our view, such other systems are more dependent than ours on human resources to carry out the analysis. We are not aware of other systems in the field that have the automated capability of our products.

The Company has had only a limited operating history and no revenues from its continuing operations upon which an evaluation of its prospects can be made. The Company’s prospects must be considered keeping in mind the risks, expenses and difficulties frequently encountered in the establishment of a new business in constantly changing industry. There can be no assurance that the Company will be able to achieve profitable operations in the foreseeable future or at all.

The Company has identified a number of specific risk areas that may affect the Company’s operations and results in the future:

Technical Risks. The Medicsight CAD may not deliver the levels of accuracy and reliability needed, or the development of such accuracy and reliability may be delayed.

Market Risks. The market for the Medicsight CAD and MedicExchange may be slower to develop or smaller than estimated or it may be more difficult to build the market than anticipated. The medical community may resist the Medicsight CAD and MedicExchange products or be slower to accept it than we expect. Revenues from Medicsight CAD and MedicExchange may be delayed or costs may be higher than expected which may result in the Company requiring additional funding.

Regulatory Risks. The Medicsight CAD system is subject to regulatory requirementsaccounting principles generally accepted in the United States Europe, Japan, China andof America. The notes to the consolidated financial statements contained in this Annual Report describe our other targeted markets. Necessary regulatory approvals may not be obtained or may be delayed. We may incur substantial additional cost in obtaining regulatory approvals for our products in our targeted markets.

Competitive Risks. There are a number of groups and organizations, such as software companiessignificant accounting policies used in the medical imaging field, scanner manufacturers, screening companies and other healthcare providers that may develop a competitive offering to the Medicsight CAD and MedicExchange. In addition these competitors may have significantly greater resources than the Company. We cannot make any assurance that they will not attempt to develop such offerings, that they will not be successful in developing such offerings or that any offerings they do develop will not have a competitive edge over Medicsight CAD and MedicExchange.

Financial Risk. The Company has incurred significant operating losses since inception and has generated no revenues from continuing operations. As a result, the Company has generated negative cash flows from operations and has an accumulated deficit at December 31, 2005. The Company is operating in a developing industry based on new technology and its primary source of funds to date has been through the issuance of securities and borrowed funds. The Company is currently seeking additional funding and is actively developing the technology in order to bring it to market. While the Company is optimistic and believes appropriate actions are being taken, there can be no assurance that management’s efforts will be successful or that the products the Company develops and markets will be accepted by consumers.

Corporate Structure. The Company’s corporate structure may make it more difficult or costly to take certain actions. The Company conducts substantially all its business through MS-PLC, a U.K. public company which is 81.8% owned by the Company, and through MS-PLC’s subsidiaries in the United Kingdom and the United States and through MDX, which is 90% owned by the Company. Although the Company and MS-PLC share directors and management, they are required to comply with corporate governance and other laws and rules applicable to public companies in the United Kingdom and the United States.  Should the Company propose to take any action, such as a transfer or allocation of assets or liabilities between the Company and MS-PLC, the Company would have to take into consideration the potentially conflicting interestspreparation of the Company’s stockholders and the minority stockholdersconsolidated financial statements. The preparation of MS-PLC.  This may deter the Company from taking such actions that might otherwise be in the best interest of the Company or cause the Company to incur additional costs in taking such actions. MS-PLC would not be able to pay dividends or make other distributions of profits or assets to the Company without making pro rata payments or distributions to the minority stockholders of MS-PLC.  Although neither MS-PLC nor the Company has plans to pay dividends or make distributions to its shareholders, the Company’s corporate

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structure may deter MS-PLC and the Company from doing so in the future. This risk will also apply to MDX as it begins its operations this year as the Company owns 90% of MDX’s equity.

Foreign Exchange Risks. As the Company’s operating currency is UK sterling (£) and itsthese financial statements arerequires us to make estimates and assumptions that affect the reported in US Dollars, the Company’samounts of assets and liabilities and itsdisclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results of operations are affected by movementscould differ from those estimates. We continually evaluate our critical accounting policies and estimates.

We believe the critical accounting policies listed below reflect significant judgments, estimates and assumptions used in the $: £ exchange rate.preparation of our consolidated financial statements.

Goodwill

We account for goodwill in accordance with the provisions of SFAS No. 142, “Goodwill and Other Risks. Intangible Assets.”  Under SFAS No. 142, goodwill and intangible assets with indefinite lives are reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company’s ability to deliver its software could be hindered by risks such as the loss of key personnel or the patents and trademarks being successfully challenged or credit facilities being reduced or terminated by lenders.

RESULTS OF OPERATIONS

Fiscal Year Ended December 31, 2005 vs. Fiscal Year Ended December 31, 2004

Research and Development. The Company’s research and development expenses for Fiscal 2005 were $2,363,000 as compared to $2,972,000 for Fiscal 2004. The decrease of $609,000 was due to reduction in the numbers of staff required for the developmentfirst step of the products. The Company’s researchgoodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. We operate as one reporting unit and development costs were comprised of stafftherefore compare the book value to the market value (market capitalization plus a control premium). If the market value exceeds the book value, goodwill is considered not impaired, and consultancy costs expensed onthus the development of MS-PLC’s software products.

Selling, General and Administrative Expenses. The Company’s selling, general and administrative expenses from continuing operations for Fiscal 2005 were $9,300,000 as compared to $10,578,000 for Fiscal 2004. The decrease of approximately $1,300,000 was due to a number of factors:

•                  Salaries and directors’ and sub-contractors’ compensation declined from $5,009,000 in Fiscal 2004 to $4,595,000 in Fiscal 2005 due to reduction in staff numbers and the reduction of sub-contractors costs (re-structuringsecond step of the medical boards).

