
Free cash flow		(2.500	)	(4.489	)	(0.099	)	4.933		7.065		8.238
Discount Factor		1.105		1.222		1.350		1.493		1.650		1.824
Present value £m		(2.262	)	(3.674	)	(0.073	)	3.305		4.282		4.517

		VALUE CALCULATION			£m
Value as multiple of 2007 EBITDA	4.5	Value of business to 2007			6.1
Value as multiple of 2007 sales	3.0	Value of business after 2007			71.9
		Total value of business			78.0
		New product probability of success			10.0		%
		Probability weighted value			7.8
		Percentage shareholding	20.3	%	1.6
		Discount for marketability etc	50.0	%	(0.8		)
		Value of shareholding			0.8
		Number of shares			15,000,000
		Value per share			£	0.053

10.4 We have also calculated a share value based on valuing the company’s assets, which is principally intellectual property. Again, although this is not directly in accordance with the share rights it also gives some useful insight and comparison, summarised as follows:

Discount Rate	10.53		%
Tax Rate	30.00		%
Royalty per scan	£	50
Profit growth rate 2005 to 2007	154.04		%
Profit growth rate after 2007	4.00		%

		2002		2003		2004		2005		2006		2007
Total scans per year		0.000		11,832		41,904		77,712		99,264		108,864
Discounted to more realistic levels	50.0%	0.000		(5,916	)	(20,952	)	(38,856	)	(49,632	)	(54,432	)
Revised total scans per year		0		5,916		20,952		38,856		49,632		54,432
Royalty per scan £		50		50		50		50		50		50
Royalties £m		0.000		0.296		1.048		1.943		2.482		2.722
Overheads		(1.800	)	(1.800	)	(1.800	)	(1.800	)	(1.800	)	(1.800	)
Operating Profit		(1.800	)	(1.504	)	(0.752	)	0.143		0.682		0.922
Taxation		0.540		0.451		0.226		(0.043	)	(0.204	)	(0.276	)
Profit after tax		(1.260	)	(1.053	)	(0.527	)	0.100		0.477		0.645
Discount Factor		1.105		1.222		1.350		1.493		1.650		1.824
Present Value £m		(1.140	)	(0.862	)	(0.390	)	0.067		0.289		0.354

		VALUE CALCULATION			£m
Value as multiple of 2007 royalties	1.5	Value of IP to 2007			(1.682		)
Value as multiple of 2007 profit after tax	6.1	Value of IP after 2007			5.630
		Total value of IP			3.949
		New product probability of success			10.0		%
		Probability weighted value			0.395
		Percentage shareholding	20.3	%	0.080
		Discount for marketability etc	50.0	%	(0.040		)
		Value of shareholding			0.040
		Number of shares			15,000,000
		Value per share			£	0.003

MS-plc forecasts

10.5 Our valuation calculations are based on forecasts prepared by MS-plc. It is apparent that these are highly optimistic, not least as no income was developed to the end of 2002 and in 2003 about £500,000 was forecast for that year. Therefore these forecasts of substantial income need to be treated with caution for a valuation.

Market Methodology

10.6 The shares were issued by MS-plc at 5p per share on 22 November 2001 and used for this transaction immediately afterwards.

10.7 MS-plc shares were issued to repay debt of amounting to 5p a share on 22 November 2001.

10.8 MS-plc converted to a plc on the audited balance sheet with £3.7m total share capital at (5p a share) on 22 November 2001.

10.9 Subsequent transactions in MS-plc shares were at £1 per share. However the following points should be noted:

• The transactions were some time after the valuation date of November 2001.

• The transactions were only small parcels, of shares, much less than 15m.

• The transactions were required for a level of finance which actually took some 10 months to raise.

• Of the finance required, £4.9m was raised in total, which was only 80% of target.

• The investments were relatively small amounts, for small parcels of shares.

• Many investors committed on basis that their investment was eligible for EIS (20% against Income Tax plus up to 40% relief from rolling Capital Gains).

10.10 MS-Inc’s OTC trading prices may be taken to imply a value for MS-plc shares. However:

• Insights retained the rights for uses other than medical but MS-plc did not (MS-plc only had the rights for medical use).

• The value of MS-plc in 2003 does not support £1 a share, and there has been value improvement since November 2001 (eg the work of the team of software engineers engaged since November 2001).

• The share price was driven by market perceptions rather than reality.

10.11 We have obtained data on share prices for listed and unlisted companies around November 2001. MS-plc’s main competitors at the time were GE, Phillips, Siemens and Toshiba, but this was an insignificant part of their business and not possible to analyse separately. We have researched some comparable public information. Although it is not particularly comparable it is comparable as anything which can be practicably obtained from published information. The data is consistent with our principal valuation methods and is summarised:

• BDO Stoy Hayward/Acquisitions Monthly Private Company Index showing a private company index P/E ratio of 12.6 for Q3 2001 against the four month average FT Non-Financials P/E ratio of 21.1.

• FTSE-Actuaries Indices showing a P/E ratio of 42.9 and Net Yield of .9% for Software and Computer Services October – December 2001.

Cost Methodology

10.12 At 22 November 2001 the balance sheet of MS-plc had net assets of £3,693,429 after including book values of £3.5m for intangibles.

Overall assessment

10.13 By November 2001 MS-plc had not generated any revenue, and little real prospect of substantial sales within the short to medium term. Indeed it has only generated modest amounts of sales by 2003. Based on historic performance shareholders had no prospects of dividends or realisations from a share sale. This gives an expectation that shares would only have a nominal value unless there is strong evidence about how value would be derived. We have not seen any such evidence.

10.14 The four different income approaches are all consistent with this, as is the cost approach. The only approach which indicates the possibility of a higher value are some market transactions. There are however good reasons to discount them in this instance. It is therefore reasonable to conclude that a fair value of shares in MS-plc at November 2001 was their nominal value of 5p per share.

11 Shares in Insights

Objective

11.1 To summarise all relevant valuation approaches for 1,000 shares in Insights (50%) at November 2001.

Income Methodology

11.2 No business plans were ever developed for Insights, there was just a market study. Valuation calculations based on distinct income forecasts for Insights are therefore not possible.

11.3 In the event Insights generated no income other than through the sale of its rights.

Market Methodology

11.4 The first part of the same transaction was valued at US$93,000,000 for 50%. With regard to this:

• By November 2001 the perceived value of the intellectual property had decreased

• It needed to be combined with MS-plc intellectual property which had yet to be developed

• The condition for the second tranche was not then satisfied, and there was no clear timetable or resources needed to achieve it

• The condition would perhaps only be fulfilled after clinical trials were finished, and the results evaluated it as fit for purpose. These trials had still not yet started even by end 2003

• The negotiating position of Nightingale was weak on the second tranche

• The perception then by Nightingale, Medicsight Inc and MS-plc was of a token value at 5p per share

11.5 The assets were subsequently sold, £3.6m for the medical use intellectual property to MS-plc and £1.5m for the remaining intellectual property to Medicsight Finance Limited, plus the transfer of loan from Nightingale of $3.25m (also included was a

rent deposit and a patent). No work was carried out on any other application of this intellectual property. Then Insights was sold for the nominal sum of £100.

Cost Methodology

11.6 At 31 December 2001 the balance sheet of Insights had net liabilities of £4,031,092, after including book values of £1.7m for intangible assets.

Overall assessment

11.7 By November 2001 Insights had not generated any profits, and had only generated modest amounts of sales. Based on historic performance shareholders had no prospects of dividends or realisations from a share sale. This gives an expectation that shares would only have a nominal value unless there strong evidence about how value would be derived. We have not seen any such evidence.

11.8 Taking all the factors together, and considering the reasons for certain inconsistencies it is reasonable to conclude that a fair value for 15,000,000 shares in MS-plc at November 2001 was £750,000 or 5p per share.

12 Signed certification

12.1 I certify to the best of our knowledge and belief:

• the statements of fact contained in this report are true and correct;

• the reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, impartial, unbiased professional analyses, opinions, and conclusions;

• I have no present or prospective interest in the property that is the subject of this report, and I have no personal interest with respect to the parties involved;

• I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment;

• my engagement in this assignment was not contingent upon developing or reporting predetermined results;

• my compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favours the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal;

• my analyses, opinions, and conclusions were developed, and this report has been prepared in conformity with the Uniform Standards of Professional Appraisal Practice; and

• significant professional assistance to the person signing this report was only provided by representatives of Intangible Business Limited.

Signed

Thayne Forbes

Intangible Business Limited

Appendix 1

Our people

Key people

Senior Consultants

• Stuart Whitwell

• Thayne Forbes

• Charles Langford

• Tracey McCulloch

• Elise Neils (USA)

Senior Associates

• Edmond Huysser (Holland)

• Sheila Searle (USA)

• Malcolm Davis (Japan)

• Patrick Gillon (Spain)

• Philippa Kelham

• David Kelham

• Sam Dias (UK - econometrician)

• Peter Gibson (Italy)

• Rick Gilewicz (Latin America)

• Keith Lucas

• Robert Needham (CIS and Baltics)

Thayne Forbes

• Thayne read Mathematics at Oxford University before qualifying as a Chartered Accountant with Binder Hamlyn in London in 1986. He has since passed the Intensive Diploma at the Chartered Institute of Marketing Exams to gain dual Chartered status. He is also a member of The Academy of Experts, The Society of Expert Witnesses, and The Institute of Expert Witnesses.

• Thayne worked for Arthur Andersen for six years, and then at Brand Finance for a year, prior to becoming a founder shareholder director of Intangible Business Limited. Whilst at Arthur Andersen, Thayne was one of the key intellectual property specialists in the UK practice, for example he was the UK representative on the global steering committee responsible for developing international training and best practice in valuations.

• Thayne’s strategy and valuation work has covered brands, other intangible assets, businesses and shares. He has carried out over 100 such advisory projects over the last 15 years. These have been required across a wide range of industry sectors both in the UK and international markets for a variety of business reasons, such as brand strategy, sale or purchase and business re-organisation.

• Thayne has managed and worked on a wide variety of brand strategy/valuation projects including postal services, watches, pharmaceuticals, media, banking, fashion, petroleum and lubricants, facial and toilet tissue, ingredient brands, celebrities and many others

Stuart Whitwell

• Stuart graduated from Plymouth University in Business Studies and trained in sales operations in Unilever’s MacFisheries subsidiary before qualifying as a Chartered Management Accountant with Reed International in 1985. He has also undertaken the final examinations of the Chartered Institute of Marketing in order to achieve dual Chartered status. He is also a member of the Marketing Society

• He worked for Brown and Root (2 years), Sea-Land (2 years), and Hiram Walker International (for 10 years) in Europe and Asia Pacific having specialised in brand market business development projects in Europe and Asia. He held various senior positions in Finance, Business Development and General Management during this period holding the position of Regional Director of Finance and Business Development for Asia Pacific, and was responsible for many successful acquisitions, joint ventures and new brand/market developments

• For two years Stuart ran his own consulting company in Hong Kong undertaking market and business development projects for Brown-Forman, Pernod Ricard and Jose Estevez S.A. in China and the Philippines. During this period Stuart successfully launched three new to market brands and implemented successfully a new independent sales and marketing distribution company.

• Stuart has managed and worked on a wide range of brand strategy/valuation projects including clients in media, telecoms, petroleum and lubricants, utilities, logistics, electronics, retail, banking, postal services, building products, logistics, ingredient brands, celebrities, fashion, beverages, facial and toilet tissue and furniture retailing.

Elise Neils

• Elise is based in the US and specialises in providing valuation services to businesses, governmental entities, attorneys, and accountants. Over the past fourteen years, Elise has supervised and participated in hundreds of complex valuation assignments involving intangible assets, businesses, brand names, software, real estate, sports franchises and hard assets.

• Elise has a Juris Doctor from Marquette University Law School and a Bachelor of Business Administration in Finance from the University of Wisconsin - Milwaukee. She has successfully passed the American Society of Appraisers Business Valuation Advancement Examination and is a licensed member of the State Bar of Wisconsin; a Member of the National Association of Securities Dealers Board of Arbitrators; and a member of the Alumni Board of Directors of the National Sports Law Institute.

• Most recently Elise testified at an SEC hearing on auditor independence at Pace University in New York City and spoke to sports and entertainment lawyers on the Valuation of Stadium Naming Rights.

• Elise has worked on many Intangible Business assignments most notably in wines and spirits, quick service restaurants and ingredient brands

Tracey McCulloch

• Tracey studied Business Marketing at the Queensland University of Technology in Australia. She spent four years working in a variety of marketing and communications roles before pursuing her ambition in 1994 to travel and work in the UK marketing industry. She started life in London with leading UK design and brand consultancy Tutsells Lambie-Nairn. Whilst working there, she discovered her passion for brands, and after a year, joined the Leo Burnett Brand Consultancy unit. She spent over two years with LBBC working with global clients on brand architecture, brand positioning, internal brand management and strategy projects.

• In 1998, she embarked on the ‘brand valuation path’, joining Brand Finance where she worked for over three years on many successful, brand valuation and strategy projects for global clients.

• Tracey joined Intangible Business in September 2001, keen to pursue her interest in the exciting field of brand valuation and strategy, and has since worked on projects for brands such as The Woolmark, Allied Domecq Spirits & Wines, Princess Diana of Wales Memorial Fund and The Glasshouse Fashion chain.

Charles Langford

• Charles’ background is entirely within the field of Brand Valuation having worked on projects across most business sectors which have allowed him to appreciate all the different methodologies and approaches to brand valuation and respective application

• Charles specialist expertise is the ability to develop bespoke brand valuation models that reflect the defined understanding and linkage between relative consumer equity and market performance and the ability of a business to convert this to financial performance through operational efficiency

• Charles has worked on a range of brand valuation projects with Intangible Business including wines and spirits, quick service restaurants, fabrics, fashion and ingredient brands

[GRAPHIC]

Intangible Business Limited	T + 44 (0) 870 240 7386
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169 Tower Bridge Road	www.intangiblebusiness.com
London SE1 3LJ
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Appendix 2

Discount Rate

1.1 A discount rate is an annually compounded rate by which each increment of expected economic income is discounted back to its present value. A discount rate reflects both time value of money and risk, and therefore represents the cost of capital.

1.2 For purposes of this report, the terms ‘discount rate’, ‘cost of capital’, and ‘weighted average cost of capital’ (“WACC”) are used interchangeably.

1.3 According to Dr. Alfred Rappaport in his 1998 edition of Creating Shareholder Value,

“The appropriate rate for discounting the company’s cash flow stream is the weighted average costs of debt and equity capital…It is important to emphasize that the relative weights attached to debt and equity, respectively, are neither predicated on dollars the firm has raised in the past, nor do they constitute the relative proportions of dollars the firm plans to raise in the current year. Instead, the relevant weights should be based on the proportions of debt and equity that the firm targets for its capital structure over the long-term planning period.”