•                  Rent, rates and service charges declined from $1,623,000 in Fiscal 2004 to $1,418,000 due toimpairment test is not necessary. If our book value exceeds the Company requiring less space in 46 Berkeley Square in 2005.

•                  Other savings include travel (due to Company’s review of its requirements in 2005 - $154,000),market value, the cessationsecond step of the clinical trial in 2004 and subsequent reduction in medical images costs ($440,000) and a reduction in depreciation following 2004’sgoodwill impairment review ($348,000).

For Fiscal 2005,test is performed to measure the Company did not record anamount of impairment charge from continuing operations. For Fiscal 2004, the Company recorded an impairment to MAM’s property and equipment of $386,000 which relates to the closureloss, if any. The second step of the Ravenscourt centre. This was as a resultgoodwill impairment test, used to measure the amount of impairment loss, compares the implied fair value of the decision to transfer MAM’s assets to MS-PLC and Lifesyne or sell to independent third parties at open marketgoodwill with the book value or fully impair, as its business opportunities were limited due toof the change in strategy by Lifesyne.

Impairment Loss on Investments. For Fiscal 2005 there was no impairment charge on investments as compared to Fiscal 2004 where the Company incurred an impairment loss on investments of $70,000 relating to the impairment ingoodwill. If the carrying value of Eurindia PLC (“Eurindia”). The Company based thisthe goodwill exceeds the implied fair value of the goodwill, an impairment on information provided by Eurindia’s management.

Income Tax Benefit Realized. In Fiscal 2005, MS-PLC received $858,000 relating to a tax credit paid by the United Kingdom taxation authorities under its R&D tax relief scheme for small and medium. The basis for the R&D relief is to encourage the development of new technologies and is only applicableloss would be recognized in an amount equal to the research and developmentexcess. Any loss recognized cannot exceed the carrying amount of goodwill. After a goodwill impairment loss is recognized, the adjusted carrying amount of goodwill is its new accounting basis. Subsequent reversal of a new technology and not a product.

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The tax credit relates to expenditures incurred between November 2001 and December 2003. The Company did not accrue for any potential tax credit for Fiscal 2004 as it has determinedpreviously recognized goodwill impairment loss is prohibited once the measurement of that loss is completed. We completed the completion date of the new technology occurred at the end of Fiscal 2003.

Discontinued operations. The revenues from the Company’s discontinued Lifesyne’s scanning operations for Fiscal 2005 was $427,000 as compared to $538,000 for Fiscal 2004. The reduction was due mainly to the 10 month trading period in Fiscal 2005.

The selling, general and administrative expenses from the Company’s discontinued Lifesyne’s scanning operations for Fiscal 2005 was $1,527,000 as compared to $2,101,000 for Fiscal 2004. The reduction was mainly due to a reduction in staff and the 10 month trading period in Fiscal 2005.

For Fiscal 2005, the Company recordedannual goodwill impairment of $394,000 against property and equipment related to the discontinued Lifesyne operations. For Fiscal 2004, the Company recorded impairment of $582,000 against property and equipment related to the discontinued Lifesyne operations.

Net Loss and Net Loss per Share. Net loss was $12,216,000 for Fiscal 2005 compared to a net loss of $15,030,000 for Fiscal 2004. Net loss per share for Fiscal 2005 was $0.36, based on weighted average shares outstanding of 34,224,023, compared to $0.49 for Fiscal 2004, based on weighted average shares outstanding of 30,853,734. The decrease in net loss for Fiscal 2005 is principally due to reduction in selling, general and administrative costs and the realized income tax benefit.

The loss from continuing operations was $10,738,000 for Fiscal 2005 compared to a loss from continuing operations of $12,885,000 for Fiscal 2004. Loss per share from continuing operations for Fiscal 2005 was $0.31, based on weighted average shares outstanding of 34,224,023, compared to $0.42 for Fiscal 2004, based on weighted average shares outstanding of 30,853,734.

Note As the Company’s operating currency is UK sterling (£) its results of operations are affected by changes in the $: £ rates used to translate the revenues and costs. For Fiscal 2005 the average rate was $1.80: £1.00 and for Fiscal 2004 the rate was $1.83: £1.00, a decrease of 1.7%.

Contractual Obligations and Commitments. As of December 31, 2005, the Company was party to a capital lease obligation in the amount of $25,000 for motor vehicles. The obligation for the vehicle lease requires monthly payments of $1,700, including interest, through April 2007. The underlying vehicles secure the lease.

On May 25, 2005, the Company’s discontinued Lifesyne operations settled the outstanding capital lease obligation for its scanner which was subsequently sold. The outstanding capital lease obligation was $286,000assessment as of December 31, 2004.2006, in which no impairment was identified. Goodwill was $11,200,000 as of December 31, 2006.

Equity-based compensation

Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS No. 123(R), using the modified prospective transition method, and therefore have not restated prior periods’ results. Under this method, we recognize compensation expense for all equity-based payments granted on or after January 1, 2006 and prior to but not yet vested as of January 1, 2006 in accordance with SFAS No. 123(R). Under the fair value recognition provisions of SFAS No. 123(R), we recognize equity-based compensation net of an estimated forfeiture rate and recognize compensation cost only for those shares expected to vest over the requisite service period of the award. Prior to SFAS No.123(R) adoption, we accounted for equity-based payments under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, and accordingly did not recognize equity-based compensation related to these options, as the exercise price equaled the fair market value of the common stock on the date of grant.

The Company’s corporate offices are at 46 Berkeley Square, London W1J 5AT, United Kingdom. Therefair value of each option award is no formal, written lease for these offices (see ITEM 2estimated on page 10). Rental costs for 46 Berkeley Square are expected to be approximately $600,000 per annum.the date of grant using the Black-Scholes option valuation model. The Company has service offices in U.S.A., Japan and China with notice periods of between one and three months to cancel.

Fiscal Year Ended December 31, 2004 vs. Fiscal Year Ended December 31, 2003

Research and Development. The Company’s research and development expenses for Fiscal 2004 were $2,972,000 as compared to $2,498,000 for Fiscal 2003. The Company’s research and development costs were comprised of staff and consultancy costs expensed onBlack-Scholes option valuation model requires the development of Medicsight CAD products. The increase was due toassumptions that are input into the Company outsourcing additional resources where required.

Selling, Generalmodel. These assumptions are the expected stock volatility, the risk-free interest rate, the option’s expected life and Administrative Expenses. The Company’s selling, general and administrative expenses from continuing operations for Fiscal 2004 were $10,578,000 as compared to $8,848,000 for Fiscal 2003.

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The amount of salaries and directors’ and sub-contractors’ compensation increased to $5,009,000 in Fiscal 2004 from $3,579,000 in Fiscal 2003. The amount of the increasedividend yield on the underlying stock. Expected volatility is due to increases in staff numbers and sub-contractors (including medical board members and radiologists) as the Company has expanded. In Fiscal 2004 the Company incurred costs of $1,458,000 related to marketing and public relations and $487,000 relating to the clinical trials as compared to $1,299,000 and $492,000, respectively, in Fiscal 2003.

For Fiscal 2004, the Company recorded an impairment to MAM’s property and equipment of $386,000 which relates to the closure of the Ravenscourt center. This was as a result of the decision to transfer MAM’s assets to MS-PLC and Lifesyne or sell to independent third parties at open market value or fully impair, as MAM’s business opportunities were limited due to the change in strategy by Lifesyne. No impairment charge was recorded in Fiscal 2003.

Impairment Loss on Investments. For Fiscal 2004, the Company incurred an impairment loss on investments of $70,000 relating to the impairment in the carrying value of Eurindia PLC (“Eurindia”). The Company based this impairment on information provided by Eurindia’s management.

For Fiscal 2003, the Company incurred an impairment loss on investments of $95,000 relating to the impairments in the carrying value of Eurindia and Strategic Intelligence PLC (“SI-PLC”). Eurindia was impaired by $59,000calculated based on Eurindia’s management’s assessmentthe historical volatility of our common stock over the value of its portfolio at $0.72 per share. The Company fully impaired its investment in SI-PLC of $36,000, as the Company was unable to obtain any information or representations from SI-PLC as to the fair value.

Discontinued operations. Revenues from the Company’s discontinued Lifesyne scanning operations for Fiscal 2004 were $538,000 as compared to $276,000 for Fiscal 2003. The increase was due to growth in the number of scans undertaken.

The Company’s selling, generalexpected option life and administrative expenses from the discontinued Lifesyne’s scanning operations for Fiscal 2004 was $1,527,000 as compared to $1,155,000 for Fiscal 2003.

For Fiscal 2004, the Company recorded impairment of $582,000 against property and equipment related to the discontinued Lifesyne operations. For Fiscal 2003 there was no impairment loss.

Net Loss and Net Loss per Share. Net loss was $15,030,000 for Fiscal 2004 compared to a net loss of $10,096,000 for Fiscal 2003. Net loss per share for Fiscal 2004 was $0.49,other appropriate factors. Risk-free interest rates are calculated based on weighted average shares outstanding of 30,853,734, compared to a net loss per share of $0.45 for Fiscal 2003, based on weighted average shares outstanding of 22,203,126. The increase in net loss for Fiscal 2004 is principally due increase in staff costs, the effects of an appreciation of 11.6% in the $: £ exchange rate (see note below) and the limited share of the losses attributable to the minority interest.

The loss from continuing operations was $12,885,000 for Fiscal 2004 compared to a loss from continuing operations of $8,941,000 for Fiscal 2003. Loss per share from continuing operations for Fiscal 2004 was $0.42, based on weighted average shares outstanding of 30,853,734, compared to $0.40 for Fiscal 2003, based on weighted average shares outstanding of 22,203,126.

Note As the Company’s operating currency is UK sterling (£) its results of operations are affected by significant changes in the $: £continuously compounded risk-free rates used to translate the revenues and costs. For Fiscal 2004 the average rate was $1.83: £1.00 and for Fiscal 2003 the rate was $1.64: £1.00, an increase of 11.6%.

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LIQUIDITY AND CAPITAL RESOURCES

Working Capital Information as at December 31:

Net Change in Cash and Cash Equivalents. During Fiscal 2005 the Company’s cash and cash equivalents increased by $1,973,000. This is primarily the result of proceeds received from shares issued by the Company in excess of net cash used in operating and investing activities and repayments of debt. The Company used net cash of $8,998,000 in continuing operations and used net cash of $1,078,000 in discontinued operations. The Company received net cash of $15,346,000 in financing activities and used $3,388,000 in investing activities.

During Fiscal 2004, the Company’s cash and cash equivalents increased by $4,431,000. This increase was primarily the result of proceeds received from shares issued by the Company in excess of the net cash used in operating and investing activities and repayments of debt. The Company used net cash of $13,629,000 in continuing operations and used net cash of $1,486,000 in discontinued operations. The Company received net cash of $20,175,000 in financing activities and used $434,000 in investing activities.

Net Cash Used in Operations. In Fiscal 2005, the Company’s continuing operations used net cash of $8,998,000. The decrease of $4,631,000 from the amount of net cash used in continuing operations in Fiscal 2004 is mainly due to the reduction of research and development, reductions in SG&A costs, increases in VAT received and realized income tax benefit of $858,000.

In Fiscal 2004 the Company used net cash in continuing operations of $13,629,000. The increase of $1,547,000 from the amount of net cash used in continuing operations in Fiscal 2003 was mainly due to increases in staff and sub-contractors (including medical board members and radiologists).