1.4 The discount rate was computed as a WACC rate based on the following formula:

WACC = (k_e * W_e) + (k_p * W_p) + (k_d[1-t] * W_d) +/- y

Where:

WACC = Weighted Average Cost of Capital

k_e = Cost of common equity capital

W_e = Percentage of common equity in the capital structure, at market value

k_p = Cost of preferred equity

W_p = Percentage of preferred equity in the capital structure,

at market value

k_d = Cost debt (pre-tax)

t = Tax rate

W_d = Percentage of debt in the capital structure, at market value

y = Specific risk factor adjustment

1.5 In summary, the WACC rate has several attributes, including:

• It is market driven i.e., it is the expected rate of return that the market requires to commit capital to the investment in the shares.

• It is forward-looking, based on expected returns.

• The base against which cost of capital is measured is market value, not book value.

• It is measured in nominal terms, including expected inflation.

Cost of Equity

1.6 In developing the cost of equity, we used the ‘build up model’ based on the CAPM:

E = R_f + b(ERP)

E = Cost of Equity

R_f = Risk-free Rate

b = Beta

ERP = Equity risk premium

Risk Free Rate

1.7 The CAPM implicitly assumes the presence of a single riskless asset, that is, an asset perceived by all investors as having no risk. The risk free rate is the return available as of the valuation date on a security that the market generally regards as being free of the risk of default. A common choice for the nominal riskless rate is the yield on a government security. While interest rate changes cause government obligations to fluctuate in price, investors face essentially no default risk as to either coupon payment or return of principal.

1.8 The risk-free rate reflects the following components:

• A real return for lending out the funds over the investment period, thus forgoing consumption for which the funds otherwise could be used.

• The expected rate of inflation over the term of the risk-free investment.

• The risk that the principal’s market value will rise or fall during the period to maturity as a function of changes in the general level of interest rates.

1.9 In our analysis, we utilized the CSFB Equity-Gilt Study, 15 year gilt index for the risk free rate.

Beta

1.10 Beta is a measure of an asset’s sensitivity to the market, otherwise known as systematic risk. The systematic risk of a security is estimated by regressing the security’s excess returns against the market portfolio’s excess returns. The slope of the regression equation is the beta. Beta is a function of the relationship between the return on an individual security and return on the market as measured by a broad market index.

Equity Risk Premium

1.11 The equity risk premium (‘ERP’) represents the additional return an investor expects to compensate for the additional risk associated with investing in equities as opposed to investing in a riskless asset. The ERP is reflective of what an investor thinks the risk premium is going forward. Unfortunately, the expected ERP is unobservable in the market and therefore must be estimated through the use of historical data. The historical equity risk premium is calculated by subtracting the long-term average of the income return on the riskless asset from the long-term average stock market return as measure over the same period as that of the riskless asset. This assumes that what has happened in the past in representative of what might be expected in the future.

Cost of Debt

1.12 The other capital used to estimate a discount rate is debt, the cost of which is typically based on interest rates

Tax rates

1.13 The discount rate is based on the cash flows after tax, and should therefore be adjusted for tax to match the cash flows. Typically there is no adjustment to the cost of equity but there is an adjustment to the cost of debt.

Weighting of Equity and Debt

1.14 The discount rate should reflect an appropriate capital structure of equity and debt and so the cost of equity and the cost of debt should be weighted to give a WACC.

Appendix 3

Terminal value methodology

1.1 For purposes of this report, the terms ‘terminal value’, ‘continuing value’, and ‘perpetuity value’ are used interchangeably. The terminal value is an estimate of the present value of the future cash flows from the explicit forecast period.

1.2 Estimating the terminal value or continuing value parameters is an integral part of the forecasting process. The continuing value parameters should reflect a coherent forecast for the long-term economic situation of the industry. Specifically, the continuing value parameters are based on the expected hypothetical steady state condition for the shares. This has been applied by assuming a steady percentage increase after 2007 and using Gordon’s growth model to calculate a present value for this.

Appendix 4

Required Dividend Yield

Net Yield of listed companies	0.90	%
Required premium	9.10	%
Required Dividend Yield	10.00	%

	Weighting
Weighted average cost of capital

Cost of equity
Risk free rate			4.71	%
Equity risk premium	6.00	%
Beta	1.25
			7.50	%
Cost of equity			12.21	%	80.00	%	9.77	%

Cost of debt
Mean LIBID/LIBOR			3.97	%
Premium for corporate borrowing			1.50	%
Borrowing rate			5.47	%
Corporate tax	30.00	%	-1.64	%
Cost of debt			3.83	%	20.00	%	0.77	%

Weighted average cost of capital							10.53	%

Sources

Net Yield listed companies LBS Risk Measurement Service - index for Software and Computer Services Sector

Risk free rate Bank of England ten year government securities month end November 2001

Beta LBS Risk Measurement Service - index for Software and Computer Services Sector

Equity risk premium taken between Ibbotson 9% and CFSB 3.5%

Bank of England LIBID/LIBOR end of month rates November 2001

Premium for Corporate borrowing based on normal business practice 2nd tier rates

Debt Equity weighting based on normal gearing ratios

Exhibit 99.2

PRIVATE & CONFIDENTIAL

December 21, 2001

Mr. Stefan Allesch-Taylor

Chairman and Chief Executive Officer

HTTP Technology, Inc.

46 Berkeley Square

London, UK W1X 5DB

Dear Mr. Allesch-Taylor:

Empire Valuation Consultants, Inc. (“Empire”), an independent consulting firm specializing in going concern valuations, was retained by HTTP Technology, Inc. (“HTTP”) to express an opinion as to the fair market value of the assets (“Assets”) of Nightingale Technologies, Ltd. (“Nightingale” or the “Company”), which were acquired by HTTP as of December 29, 2000 (the “Valuation Date”). It is our understanding that this valuation will be used in meeting financial reporting requirements.

Methodology

Nightingale has been valued on a going concern basis. Since the Company is closely-held, and thus without a public market for its ownership interests, this appraisal was conducted according to guidelines established by the Internal Revenue Service (“IRS”), and in conformity with appraisal practices promulgated by the American Society of Appraisers in the Principles of Appraisal Practice and Code of Ethics, and the Uniform Standards of Professional Appraisal Practice (“USPAP”), together with such standards as were deemed relevant to this engagement.

As noted, this report has been prepared in conformance with USPAP; Standards 9 and 10 apply directly to the preparation of valuation reports of business interests. In general, these requirements are binding. However, flexibility with regard to the extent of certain information contained within the written appraisal report (Standards Rule 10-2) is permitted. Therefore, this letter report’s contents have been limited to discussion of those elements deemed critical to the formation of this opinion.

350 Fifth Avenue • Suite 5513 • New York, NY 10118 • 212-714-0122 • Fax 212-714-0124

3255 Brighton Henrietta Town Line Road • Rochester, NY 14623 • 716-475-9260 • Fax 716-475-9380

Fair market value as defined here is the price at which ownership interests would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of all relevant facts.

Sources of Information

In valuing the Assets, the following sources of information were considered which relate specifically to Nightingale:

• Interviews, discussions, and electronic mail correspondence with the following people regarding Nightingale’s and HTTP’s history, operations, finances, and outlook as of the Valuation Date:

• Dr. Jamshid Dehmeshki, Chief Technology Officer;

• Mr. Paul Gothard, HTTP’s Controller; and

• Yourself, HTTP’s Chief Executive Officer;

• Audited financial statements of Nightingale from inception (July 12, 2000) to December 28, 2000;

• Copy of filled out valuation data request for Nightingale prepared by Jason Forsyth;

• Five-year financial statement projections and notes for Nightingale, as of the Valuation Date;

• Memorandum and Articles of Incorporation of Nightingale, dated July 12, 2000;

• HTTP Form 8-K, dated March 7, 2001 containing the Nightingale purchase agreement;

• Description of Nightingale’s Stochastic Perception Engine (“SPE”);

• SPE Market Attractiveness Study, dated December 2000 and developed by Z/yen Limited;

• Nightingale patent application for the SPE, dated September 22, 2000;

• Assignment of Patent Application to Nightingale from Nightingale (Nuie) Ltd., dated October 5, 2000;

• $10 million unsecured loan note from Nightingale to Nightingale (Nuie) Ltd. for purchase of SPE in-process patent;

• HTTP’s World Wide Web (“web”) site (www.http-tech.com);

• Employment agreements between Dr. Sabbir Ahmed Rahman and Nightingale; and

• Additional information supplied by HTTP and Nightingale.

Sources of data on the industry include statistical processing, speech recognition and medical imaging competitor’s (Autonomy, Plc., SPSS, Inc., Nuance Communications, Inc., Dues Technology, Inc. and R2 Technology, Inc.) annual reports, press releases, web pages and analyst reports. Economic data were gathered from Pricewaterhouse Coopers UK Economic Outlook and HM Treasury’s Forecasts for the UK Economy, among other sources. Data regarding expected rates of return came from Ibbotson Associates.

Business Profile – Nightingale Technology

Nightingale developed software that utilized its in-process patented SPE algorithm. As of the Valuation Date, the Company was building a technology demonstrator, a software package that demonstrates the capabilities of the SPE, and the SPE was in the process of verification and validation by the Defense Evaluation and Research Agency (“DERA”). Once the SPE technology demonstrator was completed and the SPE was validated by DERA, HTTP planned on developing software that would allow the SPE to be used in four application areas: medical imaging, statistical processing, speech recognition and defense. The Company had no sales and an operating loss of about £751,222 ($1.05 million) for the period from inception (July 12, 2000) to December 28, 2000.

The Company’s headquarters are located London, UK where most of its staff is employed.

A. History/Overview

The Company was formed in July 2000 to hold the SPE patent rights developed by Nightingale (Nuie) Ltd. and Dr. Rahman. On October 5, 2000, Nightingale purchase the SPE patent and commercial rights for loan note of $10 million to Nightingale (Nuie) Ltd. In addition, after the purchase of the SPE patent, Nightingale continued development on the SPE software demonstration package. On December 29, 2000, HTTP offered to purchase the stock of Nightingale for 30

million HTTP shares. The payment of the shares was contingent upon two events. First, once Nightingale received DERA validation, 7.5 million shares (15 million shares post 2:1 HTTP stock split) would be issued and second, once the SPE is used in a medical imaging prototype to provide scanning analysis, the 7.5 million (15 million shares post 2:1 HTTP stock split) additional shares will be provided.

B. Technology – Stochastic Perception Engine

As of the Valuation Date, Nightingale had developed the mathematics of the SPE, had an in-process patent for the SPE and was in the process of developing a technology demonstrator and having the SPE validated by DERA. The SPE is a toolbox of algorithms used to analyze data.

The SPE consists of five components: cluster analysis, feature or variable selection, density estimation, data classification and value prediction. Cluster analysis is the process of identifying structure in data when the structure is unknown. The SPE uses the single-link method to perform cluster analysis. The single-link method allows the SPE to perform cluster analysis in a fast and efficient (lower memory and processing requirements) manner. Variable estimation is the process of determining the variable and the weight the variables will have in the classification process. The SPE has the feature to allow the user to define the variables and weights. Density estimation is the process of estimating a population distribution from sample data. The SPE utilizes the Gaussian, Putty and Morph modeling methods for density estimation. Data classification is the process of identifying data classes and assigning samples to each data class. The goal is to minimize the error is classifying the samples. The SPE uses the Gaussian, Putty and Morph methods for sample classification and selects the method the fewest errors to perform data classification of new samples and value prediction. Value prediction is the process of predicting the class a new sample of data will be included in. As of the Valuation Date, the value prediction component had not been implemented into the SPE.

As of the Valuation Date, Nightingale had identified the initial application of the SPE to the medical imaging, statistical analysis, speech recognition and defense fields.

C. Identifiable Intangible Assets

A major source of potential revenue for Nightingale is its SPE algorithm (“Technology”). As of the Valuation Date, no revenue had been obtained from the Technology. The Company was in the process of developing a technology

demonstrator that utilized the Technology and receiving validation of the Technology from DERA.

Additional intangibles acquired by HTTP include: (1) assembled workforce (“Workforce”) and (2) covenant not to compete (“CNC”). These intangible assets provide a supporting role in the development of the software resulting from the Technology described above.

D. Customers & Competition

The Company’s potential customers for its Technology include medical imaging firms, any organization the uses statistical analysis, speech recognition software firms and defense organizations.

The SPE competes against other statistical processing algorithms, such as neural networks and portioning methods, used in products for potential customers described above.

The first market HTTP and Nightingale want to enter with the SPE is the medical imaging market. In this market, the SPE would be used to help radiologists to determine if an area is cancerous. The SPE would determine likely cancerous areas the radiologist may have missed and highlight them for further study by the radiologist. With the development of the prototype medical imaging system using the SPE, Nightingale plans on entering the cancer screening software market. Two firms have developed software and systems to perform cancer screening for breast cancer and lung cancer. These firms are as follows:

• CADx Medical Systems (“CADx”) is a breast cancer screening software and systems developer. CADx, with software development from Qualia Computing Inc., developed a breast cancer screening systems called Second Look. As of the Valuation Date, Second Look had completed clinical trails in 11 US locations and had applied for FDA pre-marketing approval for sales in the US and was available for sale outside the US. CADx had two joint development projects with mammography equipment manufacturers. CADx was a private company located in Montreal, Canada.

• Deus Technology (“Deus”) is a lung cancer screening software and system developer. Dues has developed the first lung cancer screening product, RapidScreen RS-2000. RapidScreen RS-2000 utilized neural networks and fuzzy logic to identify likely cancerous locations. As of the Valuation Date, Dues was in the process of applying for FDA marketing approval for RapidScreen RS-

2000. Deus had no revenue because it not sold any products as of the Valuation Date. Deus is located in Rockville, Maryland.

• R2 Technologies (“R2”) is a breast cancer screening software and system developer. R2 developed the first FDA approved breast cancer screening product, ImageChecker M1000. As of the Valuation Date, 150 ImageChecker systems were installed on a world-wide basis. R2 was also developing software/systems for screening of other cancers. R2 is a private company and has raised over $60 million in venture financing since inception in 1993. R2 is located in Los Altos, California.

Another market HTTP and Nightingale want to enter with the SPE is the statistical software

market. The applications of statistical software include analytical software tools (such as data mining and data analysis) and knowledge management tools, structuring and searching of unstructured data. Firms who develop software for these applications include:

• Autonomy, Plc (“Autonomy”) is UK based knowledge management software developer. Autonomy’s software is a platform that enables a broad range of operations to be performed on unstructured data. Autonomy is located in Cambridge, UK. For the year ended December 2000, Autonomy had an operating income of $12.1 million on sales of $65.4 million.

• SSPS, Inc. (“SPSS”) is a statistical analysis software developer located in Chicago, Illinois. SPSS developed three software products for use in the CRM, general data mining and data analysis and market research markets. For the year ended December 2000, SPSS had an operating profit of $11.5 million on sales of $140.8 million.

• Xanalys (“Xanlays”), a subsidiary of Global Graphics SA, is a developer of an information management software. Xanalys’ two main products, Watson and Power Case, provide database analysis and visualization capabilities to assist in investigations. For the year ended December 2000, Xanalys had an operating loss of Euro 1.7 million on sales of Euro 2.3 million.