Net Cash Used in Investing Activities. In Fiscal 2005, the Company used $3,388,000 in investing activities. On November 10, 2005 the Company’s majority-owned subsidiary MS-PLC completed the sale of its subsidiary Lifesyne to an independent third party for $443,000. Additionally on May 25, 2005 Medicsight’s indirect subsidiary MAM completed the sale of the CT Lightspeed 16 slice scanner located at the redundant test center at Ravenscourt Hospital in West London for $300,000, net of applicable sales tax, to GE Medical Systems. The Company used funds to purchase $131,000 of additional fixed assets. The Company held $4,000,000 for funds received in December 2005 for common stock subscribed but unissued until January 2006.

In Fiscal 2004, the Company had a net cash outflow from investing activities of $434,000. The Company used the funds to purchase additional fixed assets, the majority of which was required for the clinical trials and presentationappropriate term. The dividend yield is assumed to be zero as we have never paid or testingdeclared any cash dividends on our software.

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Net Cash Provided by Financing Activities. In Fiscal 2005, the Company had a net cash inflow from financing activities of $15,346,000. The funds received in Fiscal 2005 consisted of $12,035,000 (net of commission and expenses) raised by the sale of the Company’s common stock and $3,600,000 received fordo not intend to pay dividends on our common stock subscribed but unissued by the Company less $333,000 used to settle the outstanding capital lease obligation on CT Lightspeed 16 slice scanner by MAM.

In Fiscal 2004, the Company had a net cash inflow from financing activities of $20,175,000. The funds received in Fiscal 2004, consisted of $23,310,000 (net of commission and expenses) raised by common stock issued by the Company. The Company also repaid in full the Asia IT facility ($2,880,000) and the Company’s overdraft facility ($196,000).

Stockholders’ Equity. The Company’s stockholders’ equity at December 31, 2005 was $21,734,000, including an accumulated deficit of $(190,714,000) as compared to $18,465,000 at December 31, 2004, including an accumulated deficit of $(178,498,000). Additional paid-in capital was $208,684,000 and $196,652,000, at December 31, 2005 and December 31, 2004 respectively. The increase in stockholders’ equity was a result of an increase in accumulated deficit of $12,216,000 offset by an increase in additional paid-in capital of $12,032,000 and common stock subscribed but unissued of $3,600,000. The increase in additional paid-in capital resulted from issues of common stock at a premium by the Company in Fiscal 2005.

The Company’s stockholders’ equity at December 31, 2004 was $18,465,000, including an accumulated deficit of $(178,498,000), as compared to $10,489,000 at December 31, 2003, including an accumulated deficit of $(163,468,000). Additional paid-in capital was $196,652,000 and $173,810,000, at December 31, 2004 and December 31, 2003, respectively. The increase in stockholders’ equity was a result of an increase in accumulated deficit of $15,030,000 offset by an increase in additional paid-in capital of $22,842,000. The increase in additional paid-in capital resulted from issues of common stock at a premium by the Company in Fiscal 2004.

Additional Capital. The Company may require additional capital during its fiscal years ending December 31, 2006 and 2007 to implement its business strategies, including cash for payment of increased operating expenses such as salaries for additional employees. Such additional capital may be raised through additional public or private equity offerings, as well as borrowings and other resources. Currently, the Company has two available lines of credit.

On December 15, 2000, the Company entered into an unsecured credit facility with Asia IT that provides a $20,000,000 line of credit. Such line of credit originally expired on December 31, 2001, but has been extended until June 30, 2007. Interest on advances under the credit facility accrues at 2% above US LIBOR. The Company can draw down on this credit facility for its financing requirements, upon approval by the Company’s Board of Directors and subject to approval by Asia IT (such approval not to be unreasonably withheld). The Company is restricted from borrowing funds, directly or indirectly, other than through the credit facility with Asia IT, without the consent of Asia IT. The availability of the credit facility reduces upon the Company’s sale of any of its investment assets. The amounts drawn and interest charged under this facility are repayable on demand or at the maturity of the facility.

On November 20, 2001, Asia IT entered into a £10,000,000 ($18,000,000) credit facility with MS-PLC. Such facility matures on June 30, 2007 and is secured by a lien on all assets of MS-PLC. Interest on outstanding amounts accrues at 2% above Sterling LIBOR. Pursuant to such credit facility, MS-PLC had covenanted to undertake a public offering of its common shares in an amount not less than £25,000,000 ($45,000,000) not later than March 2002. MS-PLC did not complete such an offering but the facility nevertheless remains in place.

At December 31, 2005, the Company had not drawn down any funds under the $20,000,000 facility with Asia IT, and MS-PLC had not drawn down any funds under its £10,000,000 ($18,000,000) facility with Asia IT. Under these facilities Asia IT, a related party, has deposited $2,500,000 for the benefit of the Company which the Company has not utilized.

During Fiscal, 2005, the Company raised $12,035,000 (net of commission and expenses) by issuing 3,327,000 shares of its common stock in a private placement. The Company raised a further $3,600,000 (net

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of commission and expenses) on January 13, 2006 by issuing 1,000,000 shares of its common stock in a private placement. The Company received the consideration for the future issue in advance prior to the December 31, 2005. The Company recorded these funds as cash held for common stock subscribed but unissued at December 31, 2005, and correspondingly recorded the obligation to issue shares as common stock subscribed but unissued at December 31, 2005.

These private placements were underwritten by Asia IT, a related party. Asia IT received commissions of $1,630,000 on the above private placements.

On March 17, 2006 the Company raised a further $990,000 (net of commission and expenses) by issuing 275,000 restricted shares of common stock. Asia IT earned commissions of $110,000 on the above private placement.

During the year ended December 31, 2004 the Company raised $23,310,000 (net of commission and expenses) by issuing 8,579,000 restricted shares of common stock. These private placements were underwritten by Asia IT, a related party. Asia IT received commissions of $2,410,000 on the above private placement.

The Company’s authorized share capital is 40,000,000 shares of common stock, par value $0.001. At March 27, 2006, 37,667,883 shares of common stock had been issued.

To the extent that additional capital is raised through the sale of equity or equity-related securities of the Company or its subsidiaries, the issuance of such securities could result in dilution to the Company’s stockholders. No assurance can be given, however, that the Company will have access to the capital markets in the future, or that financing will be available on acceptable terms to satisfy the Company’s cash requirements to implement its business strategies. If we are unable to access the capital markets or obtain acceptable financing, our results of operations and financial conditions could be materially and adversely affected. We may be required to raise substantial additional funds through other means. The products derived from our proprietary software, Medicsight CAD, and our online portal, MedicExchange, are expected to account for substantially all of our revenues from operations in the foreseeable future. Our technology has not yet been fully commercialized,The expected forfeiture rate is estimated based on historical experience.

Determining the appropriate fair value model and calculating the fair value of equity-based payment awards require the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity-based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management judgment. As a result, if factors change and we have not begunuse different assumptions, our equity-based compensation expense could be materially different in the future. In addition, we are required to receive any revenuesestimate the expected forfeiture rate and recognize expense only for those shares expected to vest. If our actual forfeiture rate is materially different from our commercial operations associated withestimate, the software products. We cannot assure our stockholders that our technology and products willequity-based compensation expense could be commercialized successfully, or that if so commercialized, that revenues will be sufficient to fund our operations. Management believes it has sufficient cash and available facilities to fund operations for the coming year. If adequate funds are not available to us,significantly different from what we may be required to curtail operations significantly or to obtain funds through entering into arrangements with collaborative partners or others that may require us to relinquish rights to certain of our technologies or products that we would not otherwise relinquish.

Contractual Obligations

As of December 31, 2005, the Company has the following contractual obligations:

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Critical Accounting Policies.

In December 2001 and January 2002, the Securities and Exchange Commission requested that all registrants list their three to five most “critical accounting policies”have recorded in the Management’s Discussion and Analyses of Financial Condition and Results of Operations. The Securities and Exchange Commission indicated a “critical accounting policy” is one which is both important to the portrayal of the company’s financial condition and results and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We believe that the following accounting policies fit the definition of critical accounting policies.

current period.

Revenue Recognition. Recognition

We expect to earn our revenue primarily from software licenses and related services. Our revenue will be recognized in accordance with Statement of Position 97-2 (SOP 97-2), as amended by Statement of Position 98-9.

The Company’s revenues were derived from its discontinued scanning services operated by Lifesyne. Scan revenue is recognized when the service is delivered.

The recognition of revenues from software licenses and related services will require difficult and complex judgments. The terms of the license contract, such as whether the contract is long-term (over 12 months) or short-term, cancelable or non-cancelable and the basis on which the licensee is charged , for example, will affect the recognition of revenues from services, such as up-front fees on installation, activation and up-front license fees, on-going license fees, termination fees and maintenance fees. Where fees are received prior to any service being delivered, the recognition of the fees is deferred until the related service has been delivered successfully. Recognition of fees that relate to any “milestone” is deferred until the “milestone” has been achieved.

The Company believes that the accounting estimates related to the recognition of revenue and establishment of reserves for uncollectable amounts in the results of operations is a “critical accounting estimate” because: (1) it requires management to make assumptions about future collections, and (2) the impact of changes in actual performance versus these estimates on the accounts receivable balance reported on our consolidated balance sheets and the results reported in our consolidated statements of operations could be material. Further the Company has no history of uncollectable amounts and therefore must initially look to the estimates for the industry or particular companies that the management feels operate in a similar environment in addition to any current market indicators about general economic conditions that might impact the collectibility of accounts.

Research and Development.Development

Costs incurred in connection with the development of software products that are intended for sale are accounted for in accordance with Statement of Financial Accounting Standards No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed”. Costs incurred prior to technological feasibility being established for the product are expensed as incurred. Technological feasibility is established upon completion of a detail program design or, in its absence, completion of a working model. Thereafter, all software production costs are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. Capitalized costs are amortized based on current and future revenue for each product with an annual minimum equal to the straight-line amortization over the remaining estimated economic life of the product. Amortization commences when the product is available for general release to customers.

The Company concluded that capitalizing such expenditures on completion of a working model was inappropriate because the Company did not incur any material software production costs and therefore has decided to expense all research and development costs. The Company’s research and development costs are comprised of staff and consultancy costs expensed on the Medicsight CAD system.

products.

Impairment of Long-lived Assets and Long-lived Assets To Be Disposed of.

The Company evaluates the carrying value of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company’s assessment for impairment of an asset involves estimating the undiscounted cash flows expected to result from use of the asset and its eventual disposition. An impairment loss recognized is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Calculating the estimated fair value of an asset involves significant judgments and a variety of assumptions. Judgments that the Company makes concerning the value of its intangible assets include assessing time

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and cost involved for development, time to market, and risks of regulatory failure or obsolescence, (due to market, environmental or technological advances for example). For calculating fair value based on discounted cash flows, we forecast future operating results and future cash flows, which include long-term forecasts of revenue growth, gross margins and capital expenditures.

An impairment analysis was performed as of December 31, 20052006 and 20042005 and the Company concluded there was no impairment loss.

We are exposed to foreign currency exchange rate fluctuations related to the operation of our international subsidiaries.  Our main operating currency is UK sterling(£).We also have subsidiary operations in Japan and China who operate  in their local currencies.

RESULTS OF OPERATIONS

Fiscal Year Ended December 31, 2006 vs. Fiscal Year Ended December 31, 2005

Research and Development

The Company’s research and development expenses for Fiscal 2006 were $2,870,000 as compared to $2,363,000 for Fiscal 2005. The Company’s research and development costs were comprised of staff, staff related, consultancy, stock options, and product development software costs expensed on the research and development of Medicsights PLCs’s products.