Other developers include privately held: Minitab and Inxight Software.

The third market HTTP and Nightingale want to enter with the SPE is the speech recognition software market. Firms who develop software for the speech recognition include:

• Nuance Communications, Inc (“Nuance”) is US based speech recognition software developer. Nuance’s voice interface software platform allows the information and services of enterprise and telecommunications networks and the Internet to be accessible from any telephone. Nuance is located in Menlo Park, California. For the year ended December 2000, Nuance had an operating loss of $23.1 million on sales of $51.8 million.

• Speechworks International, Inc. (“Speechworks”) is a speech recognition software developer. Speechwork’s products provide over the telephone automated speech recognition solutions for a divers client base including airlines, stock brokers, delivery services and drug distributors. Speechworks is located in Boston, Massachusetts. Speechworks had an operating loss of $28.7 million on revenues of $30 million for the year ended December 2000.

• Vocalis, Plc. (“Vocalis”) is a UK based developer of speech recognition software. Vocalis had an operating loss of £4.1 million on revenues of £2.0 million for the year ended March 31, 2001.

Other developers include: divisions of large corporations, such as IBM, ITT Industries, Management, Lucent Technologies and Phillips Electronics and privately held firms, such as Locus Dialogue and Veritel.

Management also wants to enter the defense software market. The potential uses for the SPE in the defense software market include cooperative target recognition.

Management believes that Nightingale’s algorithms are well-positioned versus its competition, due to the strength of the SPE versus other processing algorithms on performance characteristics such as speed and memory capacity.

E. Employees & Management

Nightingale employed 9 individuals at the Valuation Date, who can be categorized according to their functions as follows:

Table I

Nightingale Employees by Classification

Classification		Number of Employees
Executive		2
Programmer		5
Admin		2
Total		9

The Company’s management as of the Valuation Date was as follows:

Table II

Nightingale Management Team

Name		Position
Tony Somers		CEO
Sabbir Rahman		Chief Scientific Officer

F. Ownership

As of the Valuation Date, Nightingale was owned by the shareholder of Nightingale (Niue) Ltd. The shareholders of Nightingale (Niue) Ltd; include several wealthy individuals residing in the United Arab Emirates.

HTTP & the Acquisition of Nightingale

Because this valuation of the Assets is related to HTTP’s acquisition of the Company, it was also necessary to review HTTP as a company together with the details of its Nightingale acquisition.

A. HTTP - Overview

HTTP was a developer of software. HTTP provided software development and programming services to many UK organizations through its HTTP software unit. The HTTP Insights unit was formed to develop software utilizing the SPE. As of the Valuation Date, HTTP had a market capitalization for its equity of about $561 million. As of March 21, 2001, HTTP had 46 full-time employees.

As of the Valuation Date, HTTP’s corporate goal was to commercialize the SPE. HTTP Software was to be increasingly focused on the development of software utilizing the SPE as well as providing on-going support to existing programming services clients. HTTP had generated $514,000 in revenue in 2000.

HTTP faced competition from other statistical software developers such as R2 Technology, Dues Technology, CADx Medical Systems, SPSS and Xanalys and other programming services firms such as Axon Plc., Diagonal Plc., and Microgen Plc.

B. Acquisition of Nightingale

On the Valuation Date, HTTP acquired the Assets of Nightingale. According to HTTP’s management, the acquisition of Nightingale will provide HTTP with a core technology, the SPE, to further develop applications of this technology in medical imaging, statistical processing, speech recognition and defense software. Nightingale will receive HTTP’s access to funds, strategy expertise and software development staff.

On December 29, 2000, HTTP (the “Company”) offered to acquire all of the issued and outstanding shares of Nightingale in a stock-for-stock transaction. HTTP offered two tranches of 7.5 million shares (15 million shares post 2:1 HTTP stock split) of HTTP stock once specific milestones had been achieved. The first 7.5 million shares would be provided if the Company received a validation by DERA as the technical and commercial viability of the SPE. This condition was satisfied as of February 21, 2001. As of the Valuation Date, management’s probability of achieving this milestone was very high, close to 100%. The second 7.5 million shares are payable upon use of the SPE in a medical imaging product or a DERA validation of the medical imaging application. As of this report date, this milestone has not been achieved.

HTTP acquired all of Nightingale’s common stock in exchange for two contingent tranches of HTTP stock. Based upon management’s estimated probabilities and HTTP’s weighted average stock price as of February 21, 2001 of $12.40, the total

purchase price for the Company was estimated to be $93.0 million. HTTP also assumed about $10.1 million dollars of liabilities, so the total purchase price was estimated to be $103.1 million. Management’s projections for the financial performance of Nightingale are shown in Exhibits A-D.

C. Classification of Nightingale’s Identifiable Assets

The total purchase price of Nightingale was $103.1 million. Therefore, on the Valuation Date, the difference between the book value and fair market value of the Company’s net assets was about $94.0 million. As such it was necessary to identify the components that made up that difference. The value of each of the Assets was estimated, as described below. The sum of these values was then subtracted from Nightingale’s total purchase price to arrive at a value for its “goodwill.”

After an in-depth review of Nightingale and discussions with HTTP’s management, the following intangible Assets were identified as of the Valuation Date:

• Technology (SPE Algorithm)

• Workforce in Place

• Covenant Not to Compete

• Goodwill

The values for each of the three intangible Assets, exclusive of goodwill, was estimated utilizing one of the valuation techniques described later in the report. This was necessary in order to ensure a proper and accurate allocation analysis. Goodwill was estimated as the excess of the purchase price over the estimated value of the identified tangible and intangible Assets.

Economic, Industry & Company Outlook

In the appraisal of any Company, the general economic factors prevailing at the valuation date, as well as those foreseen then, must be considered. Assimilation of these facts and forecasts provides insight into the economic climate in which investors are dealing. Although individual factors may or may not have a direct impact upon a particular industry, the overall economy and its outlook have a strong influence on how investors perceive specific investment opportunities.

A. General Economic Outlook

In its UK Economic Outlook, dated February 2001, PwC stated that the overall economic growth of the United Kingdom (“UK”) economy was slowing in the third

quarter of 2000. The primary driver of growth continued to be household spending as corporate investment spending rates declined in response to perceptions of inadequate returns on investment and uncertainty regarding demand. Nevertheless, the 2.8% annual rate of gross domestic product (“GDP”) growth recorded in the third quarter of 2000 was higher than with the overall 1999 growth rate of 2.2% but in line combined the first and second quarter annual growth rate of 2.8%. Independent forecasts complied by HM Treasury for December 2000 forecast GDP growth to be 3.0% for 2000 and then decline to 2.6% for 2001.

The inflation rate measured by the retail price index was expected to increase to 3.0% for 2000, based upon independent forecast complied by HM Treasury, from a 2.3% rate in 1999. Based upon these same forecasts, inflation was expected to decline in a 2.4% rate in 2001.

Despite the sharp rise in interest rates that occurred from August 1999 to February 2000, a 1% increase in the short-term lending rate, short-term rates are expected to fall by 25 to 50 basis point over the next 12 months. The three-month Treasury bill rate was forecast to fall to 5.0% from 6.0% currently.

In summary, the consensus complied by HM Treasury was forecasting real, inflation-adjusted GDP to rise at a rate of 3.0% for all of 2000. Longer-term projections continued to call for between 2.5% and 3.0% in real year-over-year GDP growth.

B. Industry Outlook

Nightingale plans to compete in four markets: medical imaging, statistical modeling/analysis, speech recognition and defense software. The medical imaging market is a nascent market with a very large growth potential. The statistical processing technologies available for automated cancer screening tools have just recently been developed. Most of the competitors in this market have developed joint ventures with medical equipment manufactures to provide the manufacturers with the capability of computer aided detection of cancer. The use of CAD for breast cancer detection has proven valuable to date and applications to other types of cancer detection are now being developed.

The statistical modeling market includes the consumer analysis tools, data mining tools and statistical modeling packages. The consumer analysis and data mining market size was estimated to be a $1.0 billion market by IDC, as of December 1999. Based upon Z/yen limited, the estimated size of the statistical software market was estimated to be $400 to $500 million market in 2000. These markets

are expected to grow rapidly due to the increased amount of consumer data and the business need to analyze the data to assist in marketing decisions.

The speech recognition market includes software used to develop the voice interface between people and computers and networks. Based upon Z/yen limited, the estimated size of the speech recognition software market was estimated to be $2 to $3 billion market in 2000. This market is also expected to grow rapidly as the popularity and ease of use associated with voice interface technology increases.

C. Company Outlook

The outlook for Nightingale was speculative at the Valuation Date. As of the Valuation Date, the SPE had potential application in large and growing markets. However, since the technology demonstrator had not been completed, the DERA validation had been not received and well financed competitors were present in each of Nightingale’s target markets, the outlook for Nightingale was speculative.

Allocation of Nightingale’s Purchase Price

The purpose of this section is to incorporate the information considered and/or presented previously into a quantitative representation, thus assigning a value to the Assets under review. The valuation methodology reflects the analysts expectation of how free and open capital markets would assign value to the Assets.

A. General Valuation Approaches

There are a number of generally accepted approaches in use for valuing intangible assets, none of which is necessarily superior to the others. It is more a question as to which of the approaches or combination of approaches is best suited to the business, industry and economic circumstances of the particular assets being appraised at the specific valuation date. The following discussion summarizes three market approaches as they generally apply.

Cost Approach: This approach is based on historic costs and/or investment costs incurred in the construction and creation of an intangible or intellectual asset. However, it is important to distinguish that cost does not necessarily represent value. Costs may not be directly related to the value of intellectual property because the method ignores the income producing capability of the asset created. However, if management incurs costs in developing or purchasing assets, it normally expects these assets to recover their cost from future cash flows. Thus, the cost approach can sometimes be used to benchmark an asset’s market value.

Market Approach: The first objective of the market approach is to identify specific, arm’s length transactions having two key criteria: (1) assets which were the same as or similar to that of the asset under analysis; and (2) public information which was sufficient to form an opinion of value. Thereafter, the implied market multiples from these transactions can be used to form a conclusion of market value.

Income Approach: Theoretically, the value of an intellectual asset equates to the present value of its expected future benefits. Application of this approach requires an identifiable income stream attributable to the asset, an expected economic remaining life of that income stream, and a required rate of return (i.e., discount rate) commensurate with the risk associated with its realization.

B. Selection of Valuation Approaches

The Market Approach was dismissed for all of the intangible Assets because, while a search was conducted, no public transactions of similar Assets were identified.

For the Company’s assumed tangible assets, the Cost Approach provided the only basis for their estimated values at the Valuation Date. First, the value of the Company’s net current assets was assumed to be the minimum value that had been stipulated in the purchase agreement. Secondly, per management, the total market value of the Company’s net fixed assets was estimated to equal its aggregate book value.

To facilitate valuation approach selection, most of the intangible Assets were then separated into two groups. The first group contained the Assets that were revenue generating. This Asset included: Technology (SPE Algorithm). Since this Asset generates the bulk of the Company’s sales, the Income Approach was used to estimate its value. The second group contained the Asset that was used in support of the revenue generating Asset. This Assets included: Workforce. Since this Assets supported the generation of Nightingale’s sales, the Company had not generated profits, was only one year old, and no comparable Assets could be identified, the Cost Approach was used to estimate its value.

Finally, for the remaining intangible Asset, i.e., Nightingale’s CNC, the Income Approach was used.

C. Selection of Discount Rates for the Intangibles

The cash flows attributable to the intangible Assets represent monies available to the investors in those Assets. In determining a discount rate for the intangible Assets,

many risk factors were considered both at the Company and specific asset levels, some of which included:

• Nightingale’s planned medical imaging, statistical processing and speech recognition products would not gain market acceptance or gain acceptance at a much slower rate than forecast;

• That, while demand for the Company’s products is uncertain, the potential interest in Nightingale’s software products could be great, given the rapidly growing medical imaging software industry;

• That Nightingale’s software products will not attain their projected levels of cash flow or that substitutes for the products will be introduced by competitors in the future; and

• That the expected useful lives for the intangible Assets are comparatively short.

Because the aggregate market value of Nightingale was known from the purchase price and its total future cash flows streams have been projected, it was possible to arrive at its weighted average cost of capital (“WACC”) discount rate implied through mathematical calculations. Exhibit E provides the details. Based on Nightingale’s projected cash flow streams and its market value of invested capital (“MVIC,” or the market value of Nightingale’s debt and equity) of $93.0 million, the WACC required to equate the value of the projected cash flows equal to the purchase price, commonly referred to as the investment’s internal rate of return, was 27%. Assuming an all equity financed firm, which is the case of most firms of a similar nature, the Company’s equity rate of return would, therefore, be 27%.

The implied WACC, derived above, incorporates the various levels of risk for all of the Assets identified above. The riskiness of the Assets range from the lower levels risk associated with tangible assets, to the levels applicable to intangibles, then to the higher levels risk associated with Goodwill. Goodwill represents the value associated with yet to-be-developed products and services. The risk level of the Assets vary due to factors such as salability, the length of Asset’s life, the Asset’s ability to be differentiated, the current stage of completeness, etc. Since Goodwill is more risky than the other Assets, Goodwill is generally viewed as requiring a higher rate of return than a company’s implied WACC, assuming its has some developed or purchased assets in place.

In order to estimate the discount rate applicable to each Asset, the required rates of return for various asset classes were considered. These rates start from rates of return on assets like cash, and extend to bond borrowing rates (including junk bonds), to public equity rates, and to speculative investments (venture capital rates). This spectrum provides insights in to relative returns required for a given risk level.

Table III

Asset Class Discount Rate Benchmarks

Asset		Rate of Return
Cash		5.7%
AAA Bond		7.2%
BBB Bond		8.0%
S&P 500		13.3%
Small Stocks		18.4%
Venture Capital		25-70%

In addition, Company specific benchmark rates were developed. These rates are shown below and developed in detail in Exhibit F. (Note: the CAPM method of estimating a discount rate for Nightingale was considered but since no betas for similar firms were available, the method was not used.)

Table IV

Company Specific Discount Rate Benchmarks

Method		Rate of Return
Build-up		25%
Size Premium		21%
Venture Capital		30-60%
Transaction IRR		27%

Generally, a company’s identifiable intangible assets are less risky in their individual earnings stream potentials, than the non-identifiable, future products or revenue streams (i.e. Goodwill). As a result, identifiable assets require either the same or a lower rate of return than the entire company. Therefore, for the Company’s identifiable intangible assets, it was concluded that the discount rate should be lower (i.e., 25% - 27%). This conclusion was made because goodwill comprises the

majority of the purchase price and goodwill should have a higher discount rate than the firm as a whole. Moreover, 25% - 28% falls with the range of the WACC and the venture capital discount rates that would be expected on investments in firms whose development stage was similar to that of Nightingale at the Valuation Date. Summary of the discount rates chosen for each of the Asset is shown in the table below:

Table V

Nightingale Intangible Asset Discount Rates

Asset		Discount Rate
Technology (SPE Algorithm)		22%
Covenant Not to Compete		27%

The specific discount rates were chosen based upon a qualitative assessment of the riskiness of each Asset and the discount rate benchmarks derived above. Since the Technology was deemed to have a lower risk than the Goodwill, a lower discount rate of 22% was chosen. Finally, the discount rate for the Covenant was estimated as the same as the Company as a whole, 27%.

In valuing assets using the Income Approach two inputs, a capital charge and an amortization benefit need to be taken into consideration. These two items are discussed below, prior to the analysis of the Assets themselves.

D. Selection of Capital Charges

As a part of estimating the cash flow for the Technology, in which the Income Approach was used, a capital charge was determined. This charge represents a rent (as a % of each Asset’s sales or flat charge per year) for other Assets utilized in the development of the specific intangible’s projected revenue stream. These charges were determined, based on each asset’s value at the Valuation Date and its expected after-tax rate of return or rent factor for the assets that do not wear-out (working capital). For assets that do wear-out (fixed assets, workforce and CNC), the charge is based upon a payment that includes both a return on and return of the assets original value. The following are the after-tax rent factors and capital charges (as a % of sales) determined for the Company.

Table VI

Nightingale Capital Charges

Asset	After-tax Rent Factor			After-tax Capital Charge as a% of Sales
Net Current Assets	3.7		%	2.07	%
Net Fixed Assets	6.1		%	0.36	%
Workforce	$	49,900	/yr
CNC	$	149,000	/yr

Note: the specific charges utilized in each case is dependent upon which Assets were used in combination with the asset being valued to generate the resulting revenue stream.

E. Amortization Tax Benefit

Since the values of Nightingale’s intangible assets are amortizable for federal income tax purposes, a purchaser of these assets would be willing to pay for this benefit. Therefore, an amortization tax benefit was added to the value of each intangible asset. This benefit was estimated as the tax savings associated with purchasing this asset. The tax savings (amortization factor) attributable to the amortization of the fair market value of an asset over its remaining life was calculated from the following formula:

AF=	L
	L-(PVxt)

where:	AF	= Amortization Factor
	L	= Tax Life (15 years)
	V	= Present Value Annuity Factor
	t	= Tax Rate = 40%

The value of the benefit for each asset was estimated as the value the most likely buyer of the Asset could obtain from purchase of the Asset. In this case, the most likely buyer of the Assets was a smaller firm who could utilize the tax benefit (i.e. was profitable). This firm would have a required rate of return lower than Nightingale’s (27%). Therefore, a required rate of return of 20% was used to determine the Amortization Factor for the Assets. The resulting Amortization Factor for of all the Assets was 15.9%. See Exhibit G for calculation details.

F. Value of Nightingale’s Net Current Assets & Net Fixed Assets

To determine the value of the Company’s net current assets and net fixed assets, the Cost Approach was used, which requires that the assets and liabilities in question be restated to their market values.

As of the Valuation Date, the book value of the Company’s current assets less its current liabilities was $527,000, rounded, excluding $10.7 million in debt assumed by HTTP. As of the Valuation Date, the book value of its net fixed assets was $66,000, rounded. It was concluded, after discussions with Nightingale’s management, that the minimum contractual value for the net current assets and the book values for Nightingale’s net fixed assets are reasonable proxies for their market values. Therefore, the fair market values of the Company’s net current assets and net fixed assets were concluded to be $527,000, rounded, and $66,000, rounded respectively, as of the Valuation Date. Exhibit H is a restated balance

sheet for Nightingale at the Valuation Date and provides the fair market value estimates of its tangible and intangible assets.

G. Value of Technology (SPE Algorithm)

As described above, one of Nightingale’s most valuable intangible Assets is the SPE Algorithm Technology. This technology was an outgrowth of the work of Dr. Rahman had performed on the development of more efficient processing algorithms. The technology, described in more detail above, allows for more efficient data mining, data analysis and processing of large data sets.

As of the Valuation Date, a set of algorithms, the SPE, had been developed and a patent application had been filed for their protection. Subsequent to the acquisition, a technology demonstrator, a software package, was developed to demonstrate the usefulness of the SPE. As of the Valuation Date, no SPE IPR&D existed because the SPE had alternative uses in planned applications including medical imaging, statistical processing and speech recognition. In addition, the consideration of HTTP stock was not be paid until technical feasibility, DERA validation, was achieved.

Since the SPE Technology is the most important revenue generating Assets for Nightingale, we estimated their value using the Income Approach. The specific valuation steps were as follows:

• The SPE technology will generate revenue for Nightingale in two ways. First, Nightingale will collect royalty fees for the use of the SPE in other firm’s software packages. Second, Nightingale will receive licensing, implementation and maintenance revenue from the software it develops using the SPE algorithms. Management provided a forecast of royalty, licensing and maintenance revenues to 2006;

• Next, the revenue applicable factor, which represents the portion of future revenue applicable to the Technology was estimated. This factor was based upon the relative expenditure to develop the algorithm ($10 million) to the expected future expenditure to implement applications of the algorithm plus the initial $10 million dollars to develop the algorithm. A 10% per year technology obsolescence factor was applied to the initial $10 million expenditure to account for the modification of the algorithms.

• Operating expenses include: royalties, sales and marketing, and general and administrative expenses. Management projected these expenses at 33% of

revenues. Management estimates 100% of these costs are attributable to maintaining the Technology. The resulting operating margin was 67%.

• Taxes then subtracted from operating income. Taxes are based upon a 40% tax rate.

• Next, a capital charge of 2.5% of sales plus $199,100/year are subtracted from the after-tax income to estimate the after-tax cash flow. This capital charge includes charges for other Assets used to generate the SPE Technology income. These Assets include: working capital, fixed assets, Workforce and CNC.

• The resulting after-tax cash flow was discounted by the discount rate estimated for the SPE Technology of 22%.

• Since the algorithm will be used in products after 2005 a terminal value was estimated as the 2005 net cash flow times decreased by the LT growth rate based upon Nightingale’s 3% LT growth rate less the terminal technology obsolescence factor of 12.5%, divided by WACC of 22% less -10% LT growth rate.

• The resulting cash flows were added together to arrive at a net present value of $19,837,000, rounded. This cash flow includes the cash flows attributable the SPE Technology.

Finally, the amortization tax benefit factor, attributable to a buyer being able to write the asset up and amortize it over 15 years was applied to the net present value resulting in a value of $22,470,000, rounded for the SPE Technology. See Exhibit I for detailed calculations.

The expected average life of the SPE Technology, based upon the time when a majority of the cash flows will be realized is five years.

H. Value of Nightingale’s Workforce

Nightingale’s Workforce is composed of 9 individuals. As mentioned above, we used the Cost Approach (based on calculating a replacement cost) to determine the value of the Company’s Workforce. For each class of employee, we estimated the cost to identify, recruit, hire, and train employees of similar quality.

Recruitment costs for all employees and management were concluded to be 25% of annual compensation. Given that it is not Nightingale’s management’s policy to pay for relocation costs and that its headquarters are near a major metropolitan city, relocation costs for a replacement Workforce were estimated to be zero. The other cost looked at was training costs. These costs include direct costs to train and indirect costs of training, such as lost productivity during the training process. These costs were concluded to equal 1/3 of total, first year compensation for all employees.

Based on the above assumptions and the current compensation paid to the Company’s employees, the estimated pre-tax cost for replacing Nightingale’s work force was $263,000. Taxes were then subtracted from pre-tax cost to recreate the Workforce. Taxes are based upon a 40% tax rate. Resulting in an after-tax cost to re-create the Workforce of $158,000.

Finally, the amortization tax benefit factor, attributable to a buyer being able to write the asset up and amortize it over 15 years was applied to the net present value resulting in a value of $180,000 for the Workforce. See Exhibit J for calculation details.

I. Value of Nightingale’s Covenant Not to Compete

As described above, one of Nightingale’s intangible Assets is its covenant not to compete. The CNC is an agreement between HTTP and the employees of Nightingale which precludes Nightingale employees leaving HTTP and from competing with Nightingale. The duration of the CNC is two years from the date of departure from HTTP. The CNC covers the key employee, Dr. Rahman, of Nightingale.

In addition to the CNC, the key employee of Nightingale entered into three-year employment contracts with HTTP. The employment contract pays the employee a $100,000 salary and 10% profit participation in the sale or use of the SPE. Since there are no penalties for leaving HTTP if Dr. Rahman received a better offer from another party, the period of competition without the non-compete was assumed to be zero years.

We estimated the CNC’s value using the Income Approach. The estimate value of the CNC is the sum of the present value of the cash flows that would be lost if the CNC was not in place. Specifically, the value of the CNC is difference between the projected cash flows if employees start competing as soon as possible, before the CNC expires, (zero years because of no penalty for leaving other than lost salary and profit participation) and the projected cash flows if the employees

start competing after the CNC expires (two years).

The specific valuation steps were as follows:

• Expected revenue loss was based on the difference between the revenues where the employee starts competing with HTTP one year from the Valuation Date (the start-up time for a new company) and where the employees start competing with HTTP in three years from the Valuation Date (one year after the non-compete expires). The lost revenue stream has been reviewed by Management.

• The estimated lost cash flow was estimated as the lost revenue times the cash flow margins ranging from 8% of 11%. The cash flow margin is derived from the management provided forecast.

• The resulting after-tax cash flow was discounted by the discount rate implied from the transaction price of 27%.

• The resulting cash flows were added together to arrive at a net present value of $861,000, rounded.

• The net present value was multiplied times the probability of competition of 50% to arrive at value of the CNC of $431,000, rounded.

Finally, the amortization tax benefit factor, attributable to a buyer being able to write the asset up and amortize it over 15 years was applied to the net present value resulting in a value of $500,000, rounded, for the CNC. See Exhibit K for detailed calculations.

The expected average life of the CNC, based upon the duration of the CNC, is two years.

J. Value of Nightingale’s Goodwill

The Goodwill value associated with the Nightingale acquisition contains time-to-market benefits, synergies, and strategic positioning value. Buy purchasing Nightingale, HTTP has saved time and resources in the development of a statistical algorithms on which powerful computer processing software can be built. In addition, HTTP has strengthened its position in the statistical software development marketplace. Synergies may also be realized through use of HTTP’s software development workforce in developing application for the SPE. Goodwill is

calculated as the residual value after subtracting the identifiable asset values from the basis. The resulting residual value is $79,981,358.

Management’s expected life for Goodwill is five years. Nightingale is expected to generate revenues from its existing technology and yet to-be-developed software over the next five years. Some of the revenue is applicable to the existing technology but most of it is applicable to to-be developed products and services.

The reasonableness of this life was tested by examining the lives attributed to the goodwill of statistical software developers acquired over the past two years. Based upon the financial filings of firms such as Autonomy, Nuance Communications and SPSS the lives attribute to goodwill for statistical software development firms ranged from eighteen months to ten years. Therefore, the five-year life attributed to Goodwill is not unreasonable.

See Exhibit L for a summary of all of the projected cash flows and capital charges, for Nightingale. The exhibit also provides a reconciliation of the discount rates.

Valuation Conclusion

Given the appraisal procedures and facts outlined above, it is our opinion that the concluded values, percentages of Company value, weighted average useful lives and discount rates for Nightingale’s Assets at the Valuation Date are as follows:

Table VII

Nightingale Purchase Price Allocation Summary of Value

Asset	Value ($000s)		% Nightingale Value		Useful Life (Yrs)	Discount Rate

Current Assets (incl. Debt)	(10,198	)	-11.0	%		3.6	%
Net Fixed Assets	66		0.1	%	5.0	6.0	%
Technology (SPE Algorithm)	22,470		24.2	%	5.0	22.0	%
Workforce	180		0.2	%	3.0
Covenant Not to Compete	500		0.5	%	2.0	27.0	%
Goodwill	79,981		86.0	%	5.0	27.1	%
Total	93,000		100.0	%		27.0	%

Respectfully submitted,

Empire Valuation Consultants, Inc.


/s/ Keith D. Smith
Keith D. Smith, CFA
Senior Valuation Associate


/s/ Scott A. Nammacher
Scott A. Nammacher, ASA, CFA
Managing Director

Addendum 1-1

STATEMENT OF LIMITING CONDITIONS

Confidentiality/Advertising: This report and supporting documentation are confidential. Neither all nor any part of the contents of this appraisal shall be copied or disclosed to any party or conveyed to the public orally or in writing through advertising, public relations, news, sales, or in any other manner without the prior written consent and approval of both Empire Valuation Consultants, Inc. and its client.

Litigation Support: Depositions, expert testimony, attendance in court, and all preparations/support for same, arising from this appraisal shall not be required unless arrangements for such services have been previously made.

Management: The opinion of value expressed herein assumes the continuation of prudent management policies over whatever period of time is deemed reasonable and necessary to maintain the character and integrity of the appraised business entity as a going concern.

Information and Data: Information supplied by others that was considered in this valuation is from sources believed to be reliable, and no further responsibility is assumed for its accuracy. Information used was limited to that available on or before the Valuation Date, or which could be reasonably ascertained as of that date. We reserve the right to make such adjustments to the valuation herein reported as may be required by consideration of additional or more reliable data that may become available subsequent to the issuance of this report.

Purpose: All opinions of market value are presented as Empire Valuation Consultants, Inc.’s considered opinion based on the facts and data obtained during the course of the appraisal investigation. We assume no responsibility for changes in market conditions which might require a change in appraised value. The value conclusion derived in this appraisal was for the specific purpose and date set forth in this appraisal and may not be used for any other purpose.

Fee: The fee established for the formulation and reporting of these conclusions is not contingent upon the value or other opinions presented.

Interest: Neither the appraiser nor any officer or employee of Empire Valuation Consultants, Inc. has any interest in the property appraised.

Unexpected Conditions: We assume that there are no hidden or unexpected conditions of the assets valued that would adversely affect value.

Addendum 1-2

Non Appraisal Expertise: No opinion is intended for matters which require legal or specialized expertise, investigation or knowledge, beyond that customarily employed by appraisers.

Hazardous Substances: Hazardous substances, if present within the facilities of a business, can introduce an actual or potential liability that will adversely affect the marketability and value of the business or its underlying assets. In the development of our opinion of value, no consideration has been given to such liability or its impact on value unless otherwise indicated in the report.

Addendum 2

CERTIFICATION OF APPRAISERS

We the appraisers certify that, to the best of our knowledge and belief:

1. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice.

2. All statements of fact contained in this report are true and correct.

3. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, unbiased professional analysis, opinions, and conclusions.

4. The professional fee paid to Empire for the preparation of this report is not contingent upon the opinion of value stated herein.

5. Neither Empire nor any of its employees has, to the best of our knowledge, a present or intended financial interest in either the entity being valued or in any affiliates that may exist.

6. No one provided significant professional assistance to the persons signing this report, unless specifically stated herein.

The American Society of Appraisers has a mandatory recertification program for all of its Accredited Senior Appraisers. The senior member, designated by the “ASA,” signing below is in compliance with that program.