Selling, General and Administrative Expenses

The Company’s selling, general and administrative expenses from continuing operations for Fiscal 2006 were $12,842,000 as compared to $9,300,000 for Fiscal 2005, the significant items being (in thousands):

Points to note are:

·      People related costs increased by $475,000 (11%) as we expanded our operations in Medicsight and Medicexchange in Japan and China respectively.  Recruitment fees also increased year on year as a result.

·      Professional fees increased $580,000 (114%) due to international expansion and increased work on commercial agreements.

·      Software and related increased $378,000 (525%) as we expensed the initial website build costs and ongoing hosting fees of medicexchange.com

·      Marketing, conferences and public relations increased $815,000 (52%) as a result of supporting our Medicsight partners, promoting our international presence and building the Medicexchange business and brand.

Income Tax Benefit Realized

In Fiscal 2005, Medicsight PLC received a tax credit of $858,000 from the United Kingdom taxation authorities under its Research & Development tax relief scheme for small and medium sized enterprises. The tax credit relates to expenditures incurred between November 2001 and December 2003. The Company has not accrued for any subsequent tax credits as it has determined that the completion date (under rules of the scheme) of the new technology occurred at the end of Fiscal 2003.

Net Loss and Net Loss per Share

Net loss was $14,935,000 for Fiscal 2006 compared to a net loss of $12,216,000 for Fiscal 2005. Net loss per share for Fiscal 2006 was $0.39 (based on weighted average shares outstanding of 38,092,965), compared to $0.36 for Fiscal 2005 (based on weighted average shares outstanding of 34,224,023).  The increase net loss for Fiscal 2006 is principally due to the increase in selling, general and administrative costs and reduction in realized income tax benefit.

Operational currency

The Company’s main operating currency is UK sterling (£).  Its results of operations are affected by changes in the $: £ rates used to translate the operational result. For Fiscal 2006, the average rate was $1.85:£1.00 and for Fiscal 2005 the rate was $1.80:£1.00, an increase of 2.8%.

Contractual Obligations and Commitments

The Company’s corporate offices are at the Kensington Centre, 66 Hammersmith Road, London W14 4UD, UK.  This property is leased on a 10 year agreement with a right to terminate on the expiry of the fifth year of the lease.  The Company has offices in New York,  Tokyo (Japan) and Beijing (China) with notice periods of between one and three months to cancel.  Our minimum annual lease commitments under these arrangements are (in thousands):

As of December 31, 2006, the Company was party to a capital lease obligation in the amount of $7,000 for motor vehicles. The obligation for the vehicle lease requires monthly payments of $1,700, including interest, through April 2007. The underlying vehicles secure the lease.

Fiscal Year Ended December 31, 2005 vs. Fiscal Year Ended December 31, 2004

Research and Development

The Company’s research and development expenses for Fiscal 2005 were $2,363,000 as compared to $2,972,000 for Fiscal 2004. The decrease of $609,000 was due to reduction in the numbers of staff required for the development of the products. The Company’s research and development costs were comprised of staff and consultancy costs expensed on the development of Medicsight PLC’s software products.

Selling, General and Administrative Expenses

The Company’s selling, general and administrative expenses from continuing operations for Fiscal 2005 were $9,300,000 as compared to $10,578,000 for Fiscal 2004. The decrease of approximately $1,300,000 was due to a number of factors:

·      Salaries and directors’ and sub-contractors’ compensation declined from $5,009,000 in Fiscal 2004 to $4,595,000 in Fiscal 2005 due to reduction in staff numbers and the reduction of sub-contractors costs (re-structuring of the medical boards).

·      Rent, rates and service charges declined from $1,623,000 in Fiscal 2004 to $1,418,000 due to the Company requiring less space in 46 Berkeley Square in 2005.

·      Other savings include travel (due to Company’s review of its requirements in 2005 - $154,000), the cessation of the clinical trial in 2004 and subsequent reduction in medical images costs ($440,000) and a reduction in depreciation following 2004’s impairment review ($348,000).

For Fiscal 2005, the Company did not record an impairment charge from continuing operations. For Fiscal 2004, the Company recorded an impairment to Medicsight Asset Management’s property and equipment of $386,000 which relates to the closure of the Ravenscourt centre. This was as a result of the decision to transfer Medicsight Asset Management’s assets to Medicsight PLC and Lifesyne or sell to independent third parties at open market value or fully impair, as its business opportunities were limited due to the change in strategy by Lifesyne.

Impairment Loss on Investments

For Fiscal 2005 there was no impairment charge on investments as compared to Fiscal 2004 where the Company incurred an impairment loss on investments of Excess$70,000 relating to the impairment in the carrying value of Purchase Price Over Net Assets Acquired.Eurindia PLC (“Eurindia”). The Company adopted SFAS No. 142 on January 1, 2002. Underbased this standard, goodwill is no longer be amortized over its estimated useful life, but is tested for impairment on an annualinformation provided by Eurindia’s management.

Income Tax Benefit Realized

In Fiscal 2005, Medicsight PLC received $858,000 relating to a tax credit paid by the United Kingdom taxation authorities under its R&D tax relief scheme for small and medium businesses. The basis for the R&D relief is to encourage the development of new technologies and whenever indicators of impairment arise. Underis only applicable to the provisions of SFAS No. 142, any impairment loss identified upon adoption of this standard is recognized as a cumulative effectresearch and development of a new technology and not a product.

The tax credit relates to expenditures incurred between November 2001 and December 2003. The Company did not accrue for any potential tax credit for Fiscal 2004 as it has determined that the completion date of the new technology occurred at the end of Fiscal 2003.