	/s/ Keith D. Smith
	Keith D. Smith, CFA
	Senior Valuation Associate


	/s/ Scott A. Nammacher
	Scott A. Nammacher, ASA, CFA
	Managing Director

	December 21, 2001

Addendum 3-1

EMPIRE VALUATION CONSULTANTS, INC.

3255 Brighton Henrietta TownLine Road		350 Fifth Avenue, Suite 5513
Rochester, New York 14623		New York, New York 10118
Tel:	(585) 475-9260	Tel:	(212) 714-0122
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www.empireval.com

Valuation Services

Empire Valuation Consultants, Inc. provides valuations to business owners, attorneys, accountants, commercial bankers, investment bankers, trust departments, insurance agents, and financial planners, among others. Empire’s consultants have prepared or managed the preparation of over 7,500 appraisals for the following reasons:

	•	Buy/Sell Agreements
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Other Financial Services

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• ESOP Feasibility Studies & Preliminary Valuations

Empire is available to work with our client’s team of financial advisors or participate in independent feasibility studies and preliminary valuation reviews in connection with ESOP formation planning.

Addendum 3-2

KEITH D. SMITH, CFA

Academic Degrees

M.B.A.	University of California, Los Angeles, Finance, 1997

B.S.	Union College, Electrical Engineering, 1986

Employment

Senior Valuation Associate, Empire Valuation Consultants, Inc., Rochester, New York, 2000 - Present

Manager, Valuation Services, PricewaterhouseCoopers LLP, Los Angeles, California, 1997 - 2000

Senior Technical Analyst, Management, Consulting & Research, Los Angeles, California, 1992 - 1997

Captain, United States Air Force, Los Angeles Air Force Base, 1986 - 1992

Experience

Mr. Smith is a Chartered Financial Analyst (“CFA”) charterholder. He has four years of experience in financial consulting and business valuations. He has valued the equity, debt, derivatives, liabilities and NOLs of publicly and privately held businesses for acquisitions, divestitures, estate and gift tax reporting, liquidation, financial reporting, and general corporate planning purposes. In addition, he has valued intangible assets including technology, in-process research and development, trademark/tradenames, customer and subscription lists, on-line audiences, covenants not to compete, inventory, workforce and co-marketing agreements/alliances. He has a significant amount of experience in valuing technology, telecommunications, Internet and finance companies and early stage businesses. Mr. Smith has also assisted in developed business plans by developing a financial model of the business utilizing management provided and publicly available industry data.

Addendum 3-3

SCOTT A. NAMMACHER, ASA, CFA

Academic Degrees

M.B.A.	New York University Graduate School of Business, Finance, 1985

B.S.	University of Minnesota, Business, 1977

Employment

Principal and Managing Director, Empire Valuation Consultants, Inc., New York, New York, 1992-Present

Manager, Financial Valuations, Arthur Andersen & Co., New York, 1990-1991

V.P., Marigold Capital Development, Investment Banking Div. of Marigold Enterprises, Greenwich, Connecticut, 1989-1990

Manager - Domestic Finance, PepsiCo, Inc. Purchase, New York, 1985-1989

Experience

Mr. Nammacher is an Accredited Senior Appraiser (ASA) of the American Society of Appraisers and is a Chartered Financial Analyst (CFA). He has over 14 years of experience in financial consulting and business valuations. He has valued the equity, debt, warrants, NOLs, etc. of publicly and privately held businesses for acquisitions, divestitures, stock repurchases, estate and gift tax reporting, buy/sell agreements, recapitalizations, and general corporate planning purposes. Mr. Nammacher has also developed business plans and financing packages, and has been involved in completed transactions totaling almost $1.1 billion. In addition, he played key roles in the successful launch of a new business publication.

Mr. Nammacher has testified as an expert witness in U.S. Tax Court and U.S. Bankruptcy Court, and other jurisdictions, acted as a valuation consultant to the Superior Court of New Jersey, and published a book and several articles on “junk bonds.” He also received the prestigious “Graham & Dodd Scroll Award” from the Financial Analysts Journal for outstanding financial writing relating to a cover story he co-authored. He has also published an article on the various approaches to determining the tax basis of real property in the U.S.

Addendum 4

VENTURE CAPITAL FIRMS – STAGES & RATES OF RETURN

Start-ups are generally financed by venture capitalists (i.e., professionally managed funds whose full-time activity is the investment of relatively large pools of capital in a portfolio of primarily early stage enterprises) and by speculative (i.e., high-risk-accepting) private investors. The thresholds of minimum expected rate of return on start-up candidates for investment are high.

Stage of Start-up		Approximate Range of Required Return
Initial Start-up		50% to 75%
First Stage		40% to 60%
Second Stage		35% to 50%
Third Stage		30% to 50%
Fourth Stage		30% to 40%

Standard Definitions of Start-up Stages

“Initial Startup” companies, usually less than a year old, are involved in early product development and testing.

“First stage” companies are performing market studies, testing prototypes, and perhaps manufacturing limited amounts of product.

“Second stage” is usually considered to be when financing for initial expansion is provided. A viable product exists and a market for it has been established. Profits, if any, are not yet meaningful.

“Third stage” should be experiencing a rapid ramp up in sales. Profit margins should be acceptable but internally generated cash is probably insufficient to meet expansion requirements.

“Fourth stage” companies should be profitable and growing rapidly. Although capital may still be needed to fuel growth, much of the risk associated with early stage companies has been eliminated. Cash out may be only a year or two away.

Nightingale Technologies

Exhibit Summary

Exhibit Item		Exhibit Letter

Comparative Income Statements		A-1
Common Sized Income Statements		A-2
Income Statements - Trend Anaylsis		A-3
Comparative Balance Sheets		B-1
Common Sized Balance Sheets		B-2
Balance Sheet Items as % of Sales		B-3
Comparative Cash Flow Statements		C
Comparative Financial Ratios		D
Discounted Cash Flow Value		E
Cost of Capital Calculations		F
Amortization Tax Benefit Calculation		G
Summary of Values		H-1
Asset Value Summary & Restated Balance Sheet		H-2
Value of Technology		I
Value of Workforce in Place		J
Value of Covanent Not to Compete		K
Cash Flow Summary & Reconciliation of Values		L

Exhibit A-1

Nightingale Technologies

Comparative Income Statements

£/$ 1.453	History Dec-00		Projected Fiscal Year Dec-01		Projected Fiscal Year Dec-02		Projected Fiscal Year Dec-03		Projected Fiscal Year Dec-04		Projected Fiscal Year Dec-05

Revenue	—		759,500		37,267,758		146,191,638		283,783,947		431,249,901
Cost of Sales	—		(225,225	)	(6,534,239	)	(27,829,743	)	(62,936,301	)	(120,309,242	)
Gross Profit	—		534,275		30,733,518		118,361,896		220,847,646		310,940,659

Sales & Marketing	—		(455,700	)	(8,195,776	)	(32,857,057	)	(74,209,771	)	(100,731,594	)
General & Administration	(609,876	)	(6,790,000	)	(5,699,750	)	(6,237,213	)	(7,142,794	)	(8,184,214	)
Royalties to Others			—		(1,563,207	)	(7,796,977	)	(13,538,212	)	(19,345,065	)
Amortization & Depreciation	(481,504	)	(125,477	)	(413,530	)	(1,760,234	)	(4,811,657	)	(9,701,317	)
Total operating expenses	(1,091,380	)	(7,371,177	)	(15,872,263	)	(48,651,481	)	(99,702,434	)	(137,962,189	)

Operating income (loss)	(1,091,380	)	(6,836,902	)	14,861,256		69,710,415		121,145,212		172,978,470

Interest expense*	(173,123	)	—		—		—		—		—
Interest income	—		—		—		—		—		—
Other	—		—		—		—		—		—
Other income (expenses)	(173,123	)	—		—		—		—		—

Pretax income (loss)	(1,264,504	)	(6,836,902	)	14,861,256		69,710,415		121,145,212		172,978,470

Income tax expense (benefit)	—		—		(3,209,741	)	(27,884,166	)	(48,458,085	)	(69,191,388	)

Net income (loss)	(1,264,504	)	(6,836,902	)	11,651,514		41,826,249		72,687,127		103,787,082

*No projected interest expense, because projections are to determine cash flows available to debt and equity holders

Exhibit A-2

Nightingale Technologies

Common Sized Income Statements

	History Dec-00	Projected Fiscal Year Dec-01		Projected Fiscal Year Dec-02		Projected Fiscal Year Dec-03		Projected Fiscal Year Dec-04		Projected Fiscal Year Dec-05

Revenue	N/A	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of Sales	N/A	-29.7	%	-17.5	%	-19.0	%	-22.2	%	-27.9	%
Gross Profit	N/A	70.3	%	82.5	%	81.0	%	77.8	%	72.1	%

Sales & Marketing	N/A	-60.0	%	-22.0	%	-22.5	%	-26.2	%	-23.4	%
General & Administration	N/A	-894.0	%	-15.3	%	-4.3	%	-2.5	%	-1.9	%
Royalties to Others	N/A	0.0	%	-4.2	%	-5.3	%	-4.8	%	-4.5	%
Amortization & Depreciation	N/A	-16.5	%	-1.1	%	-1.2	%	-1.7	%	-2.2	%
Total operating expenses	N/A	-970.5	%	-42.6	%	-33.3	%	-35.1	%	-32.0	%

Operating income (loss)	N/A	-900.2	%	39.9	%	47.7	%	42.7	%	40.1	%

Interest expense*	N/A	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
Interest income	N/A	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
Other	N/A	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
Other income (expenses)	N/A	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%

Pretax income (loss)	N/A	-900.2	%	39.9	%	47.7	%	42.7	%	40.1	%

Income tax expense (benefit)	N/A	40.0	%	40.0	%	40.0	%	40.0	%	40.0	%

Net income (loss)	N/A	-900.2	%	31.3	%	28.6	%	25.6	%	24.1	%

*No projected interest expense, because projections are to determine cash flows available to debt and equity holders

Exhibit A-3

Nightingale Technologies

Income Statements - Trend Anay

	Projected Fiscal Year Dec-01		Projected Fiscal Year Dec-02		Projected Fiscal Year Dec-03		Projected Fiscal Year Dec-04		Projected Fiscal Year Dec-05

Revenue	N/A		4806.9	%	292.3	%	94.1	%	52.0	%
Cost of Sales	N/A		2801.2	%	325.9	%	126.1	%	91.2	%
Gross Profit	N/A		5652.4	%	285.1	%	86.6	%	40.8	%

Sales & Marketing	N/A		-1698.5	%	-300.9	%	-125.9	%	-35.7	%
General & Administration	-1013.3	%	16.1	%	-9.4	%	-14.5	%	-14.6	%
Royalties to Others	N/A		N/A		-398.8	%	-73.6	%	-42.9	%
Amortization & Depreciation	73.9	%	-229.6	%	-325.7	%	-173.4	%	-101.6	%
Total operating expenses	-575.4	%	-115.3	%	-206.5	%	-104.9	%	-38.4	%

Operating income (loss)	-526.4	%	317.4	%	369.1	%	73.8	%	42.8	%

Interest expense*	100.0	%	N/A		N/A		N/A		N/A
Interest income	N/A		N/A		N/A		N/A		N/A
Other	N/A		N/A		N/A		N/A		N/A
Other income (expenses)	100.0	%	N/A		N/A		N/A		N/A

Pretax income (loss)	-440.7	%	317.4	%	369.1	%	73.8	%	42.8	%

Income tax expense (benefit)	N/A		N/A		-768.7	%	-73.8	%	-42.8	%

Net income (loss)	-440.7	%	270.4	%	259.0	%	73.8	%	42.8	%

*No projected interest expense, because projections are to determine cash flows available to debt and equity holders

Exhibit B-1

Nightingale Technologies

Comparative Balance Sheets

£/$ 1.453	History Dec-00		Projected Fiscal Year Dec-01		Projected Fiscal Year Dec-02		Projected Fiscal Year Dec-03		Projected Fiscal Year Dec-04		Projected Fiscal Year Dec-05

Cash	709,373		38,529,802		41,596,528		57,517,988		92,966,372		147,833,787
Prepayments	86,163		89,500		75,238		86,148		98,695		113,125
Accounts Receivable	36,126		253,167		5,754,518		16,977,613		28,626,090		42,294,641
Total current assets	831,662		38,872,469		47,426,283		74,581,749		121,691,158		190,241,552

Furniture and Office Equipment	32,428		—		—		—		—		—
Motor Vehicles	40,677		—		—		—		—		—
Total	73,105		605,432		877,788		1,150,145		1,313,357		1,540,839
Accumulated Depreciation	(6,947	)	(123,009	)	(307,904	)	(554,686	)	(722,175	)	(991,085	)
Total net fixed assets	66,158		482,423		569,884		595,458		591,182		549,754

Other Assets	9,165,165		230,238,512		232,432,282		240,421,286		254,334,304		272,988,756

TOTAL ASSETS	10,062,985		269,593,405		280,428,449		315,598,494		376,616,644		463,780,061

Accounts Payable	110,986		596,667		501,583		574,321		657,969		754,164
Short-term Debt	5,837,295		5,837,295		5,837,295		5,837,295		5,837,295		5,837,295
Accrued Expenses	12,924		89,500		75,238		86,148		98,695		113,125
Accruals & Deferred Income	180,388		—		—		—		—		—
Total Current Liabilities	6,141,594		6,523,462		6,414,116		6,497,764		6,593,960		6,704,584

Long-term Debt	4,887,584		4,887,584		4,887,584		4,887,584		4,887,584		4,887,584
Total long-term liabilities	4,887,584		4,887,584		4,887,584		4,887,584		4,887,584		4,887,584

Share Capital	2,906		278,840,904		278,840,904		278,840,904		278,840,904		278,840,904
Retained Earnings (Accum. Deficit)	(969,099	)	(20,658,545	)	(9,714,154	)	25,372,242		86,294,197		173,346,990
Total Shareholders Equity	(966,193	)	258,182,359		269,126,750		304,213,146		365,135,100		452,187,894

TOTAL LIABILITIES & SHAREHOLDERS EQUITY	10,062,985		269,593,405		280,428,450		315,598,494		376,616,644		463,780,062

Exhibit B-2

Nightingale Technologies

Common Sized Balance Sheets

	History Dec-00		Projected Fiscal Year Dec-01		Projected Fiscal Year Dec-02		Projected Fiscal Year Dec-03		Projected Fiscal Year Dec-04		Projected Fiscal Year Dec-05

Cash	7.05	%	14.29	%	14.83	%	18.23	%	24.68	%	31.88	%
Prepayments	0.86	%	0.03	%	0.03	%	0.03	%	0.03	%	0.02	%
Accounts Receivable	0.36	%	0.09	%	2.05	%	5.38	%	7.60	%	9.12	%
Total current assets	8.26	%	14.42	%	16.91	%	23.63	%	32.31	%	41.02	%

Furniture and Office Equipment	0.32	%	0.00	%	0.00	%	0.00	%	0.00	%	0.00	%
Motor Vehicles	0.40	%	0.00	%	0.00	%	0.00	%	0.00	%	0.00	%
Total	0.73	%	0.22	%	0.31	%	0.36	%	0.35	%	0.33	%
Accumulated Depreciation	-0.07	%	-0.05	%	-0.11	%	-0.18	%	-0.19	%	-0.21	%
Total net fixed assets	0.66	%	0.18	%	0.20	%	0.19	%	0.16	%	0.12	%

Other Assets	91.08	%	85.40	%	82.88	%	76.18	%	67.53	%	58.86	%

TOTAL ASSETS	100.00	%	100.00	%	100.00	%	100.00	%	100.00	%	100.00	%

Accounts Payable	1.10	%	0.22	%	0.18	%	0.18	%	0.17	%	0.16	%
Short-term Debt	58.01	%	2.17	%	2.08	%	1.85	%	1.55	%	1.26	%
Accrued Expenses	0.13	%	0.03	%	0.03	%	0.03	%	0.03	%	0.02	%
Accruals & Deferred Income	1.79	%	0.00	%	0.00	%	0.00	%	0.00	%	0.00	%
Total Current Liabilities	61.03	%	2.42	%	2.29	%	2.06	%	1.75	%	1.45	%

Long-term Debt	48.57	%	1.81	%	1.74	%	1.55	%	1.30	%	1.05	%
Total long-term liabilities	48.57	%	1.81	%	1.74	%	1.55	%	1.30	%	1.05	%

Share Capital	0.03	%	103.43	%	99.43	%	88.35	%	74.04	%	60.12	%
Retained Earnings (Accum. Deficit)	-9.63	%	-7.66	%	-3.46	%	8.04	%	22.91	%	37.38	%
Total Shareholders Equity	-9.60	%	95.77	%	95.97	%	96.39	%	96.95	%	97.50	%

TOTAL LIABILITIES & SHAREHOLDERS EQUITY	100.00	%	100.00	%	100.00	%	100.00	%	100.00	%	100.00	%

Exhibit B-3

Nightingale Technologies

Balance Sheet Items as % of Sales

	History Dec-00	Projected Fiscal Year Dec-01		Projected Fiscal Year Dec-02		Projected Fiscal Year Dec-03		Projected Fiscal Year Dec-04		Projected Fiscal Year Dec-05

Cash	N/A	2.00	%	2.00	%	2.00	%	2.00	%	2.00	%
Prepayments	N/A	11.78		0.20	%	0.06	%	0.03	%	0.03	%
Accounts Receivable	N/A	33.33	%	15.44	%	11.61	%	10.09	%	9.81	%
Total current assets	N/A	5118.17	%	127.26	%	51.02	%	42.88	%	44.11	%

Furniture and Office Equipment	N/A	0.00	%	0.00	%	0.00	%	0.00	%	0.00	%
Motor Vehicles	N/A	0.00	%	0.00	%	0.00	%	0.00	%	0.00	%
Total	N/A	79.71	%	2.36	%	0.79	%	0.46	%	0.36	%
Accumulated Depreciation	N/A	-16.20	%	-0.83	%	-0.38	%	-0.25	%	-0.23	%
Total net fixed assets	N/A	63.52	%	63.52	%	63.52	%	63.52	%	63.52	%

Other Assets	N/A	30314.48	%	623.68	%	164.46	%	89.62	%	63.30	%

TOTAL ASSETS	N/A	35496.17	%	752.47	%	215.88	%	132.71	%	107.54	%

Accounts Payable	N/A	78.56	%	1.35	%	0.39	%	0.23	%	0.17	%
Short-term Debt	N/A	768.57	%	15.66	%	3.99	%	2.06	%	1.35	%
Accrued Expenses	N/A	11.78	%	0.20	%	0.06	%	0.03	%	0.03	%
Accruals & Deferred Income	N/A	0.00	%	0.00	%	0.00	%	0.00	%	0.00	%
Total Current Liabilities	N/A	858.92	%	17.21	%	4.44	%	2.32	%	1.55	%

Long-term Debt	N/A	643.53	%	13.11	%	3.34	%	1.72	%	1.13	%
Total long-term liabilities	N/A	643.53	%	13.11	%	3.34	%	1.72	%	1.13	%

Share Capital	N/A	36713.75	%	748.21	%	190.74	%	98.26	%	64.66	%
Retained Earnings (Accum. Deficit)	N/A	-2720.02	%	-26.07	%	17.36	%	30.41	%	40.20	%
Total Shareholders Equity	N/A	33993.73	%	722.14	%	208.09	%	128.67	%	104.86	%

TOTAL LIABILITIES & SHAREHOLDERS EQUITY	N/A	35496.17	%	752.47	%	215.88	%	132.71	%	107.54	%

Exhibit C

Nightingale Technologies
Comparative Cash Flow Statements

£/$ 1.453	History Dec-00		Projected Fiscal Year Dec-01		Projected Fiscal Year Dec-02		Projected Fiscal Year Dec-03		Projected Fiscal Year Dec-04		Projected Fiscal Year Dec-05

Net Income (loss)	(1,264,504	)	(6,836,902	)	11,651,514		41,826,249		72,687,127		103,787,082

Adjustments to reconcile net income (loss) to net cash provided from operating activities

Depreciation	481,504		125,477		413,530		1,760,234		4,811,657		9,701,317

(Incr.)/decr. in Prepayments	—		(3,337	)	14,263		(10,911	)	(12,547	)	(14,429	)
(Incr.)/decr. in Accounts Receivable	(122,274	)	(217,041	)	(5,501,351	)	(11,223,095	)	(11,648,477	)	(13,668,551	)
(Decr.)/incr. in Accounts Payable	124,784		485,681		(95,083	)	72,737		83,648		96,195
(Decr.)/incr. in Short-term Debt	—		—		—		—		—		—
(Decr.)/incr. in Accrued Expenses	—		76,576		(14,263	)	10,911		12,547		14,429
(Decr.)/incr. in Accruals & Deferred Income	—		(180,388	)	—		—		—		—
Net Cash Provided By (Used) In Operating Activities	(780,491	)	(6,549,935	)	6,468,609		32,436,126		65,933,956		99,916,043

Capital expenditures, net proceeds on disposals	(32,428	)	(272,356	)	(272,356	)	(272,356	)	(274,442	)	(283,097	)
Capitalized R & D Expenses	—		(49,368	)	(128,993	)	(394,548	)	(776,732	)	(1,122,131	)
Net Cash Provided By (Used) In Investing Activities	(32,428	)	(321,724	)	(401,349	)	(666,904	)	(1,051,174	)	(1,405,228	)

Issuance of Share Capital	—		—		—		—		—		—
Long-term Debt	—		—		—		—		—		—
Additional Paid-in Capital/(Shareholder Distributions)	—		6,871,659		(3,000,535	)	(15,847,761	)	(29,434,397	)	(43,643,401	)
Net Cash Provided By (Used) In Financing Activities	—		6,871,659		(3,000,535	)	(15,847,761	)	(29,434,397	)	(43,643,401	)

NET INCREASE (DECREASE) IN CASH	(812,919	)	—		3,066,725		15,921,460		35,448,385		54,867,414

Beginning Cash	39,342,721		38,529,802		38,529,802		41,596,528		57,517,988		92,966,372
Ending Cash	38,529,802		38,529,802		41,596,528		57,517,988		92,966,372		147,833,787

Exhibit D

Nightingale Technologies
Comparative Financial Ratios

	History Dec-00		Projected Fiscal Year Dec-01		Projected Fiscal Year Dec-02		Projected Fiscal Year Dec-03		Projected Fiscal Year Dec-04		Projected Fiscal Year Dec-05

Liquidity & Efficiency Ratios
Current Ratio	0.14		5.96		7.39		11.48		18.45		28.37
Quick Ratio	0.12		5.95		7.38		11.46		18.44		28.36
Days’ Receivable	N/A		121.67		56.36		42.39		36.82		35.80
Days’ Payable	N/A		966.96		28.02		7.53		3.82		2.29
Working Capital	(5,309,932	)	32,349,007		41,012,167		68,083,985		115,097,198		183,536,968
Sales/Working Capital	N/A		0.02		0.91		2.15		2.47		2.35
Working Capital as % Sales	N/A		4259.25	%	110.05	%	46.57	%	40.56	%	42.56	%

Coverage Ratios
EBIT/Interest	N/A		N/A		N/A		N/A		N/A		N/A
EBITA/Current Portion LTD	N/A		N/A		N/A		N/A		N/A		N/A

Leverage Ratios
Net Fixed Assets/Net Worth	(0.07	)	0.00		0.00		0.00		0.00		0.00
Total Liabilities (Debt)/Net Worth	(11.42	)	0.04		0.04		0.04		0.03		0.03

Profitability Ratios
% Profit Before Taxes/Total Assets	N/A		-2.5	%	5.3	%	22.1	%	32.2	%	37.3	%
% Profit Before Taxes/Tangible Net W	N/A		-2.6	%	5.5	%	22.9	%	33.2	%	38.3	%

Other Ratios
Sales/Net Fixed Assets	N/A		1.57		65.40		245.51		480.03		784.44
Sales/Total Assets	N/A		0.00		0.13		0.46		0.75		0.93

% Depreciation & Amortization/Sales	N/A		16.5	%	1.1	%	1.2	%	1.7	%	2.2	%

Exhibit E

Nightingale Technologies
Discounted Cash Flow Value
As of December 29, 2000

WACC Rate:		27.0	%
LT Growth Rate:		3.0	%

	Fiscal Year Dec-01		Fiscal Year Dec-02	Fiscal Year Dec-03	Fiscal Year Dec-04	Fiscal Year Dec-05	Horizon (1)

Project cash flow (see Exhibit L for details)	(6,871,659	)	3,000,535	15,847,761	29,434,397	43,643,401	187,607,350

Times: discount factor	0.894		0.704	0.555	0.437	0.344	0.303

Discounted cash flow	(6,142,037	)	2,112,414	8,787,750	12,855,660	15,013,685	56,871,831

Sum of Discounted Cash Flows:	89,499,303
Times: Tax Amortization Benefit	1,159
Market Value of Invested Capital	103,724,879
Less: Net Debt Outstanding	(10,724,879	)
Add: Cash Outstanding	—
	93,000,000
Times: Premium for Control	—		@ 0.0	%
	93,000,000

Equity Value of Nightingale Technologies:	93,000,000

(1) Gorden Growth Model : V= E*(r-g)/(r-g)

Exhibit F

HTTP TECHNOLOGIES
NIGHTINGALE WACC CALCULATION
AS OF DECEMBER 29, 2000
SUMMARY

The weight Average Cost of Capital is calculated as:

*WACC = Rd (1 - t) D% + ( Re E% )**

Where:	Rd	=	Cost of interest bearing debt capital
	t	=	Marginal tax rate
	D%	=	Percentage of debt included in capital structure
	Re	=	Cost of equity capital
	E%	=	Percentage of equity included in capital structure

The cost of equity capital was estimated using the methods described on pages two, three, and four of this exhibit. The WACC is estimated as a weighted average of the two methods. The weights are based upon the applicability of each method to the entity being valued:

Method	Indicated WACC

Size Premium Approach (see page 2)	20.74	%
Build-up Approach (see page 4)	24.98	%

HTTP TECHNOLOGIES

NIGHTINGALE WACC CALCULATION

AS OF DECEMBER 29, 2000

SIZE PREMIUM APPROACH

The size premium approach is based upon the premium over the risk free rate portfolios of certain sizes have historically returned. PricewaterhouseCoopers, in conjunction with the University of Chicago’s Center for Research in Securities Prices, studied the effect of market size on equity risk premiums within 25 portfolios grouped by size. Recognizing that market capitalization may be an imperfect measure of the size of a company, eight alternative measures of size are used in conducting historical rate of return research.

The unadjusted (for industry risk) equity risk premium would be as follows:

Equity Risk Premium (unadjusted)

15.15

This adjusted equity risk premium is estimated by applying the ratio of the relative betas of the industry and the size portfolios used to estimate the equity risk premium

Re	=	Rf		+	ERP

Where:		Rf		=	5.59	%

Re	=	5.59	%	+	15.15	%

Re	=	20.74	%

Calculation of WARR

WACC

= (

Rd(1-t) + (

)

Where:	D%=	0.0	%	See Page 2
	E%=	100.0	%	See Page 2
	Rd=	15.00	%	See Page 2
	t=	40.00	%	See Page 2

WACC

= (

0.00%

9.00% ) + (

100.00%

20.74% )

WACC

20.74%

HTTP TECHNOLOGIES

NIGHTINGALE WACC CALCULATION

AS OF DECEMBER 29, 2000

SIZE PREMIUM APPROACH DETAIL

Measures of Size	Values	Indicated Premium
	(in $ millions)
MV of Equity		N/A

BV of Equity		N/A

5-Year Net Income		N/A

MVIC		N/A

Total Assets	10	14.6	%

5-Year EBITDA Average		N/A

Sales	1	15.7	%

# of Employees		N/A

Average		15.2	%

HTTP TECHNOLOGIES

NIGHTINGALE WACC CALCULATION

AS OF DECEMBER 29, 2000

BUILD-UP SUMMARY

Risk-free Rate (20 years)	5.59	%

Equity Risk Premium	7.00	%

Small Stock Premium	5.40	%	Mico-cap premium

Industry Premium	4.99	%	Ibbotsons Industry Premium (2001)

Co Specific Risk	2.00	%

Build-up Equity Rate of Return	24.98	%

Debt Rate of Return (After-tax)	9.00	%

Debt/Total Captal	0.0	%

WACC	25.0	%

Exhibit G

Nightingale Technologies

Amortization Tax Benefit Calculation

As of March 15, 2001

Assumptions	WACC	20.0	%
	Tax rate	40.0	%
	Tax life	15.0

Cash Flow Factor Calculations

Period	Beginning Disc. Factor	End Disc. Factor	Mid Year Disc. Factor
0.0000	1.0000	1.0000	1.0000
1.0000	1.0000	0.8333	0.9167
2.0000	0.8333	0.6944	0.7639
3.0000	0.6944	0.5787	0.6366
4.0000	0.5787	0.4823	0.5305
5.0000	0.4823	0.4019	0.4421
6.0000	0.4019	0.3349	0.3684
7.0000	0.3349	0.2791	0.3070
8.0000	0.2791	0.2326	0.2558
9.0000	0.2326	0.1938	0.2132
10.0000	0.1938	0.1615	0.1777
11.0000	0.1615	0.1346	0.1480
12.0000	0.1346	0.1122	0.1234
13.0000	0.1122	0.0935	0.1028
14.0000	0.0935	0.0779	0.0857
15.0000	0.0779	0.0649	0.0714

PVAF:	5.1430

Cash Flow Factor:

1.1589

Exhibit H-1

Nightingale Technologies

Summary of Values

As of December 29, 2000

Item	Value			% Company Equity Value		Useful Life	Discount Rate		Rate Rent Factor		Valuation Approach