Discontinued operations

The revenue from the Company’s discontinued Lifesyne’s scanning operations for Fiscal 2005 was $427,000 as compared to $538,000 for Fiscal 2004. The reduction was due mainly to the 10 month trading period in Fiscal 2005.

The selling, general and administrative expenses from the Company’s discontinued Lifesyne’s scanning operations for Fiscal 2005 was $1,511,000 as compared to $2,101,000 for Fiscal 2004. The reduction was mainly due to a reduction in staff and the 10 month trading period in Fiscal 2005.

For Fiscal 2005, the Company recorded impairment of $394,000 against property and equipment related to the discontinued Lifesyne operations. For Fiscal 2004, the Company recorded impairment of $582,000 against property and equipment related to the discontinued Lifesyne operations.

Operational currency

As the Company’s operating currency is UK sterling (£) its results of operations are affected by changes in the $: £ rates used to translate the revenues and costs. For Fiscal 2005 the average rate was $1.80: £1.00 and for Fiscal 2004 the rate was $1.83: £1.00, a decrease of 1.7%.

Contractual Obligations and Commitments

As of December 31, 2005, the Company was party to a capital lease obligation in the amount of $25,000 for motor vehicles. The obligation for the vehicle lease requires monthly payments of $1,700, including interest, through April 2007. The underlying vehicles secure the lease.

On May 25, 2005, the Company’s discontinued Lifesyne operations settled the outstanding capital lease obligation for its scanner which was subsequently sold. The outstanding capital lease obligation was $286,000 as of December 31, 2004.

LIQUIDITY AND CAPITAL RESOURCES

Working Capital information as at December 31 (in thousands unless stated):

        Net change in accounting principle. Any impairmentCash, Cash Equivalents and Marketable Securities

As of  December 31, 2006 we had $19,757,000 in cash and cash equivalents (compared to $7,249,000 at December 31, 2005) and $24,735,000 in cash, cash equivalents, marketable securities and cash for common stock subscribed but unissued, compared to $11,249,000 at December 31, 2005.

Net cash used in operating activities was $13,990,000 for the year ended December 31, 2006 ($8,998,000 for the year ended December 31, 2005).  This resulted primarily from:

a.     our net loss incurred subsequentof $14,935,000 ($10,738,000 for Fiscal 2005), after Minority Interest of $477,000 (nil in Fiscal 2005);

b.     adjusted for depreciation and stock-based compensation expenses (non cash items) of $718,000 ($237,000 for Fiscal 2005);

c.     losses on disposal of fixed assets were $13,000 in the year ended December 31, 2006 compared to $219,000 in the year ended December 31, 2005;

d.     an overall net reduction in the movement on current assets (excluding cash items and marketable securities) and current liabilities of $691,000 in the year ended December 31, 2006 (compared to $1,284,0000 in Fiscal 2005) – primarily due to the initial adoptionpayment of SFAS No 142 is recorded ascommissions to Asia IT Capital

Investments Limited (a related party) and the timing of payments in the year ended December 31, 2006;

e.     $nil impact of the losses of the Lifesyne (discontinued) business activities in the year ended December 31, 2006 versus a charge$1,478,000 loss from Lifesyne activities in the year ended December 31, 2005.

Net cash used in investing activities of $1,255,000 in the year ended December 31, 2006 (compared to current period earnings.$3,388,000 for the year ended December 31, 2005), which consisted primarily of:

a.     a $4,000,000 decrease in cash held for common stock subscribed but unissued;

b.     a cash outflow of $4,533,000 for the purchase of available for sale marketable securities in the year ended December 31, 2006;

c.     a cash outflow of $722,000 in the year ended December 31, 2006 from the purchase of fixed assets. In the year ended December 31, 2005 we had a net $169,000 cash inflow from the sale of fixed assets;

Net cash flows from financing activities were $27,586,000 for the year ended December 31, 2006 (compared to $15,346,000 December 31, 2005), consisting mainly of:

a.     $27,604,000 net proceeds from the sale of our common stock in MGT Capital Investments Inc (formerly Medicsight Inc), Medicsight PLC and Medicexchange PLC – being $31,204,000 of total new money received in the year ended December 31, 2006 - less the $3,600,000 net movement of monies received for common stock subscribed but unissued.  For the year ended December 31, 2005 we received $12,035,000 net new money plus $3,600,000 of monies received from common stock subscribed but unissued at December 31, 2005.

b.     A reduction in our principal payments under our capital lease obligations – in the year ended December 31, 2006 we paid $18,000 compared to $289,000 paid in the year ended December 31, 2005.

In connection with the adoptionnine months ended December 31, 2006 we had $nil cash flows from the discontinued Lifesyne activities. In the nine months ended December 31, 2005 we had cash outflows of SFAS No. 142,$1,122,000 from Lifesyne activities.

Additional capital funding requirements

To date we performedhave primarily financed our initial impairment analysisoperations through private placements of goodwill and indefinite-lived intangible assets asequity securities. At December 31, 2006 we had issued 38,900,383 of January 1, 2002. The implementation involvedour 40,000,000 authorized share capital.  We have also raised finance through the determinationsale of the fair valuecommon stock of each reporting unit, where a reporting unitour principal subsidiaries – Medicsight PLC and Medicexchange PLC.

In addition to the above, we still have the two lines of credit facilities (together totaling $38 million) available from Asia IT Capital Investments Limited (a related party).  We do not anticipate having to use any part of these credit lines.

Risks and Uncertainties Related to Our Future Capital Requirements

To the extent that additional capital is defined as an operating segmentraised through the sale of equity or one level below. We continueequity-related securities of the Company or its subsidiaries, the issuance of such securities could result in dilution to perform an impairment analysis at least annually.the Company’s stockholders.

We determinedNo assurance can be given, however, that we will have access to the fair value of each significant reporting unit based on discounted forecasts of future cash flows. Judgments and assumptions are requiredcapital markets in the preparationfuture, or that financing will be available on acceptable terms to satisfy the Company’s cash requirements to implement its business strategies.