Current assets, net liabilities	$	527,363		0.6	%	—	—		3.60	%	Market
Net fixed assets	$	66,158		0.1	%	5.0	—		6.00	%	Market
Debt assumed*	$	(10,724,879	)	-11.5	%	—	—		—
Net tangible assets	$	(10,131,358	)	-10.9	%	—	—		—		—

Technology	$	22,470,000		24.2	%	5.0	22.0	%	—		Income
Workforce in place	$	180,000		0.2	%	3.0	—		12.00	%	Cost
Covenant Not to Compete	$	500,000		0.5	%	2.0	27.0	%	—		Income
Goodwill	$	79,981,358		86.0	%	5.0	27.1	%	—		Remainder

Company equity value	$	93,000,000		100.0	%	—	27.0	%	—		Income

* Debt includes both short-term and long-term debt

Exhibit H-2

Nightingale Technologies

Asset Value Summary & Restated Balance Sheet

As of December 29, 2000

	Book Value as of 12/29/00		Adjustments to Market, as of 12/29/2000	Market Value as of 3/30/01

Cash	709,373		—	709,373
Prepayments	86,163			86,163
Accounts Receivable	36,126		—	36,126

Total current assets	831,662		—	831,662

Total net fixed assets	66,158		—	66,158

Workforce in place	—		180,000	180,000
Technology	9,165,165		13,304,835	22,470,000
Covenant Not to Compete	—		500,000	500,000
Goodwill	—		79,981,358	79,981,358

Intangible assets	9,165,165		93,966,193	103,131,358

TOTAL ASSETS	10,062,985		93,966,193	104,029,178

Accounts Payable	110,986		—	110,986
Short-term Debt	5,837,295		—	5,837,295
Accrued Expenses	12,924		—	12,924
Accruals & Deferred Income	180,388		—	180,388
Total Current Liabilities	6,141,594		—	6,141,594

Long-term Debt	4,887,584		—	4,887,584
Total long-term liabilities	4,887,584		—	4,887,584

Total Shareholders Equity	(966,193	)	93,966,193	93,000,000

TOTAL LIABILITIES & SHAREHOLDERS EQUITY	10,062,985		93,966,193	104,029,178

Exhibit I

Nightingale Technologies
Value of Technology
As of December 29, 2000

Assumptions Year	Pre-2001			2001			2002			2003			2004			2005
Investment ($M)	$	10,000,000		$	225,225		$	6,534,239		$	27,829,743		$	62,936,301		$	120,309,242
Cum Investment ($M)	$	10,000,000		$	10,225,225		$	16,759,464		$	44,589,207		$	107,525,508		$	227,834,750
Remaining Investment ($M)	$	10,000,000		$	9,000,000		$	8,100,000		$	7,290,000		$	6,561,000		$	5,904,900
Revenue Applicable Factor	100.0		%	88.0		%	48.3		%	16.3		%	6.1		%	2.6		%

Operating Costs:	Sales & Marketing			23.0		%				WACC:			22.0		%
Based on ‘03 costs	General & Admin			5.0		%				Terminal Growth			-10.0		%
	Royalties			5.0		%				Investment Obsolesence			10.0		%
	Total			33.0		%

			Projected Fiscal Year Dec-01		Projected Fiscal Year Dec-02		Projected Fiscal Year Dec-03		Projected Fiscal Year Dec-04		Projected Fiscal Year Dec-05			Horizon (1)

Total Revenue			759,500		37,267,758		146,191,638		283,783,947		431,249,901
Times: Revenue Applicable Factor			88.0	%	48.3	%	16.3	%	6.1	%	2.6		%

Net Revenues			668,494		18,011,843		23,901,233		17,315,951		11,176,906

Less: Operating Costs			(220,603	)	(5,943,908	)	(7,887,407	)	(5,714,264	)	(3,688,379		)
	@ 33.0	%
EBITA			447,891		12,067,935		16,013,826		11,601,687		7,488,527

Less: Provision for Taxes			(179,156	)	(4,827,174	)	(6,405,531	)	(4,640,675	)	(2,995,411		)
	@40.00	%
Net Profit			268,735		7,240,761		9,608,296		6,961,012		4,493,116
Less after tax cost of:
Fixed assets, @ 2.1% sales			(13,824	)	(372,466	)	(494,253	)	(358,076	)	(231,127		)
Working capital, @ 0.36% sales			(2,407	)	(64,843	)	(86,044	)	(62,337	)	(40,237		)
Workforce, @ $49,900/year			(49,934	)	(49,934	)	(49,934	)	(49,934	)	(49,934		)
Covenant, @ $149,000/year			(149,158	)	(149,158	)	(149,158	)	(149,158	)	(149,158		)

Net Cash Flow			53,413		6,604,361		8,828,907		6,341,508		4,022,661			11,313,734

Times: Present Value Factor			0.9098		0.7458		0.6113		0.5011		0.4107			0.3700
			48,597		4,925,316		5,396,975		3,177,431		1,652,104			4,186,073

					Value of Technology						19,386,496
					Times: Tax Amortization Benefit						1,159
											22,467,907

					Value of Technology:						$	22,470,000

(1) Gorden Growth Model : V = E*(r-g)/(r-g)

Exhibit J

Nightingale Technologies
Value of Workforce in Place
As of December 29, 2000

Employee Category	Annual Salary & Bonus								Total Replacement Costs
			Recruitment Costs			Training Costs*
			% Salaries		US $	% Salaries		US $

Management	$	215,000	25.0	%	53,750	25.0	%	53,750	107,500

Information Technology	$	300,000	20.0	%	60,000	25.0	%	75,000	135,000

Admin	$	66,758	5.0	%	3,338	25.0	%	16,690	20,027

Totals:	581,758				117,088			145,440	262,527

Employee Replacement Costs	262,527
Less: Value of Tax Shield	(105,011		)	@ 40.0	%

	157,516

Times: Tax Amortization Benefit	1.1589

Workforce Value	182,553

Value of Workforce in Place:	$	180,000

* Includes direct costs to train, as well as indirect costs, due to less than 100% employee productivity during training period

Exhibit K

Nightingale Technologies

Value of Covanent Not to Compete

As of December 29, 2003

Assumptions:
Proabability of Competition	50	%
Discount rate	27	%

	Year 1		Year 2		Year 3		Thereafter
Impact of Competition (% of Revs)	2.5	%	4.0	%	5.0	%	5.0	%
Duration of Non-compete	2 years

	Projected Fiscal Year Dec-01				Projected Fiscal Year Dec-02			Projected Fiscal Year Dec-03			Projected Fiscal Year Dec-04			Projected Fiscal Year Dec-05			Projected Fiscal Year Jan-06

Revenue	$		759,500		$	37,267,758		$	146,191,638		$	283,783,947		$	431,249,901		$	444,187,398

Revenues Lost w/o Non-Compete	$	—			$	931,694		$	5,847,666		$	14,189,197		$	21,562,495		$	22,209,370
Revenues Lost w Non-Compete	$	—			$	—		$	—		$	7,094,599		$	17,249,996		$	22,209,370
Net Sales Lost	$	—			$	931,694		$	5,847,666		$	7,094,599		$	4,312,499		$	—

Free Cash Flow Margin	-905			%	8		%	11		%	10		%	10		%	10		%
Net Free Cash Flow Lost	$	—			$	74,536		$	643,243		$	709,460		$	431,250		$	—

Partial Period	1.0000				1.0000			1.0000			1.0000			1.0000			1.0000
Mid-Point of Cash Flow	0.5000				1.5000			2.5000			3.5000			4.5000			5.5000
Discount Factor	0.8875				0.6990			0.5506			0.4337			0.3416			0.2690

Discounted Cash Flow	$	0			$	52,102		$	354,159		$	307,667		$	147,303		$	0

Sum of Cash Flows	$	861,232
Proabability of Competition	50		%
Value of Non-compete	$	430,616
Times: Tax Authorization Benefit	1,159
Value of Non-compete w Tax Benefit	$	499,061

Value of Covanent Not to Compete:

50,000

Exhibit L

Nightingale Technologies

Cash Flow Summary & Reconciliation of Values

	Fiscal Year Dec-01		Fiscal Year Dec-02		Fiscal Year Dec-03	Fiscal Year Dec-04	Fiscal Year Dec-05	Horizon Value

CFs attributable to company	(6,871,659	)	3,000,535		15,847,761	29,434,397	43,643,401	44,952,703
Less charges/cash flows for:
Current assets, net liabilities	18,985		18,985		18,985	18,985	18,985
Net fixed assets	16,457		63,138		104,881	142,397	171,140
Workforce in place	49,934		49,934		49,934	49,934	49,934
Technology	53,413		6,604,361		8,828,907	6,341,508	4,022,661	3,620,395
Covenant Not to Compete	—		74,536		643,243	709,460	431,250

Residual/goodwill cash flows	(7,010,448	)	(3,810,418	)	6,201,811	22,172,114	38,949,431	171,640,772

GW CFs, Discounted @ 27.08%	(6,431,394	)	(2,770,206	)	3,431,073	9,652,479	13,342,994	51,787,194

Sum of discounted goodwill cash flows	69,012,139
Times: Tax Amortization Benefit	1,159
	79,981,358
Times: Control Premium	—	@ 0.0%
	79,981,358

Sum of Discounted Goodwill Cash Flows:

79,981,358

(Mark One)
ý	ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal years ended: December 31, 2003, December 31, 2002 (restated), and December 31, 2001 (restated).
OR
o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to

Delaware (State or Other Jurisdiction of Incorporation or Organization)	0-26886 (Commission File Number)	13-4148725 (I.R.S. Employer Identification No.)
46 Berkeley Square, London W1J 5AT, United Kingdom (Address of Principal Executive Offices) (Zip Code)
011-44-207-598-4070 (Registrant's Telephone Number, Including Area Code)

		December 31, 2002						December 31, 2001
		As Previously Reported			As Restated			As Previously Reported			As Restated
		(Dollars in thousands, except per share data)
Consolidated balance sheet data as of:
	Intangible assets	$	13,482		$	—		$	17,976		$	17,976
	Goodwill		100,119			11,200			88,919			68,178
	Additional paid in capital		182,897			162,156			166,337			145,596
	Vendor guarantee		(3,227	)		(3,689	)		(10,000	)		(10,000	)
	Accumulated deficit		(72,174	)		(153,372	)		(54,459	)		(54,459	)
	Stockholders' equity		107,807			5,406			101,853			81,112
		December 31, 2002
		As Previously Reported			As Restated
Consolidated statements of operations data for the year ended:
	Impairment of intangibles	$	—		$	13,482
	Impairment of vendor guarantee		6,773			6,311
	Impairment of goodwill		—			68,178
	Net loss		(17,715	)		(98,913	)
	Net loss per share—basic and diluted	$	(0.92	)	$	(5.13	)

	$		Useful Life
Tangible Fixed Assets		45,000	2-5yrs
PlanNET/RadNet Technology		1,878,000	3-5 yrs
PlanNET/RadNet In Process R&D		181,000	N/A
Value of Trademark		46,000	2-3 yrs
Covenant not to Compete		38,000	1 yr
Value of Existing Contracts		96,000	1-2 yrs
Value of Workforce		321,000	3-5 yrs
Net current assets		265,000
Goodwill		10,155,000	5 yrs

	$	13,025,000

	$
Net current assets		1,180,000
Value of Guarantee		19,184,000

	$	20,364,000

	$			Useful Life
Tangible Fixed Assets		67,000		2-5yrs
Technology		22,470,000		5 yrs
Value of Workforce		180,000		2 yrs
Net current liabilities		(10,198,000	)
Goodwill		81,572,000		5 yrs

	$	94,091,000

		Stock Options Outstanding
		Shares		Exercise Price Per Share		Weighted Average Exercise Price
Balance January 1, 2003		—			—		—
	Granted	2,828,600		$	1.65	$	1.65
	Returned	(452,900	)
	Exercised	—			—		—

Outstanding December 31, 2003		2,375,700		$	1.65	$	1.65

Options exercisable at:
	December 31, 2003	1,062,600		$	1.65	$	1.65

	2003		2002		2001
Cash and Cash Equivalents	845		1,778		203

Current Assets	2,144		2,284		657
Current Liabilities	(6,540	)	(8,977	)	(5,862	)

Working Capital (Deficit)	(4,396	)	(6,693	)	(5,205	)

Ratio of Current assets to Current Liabilities	0.33		0.26		0.11

	Payments Due By Period
Contractual Obligations ($000's)	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Operating Lease Obligations	$	2,207	$	488	$	1,013	$	649	$	57
Capital Lease Obligations		402		96		189		117		—

Total	$	2,609	$	584	$	1,202	$	766	$	57

Audit Fees.		Fees billed by our principal accountant amounted to $240,000 in Fiscal 2003, $147,000 in Fiscal 2002 and $62,000 in Fiscal 2001.
Audit Related Fees.		Fees billed by our principal accountant amounted to $nil in Fiscal 2003, $nil in Fiscal 2002 and $nil in Fiscal 2001.
Tax Fees.		Fees billed by our principal accountant amounted to $58,000 in Fiscal 2003, $7,000 in Fiscal 2002 and $nil in Fiscal 2001.
All Other Fees.		Fees billed by our principal accountant amounted to $9,000 in Fiscal 2003 concerning various matters, $nil in Fiscal 2002 and $23,000 in Fiscal 2001 for financial assistance advice under UK Company Law.

31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer (filed herewith at page E-3).
32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer (filed herewith at page E-4).
32.2		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer (filed herewith at page E-5).
99.1		Report of Intangible Business Limited as to the fair market value of the 15 million Medicsight PLC shares issued to Nightingale Technologies on behalf of Medicsight, Inc (filed herewith).
99.2		Report of Empire Valuation Consultants, Inc as to the fair market value of the Assets of Nightingale Technologies Limited (filed herewith).

	MEDICSIGHT, INC.
April 8, 2004
	By:	/s/ STEPHEN FORSYTH Chief Executive Officer (Principal Executive Officer)
April 8, 2004
	By:	/s/ PAUL GOTHARD Chief Financial Officer (Principal Financial Officer)

Report of Independent Accountants		F-2
Consolidated Balance Sheets as of December 31, 2003, December 31, 2002 (restated) and December 31, 2001 (restated)		F-3
Consolidated Statements of Operations for the years ended December 31, 2003, December 31, 2002 (restated) and December 31, 2001 (restated)		F-4
Consolidated Statements of Changes in Stockholders' Equity and Comprehensive Loss for the years ended December 31, 2003, December 31, 2002 (restated) and December 31, 2001 (restated)		F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2003, December 31, 2002 (restated) and December 31, 2001 (restated)		F-6
Notes to the Consolidated Financial Statements		F-7 to F-27

		2003			2002 As restated Note 3			2001 As restated Note 3
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	845		$	1,778		$	203
Accounts receivable (net of allowance for doubtful debts of $nil, $nil and $74)			33			1			93
Other receivables			123			1			183
Prepaid expenses			539			222			118
VAT Receivable			604			282			60

	Total current assets		2,144			2,284			657
PROPERTY AND EQUIPMENT, at cost, net of accumulated depreciation of $1,480, $480 and $315			3,033			1,416			359
INVESTMENTS, at cost			429			525			700
SECURITY DEPOSITS			843			5			50
INTANGIBLE ASSET, at cost, net of accumulated amortization of $nil, $8,988 and $4,494			—			—			17,976
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED, net of accumulated amortization of $nil, $nil and $16,645			11,200			11,200			68,178

Total assets		$	17,649		$	15,430		$	87,920

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable		$	2,342		$	2,468		$	635
Accrued expenses			700			704			437
Accrued professional expenses			326			191			209
Bank overdraft			196			—			—
Line of credit—related party			2,880			2,332			1,325
Current portion of obligations under capital leases			96			32			6
Short-term debt			—			3,250			3,250

	Total current liabilities		6,540			8,977			5,862

Obligations under capital leases, net of current portion			306			42			19

	Total liabilities		6,846			9,019			5,881

STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value, 25,000,000 shares
authorized, 24,488,858, 21,154,879 and 19,288,291 shares issued and outstanding			24			21			19
Additional paid-in capital			173,810			162,156			145,596
Vendor guarantee			—			(3,689	)		(10,000	)
Currency translation adjustment			123			290			(44	)
Accumulated deficit			(163,468	)		(153,372	)		(54,459	)

TOTAL STOCKHOLDERS' EQUITY			10,489			5,406			81,112
Minority interest			314			1,005			927

Total Stockholders' equity and minority interest			10,803			6,411			82,039

Total liabilities and stockholders' equity		$	17,649		$	15,430		$	87,920

	2003			2002 As restated Note 3			2001 As restated Note 3
REVENUES	$	276		$	82		$	225
EXPENSES:
Selling, general and administrative		10,279			10,619			10,522
Software development cost		—			—			77
Research and development cost		2,498			1,239			1,266
Impairment of intangibles		—			13,482			387
Impairment of investments		95			175			2,412
Impairment of vendor guarantee		—			6,311			9,109
Amortization of goodwill		—			—			15,385
Impairment of goodwill		—			68,178			7,217

		12,872			100,004			46,375

Operating loss		(12,596	)		(99,922	)		(46,150	)
OTHER INCOME/(EXPENSE)
Interest and other income		12			3			191
Net foreign exchange losses		(2	)		(164	)		—

		10			(161	)		191

Net loss before minority interest		(12,586	)		(100,073	)		(45,959	)
MINORITY INTEREST		2,490			1,170			114

Net loss	$	(10,096	)	$	(98,913	)	$	(45,845	)

PER SHARE DATA:
Basic and diluted loss per share		(0.45	)		(5.13	)		(2.47	)
Weighted average number of common shares outstanding		22,203,126			19,294,654			18,563,404

	2003 $'000		2002 $'000		2001 $'000
Computer hardware and software	755		478		306
Furniture and fixtures	3,691		1,278		157
Motor Vehicles	67		140		212

	4,513		1,896		674
Less: Accumulated depreciation	(1,480	)	(480	)	(315	)

	3,033		1,416		359

		Common Stock*
													Retained Earnings (Accumulated Deficit)
					Additional Paid-In Capital		Vendor Guarantee			Accumulated Comprehensive Income (Loss)						Total Stockholders' Equity
		Shares	Amount		Additional Paid-In Capital		Vendor Guarantee			Accumulated Comprehensive Income (Loss)						Total Stockholders' Equity
BALANCE, JANUARY 1, 2001		14,250	$	14	$	50,943	$	(19,109	)	$	(19	)	$	(8,614	)	$	23,215
Issuance of shares in connection with acquisition of Radical Technology PLC		40		—		601		—			—			—			601
Issuance of shares in connection with acquisition of Nightingale Technologies Ltd		5,000		5		92,995		—			—			—			93,000
Equity contribution by shareholder						1,057		—			—			—			1,057
Impairment of vendor guarantee		—		—		—		9,109			—			—			9,109
COMPREHENSIVE LOSS
Net loss for the year		—		—		—		—			—			(45,845	)		(45,845	)
Net effect of foreign currency translation adjustments		—		—		—		—			(25	)		—			(25	)

	Total comprehensive loss	—		—		—		—			(25	)		(45,845	)		(45,870	)

BALANCE, DECEMBER 31, 2001		19,290		19		145,596		(10,000	)		(44	)		(54,459	)		81,112
Additional paid-in capital received on stock issued by MS-PLC, net		—		—		5,362		—			—			—			5,362
Stock issued by Medicsight, Inc to acquire additional stock in MS-PLC		1,865		2		11,198		—			—			—			11,200
Impairment of vendor guarantee		—		—		—		6,311			—			—			6,311
COMPREHENSIVE LOSS
Net loss for the year		—		—		—		—			—			(98,913	)		(98,913	)
Net effect of foreign currency translation adjustments		—		—		—		—			334			—			334

	Total comprehensive loss	—		—		—		—			334			(98,913	)		(98,579	)

BALANCE, DECEMBER 31, 2002		21,155		21		162,156		(3,689	)		290			(153,372	)		5,406
Stock issued by Medicsight, Inc, net		3,333		3		9,060		—			—			—			9,063
Additional paid-in capital received on stock issued by MS-PLC, net		—		—		2,594		—			—			—			2,594
Funds received under vendor guarantee		—		—				3,689			—			—			3,689
COMPREHENSIVE LOSS
Net loss for the year		—		—		—		—			—			(10,096	)		(10,096	)
Net effect of foreign currency translation adjustments		—		—		—		—			(167	)		—			(167	)

	Total comprehensive loss	—		—		—		—			(167	)		(10,096	)		(10,263	)

BALANCE, DECEMBER 31, 2003		24,488	$	24	$	173,810	$	—		$	123		$	(163,468	)	$	10,489

				Year ended December 31, 2003			Year ended December 31, 2002 As restated Note 3			Year ended December 31, 2001 As restated Note 3
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss				$	(10,096	)	$	(98,913	)	$	(45,845	)
Adjustments to reconcile net loss to net cash used in operating activities
		Depreciation and amortization of intangibles			631			4,735			4,867
		Impairment of intangibles			—			13,482			387
		Amortization of goodwill			—			—			15,385
		Impairment of goodwill			—			68,178			7,217
		Capitalized software development costs written off			—			—			77
		Provision for doubtful accounts			—			—			3
		Net foreign exchange losses			—			164			—
		Interest from prior years forgiven			—			399			—
		Impairment of investment			95			175			2,412
		Impairment of vendor guarantee			—			6,311			9,109
		Minority interest in net losses of subsidiary			(2,490	)		(1,170	)		(114	)
	(Increase)/decrease in assets
		Accounts receivable			(32	)		93			21
		Other receivables			(122	)		181			(35	)
		Prepaid expenses			(317	)		(104	)		170
		VAT receivable			(322	)		(221	)		98
		Unbilled services			—			—			(86	)
		Security deposits			(743	)		44			194
	Increase/(decrease) in liabilities
		Accounts payable			42			1,038			(48	)
		Accrued expenses			70			(103	)		268
		Accrued professional expenses			135			(18	)		(28	)

			Net cash used in operating activities		(13,149	)		(5,729	)		(5,948	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets					(1,293	)		(464	)		(163	)
Proceeds from sale of investments					—			2			1,660

			Net cash (used in)/provided by investing activities		(1,293	)		(462	)		1,497

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital lease obligations					(478	)		—			(5	)
Increase/(Decrease) in bank overdraft					196			—			(179	)
Proceeds from line of credit — related party					356			1,006			1,325
Repayments of short-term debt					(3,250	)		—			(2,756	)
Proceeds from sale of common stock					9,063			—			—
Proceeds from MS-PLC sale of common stock					4,222			6,773			—
Proceeds from vendor guarantee					3,689			—			75

			Net cash provided by/(used in) financing activities		13,798			7,779			(1,540	)

Effects of exchange rates on cash and cash equivalents					(289	)		(13	)		(37	)
NET CHANGE IN CASH & CASH EQUIVALENTS					(933	)		1,575			(6,028	)

CASH & CASH EQUIVALENTS, BEGINNING OF YEAR					1,778			203			6,231

CASH & CASH EQUIVALENTS, END OF YEAR				$	845		$	1,778		$	203

SUPPLEMENTAL DISCLOSURES OF CASH PAID
Interest					66			77			6
NON CASH FINANCING ACTIVITIES
Issuance of shares for acquisitions					—			—			115,399
Capital lease obligations for equipment					841			74			—

	December 31, 2003
Net loss—as reported	($10,096	)
Add:
Stock-based employee compensation expense included in reported net income, net of related tax effects	0
Deduct:
Adjustment to total stock-based employee compensation expense determined under the intrinsic value method for expense determined under the fair value based method, net of related tax effects	(65	)

Pro forma net income	($10,161	)

Earnings per share:
Basic, as reported	($0.45	)

Basic, pro forma	($0.46	)

Diluted, as reported	($0.45	)

Diluted, pro forma	($0.46	)

Risk-free interest rate	3.5	%
Expected volatility	0	%
Dividend yield	0	%
Expected life	2 years

Fiscal Year		$	'000
	2004		109
	2005		109
	2006		94
	2007		82
	2008		37
	Thereafter		—

Total minimum lease payments			431
	Less amount representing interest		29

Present value of net minimum lease payments			402
	Less current maturities		96

	Long-term maturities		306

(all figures in $ thousands)	Technology Segment		Software Maintenance Segment		Total
Balance as of January 1, 2001	9,841		8,895		18,736
Goodwill acquired during the year	71,731		313		72,044
Amortized during the year	(13,394	)	(1,991	)	(15,385	)
Impairment losses	—		(7,217	)	(7,217	)

Balance at December 31, 2001	68,178		—		68,178
Goodwill acquired during the year	11,200		—		11,200
Impairment losses	(68,178	)	—		(68,178	)

Balance at December 31, 2003, 2002	11,200		—		11,200

	Total			Basic and diluted per share
Loss as reported	$	(45,845,000	)	$	(2.47	)
Amortization of goodwill		15,385,000			0.83

Pro forma loss	$	(30,460,000	)	$	(1.64	)

		Outstanding Options
		Outstanding Options				Exercisable Options
			Weighted Average Remaining Contractual Life			Exercisable Options
Exercise Price		Number	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number	Weighted Average Exercise Price
$	1.65	2,375,700	1 year	$	1.65	1,062,600	$	1.65

		Year Ended December 31, 2003		Year Ended December 31, 2002		Year Ended December 31, 2001
		(in thousands)
Current
	Federal	$	0	$	0	$	0
	State and local		0		0		0
	Foreign		0		0		0
Deferred			0		0		0
Total income tax provision (benefit)			0		0		0

Deferred Tax Assets	2003		2002
			(as restated)
Tax loss carry-forward	1,287,000		1,145,000
Property and plant depreciation methods	35,000		35,000

Total	1,322,000		1,180,000
Valuation Allowance	(1,322,000	)	(1,180,000	)

Net deferred tax asset	0		0

1 Introduction and summary

Instructions

Instructions

Purpose of valuation work

The shares to be valued

Standard of value

Date of valuation

Rationale for valuation methods used

Information, analysis and reasoning

Hindsight

Assumptions and limiting conditions

Valuation conclusion

Disclaimer

2 Governing guidelines

SEC guidelines

US accounting practice

Uniform Standards of Professional Appraisal Practice

Other guidelines

3 Standard of Value

US Accounting Standards

Published guidance

Conclusion

4 Rights of the shares

General

5 General Valuation Methodologies

General

Income Approach

Market Approach

Cost based approach

Appropriate methodology

6 Income approach methodologies used

Methodologies used

Gross dividend yield

Discounted cash flow

Multiples of annual profits or sales

Relief from royalty

7 Market approach methodologies used

Information

Basis of comparison

8 Cost approach methodologies used

Use of cost approach

9 Chronology of events

29 December 2000 Share Sale Agreement between Nightingale and MS-Inc

Incorporation of MS-plc

9 November 2001 minutes of MS-plc

Minutes of MS-Inc 22 November 2001

22 November 2001 letter from MS-Inc to Nightingale

Minutes of MS-plc dated 22 November 2001

15 February 2002 Underwriting Agreement between Asia IT Capital and MS-plc

Share issues

MS-plc forecasts

Market Methodology

Cost Methodology

Overall assessment

11 Shares in Insights

Objective

Income Methodology

Market Methodology

Cost Methodology

Overall assessment

12 Signed certification

Terminal value methodology

Valuation Conclusion

Table VII

Nightingale Purchase Price Allocation Summary of Value

Total

Addendum 1-1

STATEMENT OF LIMITING CONDITIONS

Addendum 1-2

Addendum 2

CERTIFICATION OF APPRAISERS

Addendum 3-2

Employment

Experience

Addendum 3-3

SCOTT A. NAMMACHER, ASA, CFA

Experience

Addendum 4

VENTURE CAPITAL FIRMS – STAGES & RATES OF RETURN

Standard Definitions of Start-up Stages

*Gross d**ividend yield*

*9 November 2001 m**inutes of MS-plc*

	Year Ended December 31, 2003		Year Ended December 31, 2002		Year Ended December 31, 2001
Income taxes at the federal statutory rates	(35	%)	(35	%)	(35	%)
Change in valuation allowance	1		—		2
Foreign operations	34		35		33

Effective rate of income tax	0	%	0	%	0	%

All figures in $ thousands		2003		2003		2002		2002		2001		2001
Revenues
	Software maintenance	—				81				225
	Medical scanning services	276				1				—

Total revenues				276				82				225
Operating expenses
	Software maintenance	—				160				1,507
	Medical scanning services	1,320				71				—

Total operating expenses				1,320				231				1,507
Loss from operations
	Software maintenance	—				(79	)			(1,282	)
	Medical scanning services	(1,044	)			(70	)			—

Total loss from operations				(1,044	)			(149	)			(1,282	)
Non apportionable costs
General and administrative charges		8,959				10,388				9,092
Research and development cost		2,498				1,239				1,266
Software development cost w/o		—				—				—
Impairment of intangibles		—				13,482				387
Impairment of investments		95				175				2,412
Impairment of vendor guarantee		—				6,311				9,109
Amortization of goodwill		—				—				15,385
Impairment of goodwill		—				68,178				7,217
Interest and other income		(10	)			161				(191	)
Minority interest		(2,490	)			(1,170	)			(114	)

Total non-apportionable costs				9,052				98,764				44,563

Net loss				(10,096	)			(98,913	)			(45,845	)

ASSETS
Segmental assets
	Software maintenance	—				—				122
	Medical scanning services	3,104				1,098				—

Total segmental assets				3,104				1,098				122
Non apportionable assets				14,545				14,332				87,798

Consolidated total assets				17,649				15,430				87,920

	By:	/s/ PAUL GOTHARD
	Paul Gothard Chief Financial Officer
April 8, 2004

	By:	/s/ STEPHEN FORSYTH
	Stephen Forsyth Chief Executive Officer
April 8, 2004