If we are unable to access the capital markets or obtain acceptable financing, our results of the estimated future cash flows, including long-term forecastsoperations and financial conditions could be materially and adversely affected.  We may be required to raise substantial additional funds through other means.

Our technology has not yet been fully commercialized and we have not begun to receive any significant revenues from commercial operations.  We cannot assure our stockholders that our technology and products will be commercialized successfully, or that if so commercialized, that revenues will be sufficient to fund our operations.

If adequate funds are not available to us, we may be required to curtail operations significantly or to obtain funds through entering into arrangements with collaborative partners or others that may require us to relinquish rights to certain of revenue growth, gross margins and capital expenditures.

our technologies or products that we would not otherwise relinquish.

Recent Accounting Pronouncements.

In May 2005,June 2006, the FinancialFASB issued FIN No. 48, Accounting Standards Board (“FASB”) issued SFAS 154, “Accounting Changes and Error Corrections, a replacementfor Uncertainty in Income Taxes-an interpretation of APB Opinion No. 20 and FASB Statement No. 3”.The standard requires retrospective application to prior periods’109 (“FIN 48”) which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement criteria for the financial statement recognition and measurement of a voluntarytax position taken or expected to be taken in a tax return. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition and defines the criteria that must be met for the benefits of a tax position to be recognized. The cumulative effect of the change in accounting principle unless it is deemed impracticable.must be recorded as an adjustment to opening retained earnings. The standard states that a change in methodCompany has completed its initial evaluation of depreciation, amortization or depletion for long-lived, non-financial assets be accounted for as a change in accounting estimate that is affected by a change in accounting principle.  The standard is effective for accounting changes and correctionsthe impact of errors made occurring in fiscal years beginning after December 15, 2005.  Thethe January 1, 2007 adoption of SFASFIN No. 15448 and determined that such adoption is not expected to have a material impact on its financial statements.

In September 2006, the Company’sFASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 applies to other accounting standards that require or permit fair value measurements. Accordingly, it does not require any new fair value measurement. SFAS No. 157 will be effective for the Company on January 1, 2008. The Company is currently evaluating the impact the adoption of SFAS No. 157 will have on its financial position orand results of operations.

In December 2004,February 2007, the FASB issued SFAS 153,”Exchanges of Non-monetaryNo. 159, “The Fair Value Option for Financial Assets an amendment of APB Opinion No.29”. The standard is based on the principleand Financial Liabilities” (“SFAS No. 159”), which permits entities to choose to measure many financial instruments and certain other items at fair value that exchanges of non-monetary assets shouldare not currently required to be measured based on theat fair value of the assets exchanged and eliminates the exception under APB Opinionvalue. SFAS No. 29 for an exchange of similar productive assets and replaces it with an exception for exchanges of non-monetary assets that do not have commercial substance. The standard is159 will be effective for non-monetary exchanges occurring in fiscal periods beginning after June 15, 2005.the Company on January 1, 2008. The Company cannot determineis currently evaluating the impact the adoption of SFAS 153 atNo.159 will have on its financial position and results of operations.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin “SAB” 108 regarding the process of quantifying financial statement misstatements. The provisions of this time.

In December 2004, the FASB issued SFAS 123 (revised 2004),”Share-Based Payment”. The standard eliminates the disclosure-only election under the prior SFAS 123 and requires the recognition of compensation expense for stock options and other forms of equity compensation based on the fair value of the instruments on the date of grantstatement will be expensed over the period service is received. We intend to adopt this Statement using the modified prospective method as of January 1, 2006. The Company estimates that the charge to the Statement of Operationseffective for the year toended December 31, 2006. The impact on the financial statements for 2006 will be approximately $500,000.is immaterial.

ITEM 7A             QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Interest Rate Risk

The Company’sOur exposure to market rate risk associated withfor changes in interest rates relates primarily to itsour investment portfolio. We place our investments in a mixture of (a) cash deposits on either overnight or 30 day rates; (b) highly liquid blue chip available-for-sale market securities. A decline in interest rate would have an advserse impact on interest income.

We do not have any debt obligations. and we do not use derivative financial instruments.

The Company has the following debt facilities all repayable on demand:

Since the Company has not drawn down funds under either facility, a hypothetical 100 basis point increase in interest rates would not increase the Company’s interest costs, assuming no draw downs are made.

Foreign Exchange Risk

Themade which the Company does not hold significant cash balances in British Pounds so any adverse movements inanticipate having to use.

Foreign Currency Risk

We are exposed to foreign currency exchange rate fluctuations related to the exchange rates are considered immaterial.

As the Company’soperation of our international subsidiaries.  Our main operating currency is UK sterling (£).  We also have subsidiary operations in Japan and its financial statementsChina who operate in their local currencies.

At the end of each reporting period, expenses of the subsidiaries are reportedconverted into U.S. dollars using the average currency rate in US Dollars,effect for the Company’speriod and assets and liabilities are converted into U.S. dollars using either historical rates or the exchange rate in effect at the end of the period.

Additionally, we are exposed to foreign currency exchange rate fluctuations relating to payments we make to vendors and itssuppliers using foreign currencies.

We currently do not hedge against this foreign currency risk.

Fluctuations in exchange rates may impact our financial condition and results of operations are affected by movements in the $: £ exchange rate.operations.

The information required by this Item is included on pages F-1 to F-20F-26 of this Annual Report.

None.

Evaluation of Disclosure Controls and Procedures.Procedures

As required by Rule 13a-15(b)13a–15(b) under the Exchange Act, our management carried out an evaluation of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” as of December 31, 2005.2006. This evaluation was carried out under the supervision and with the participation of our management, including our Company’s Chief Executive Officer and Chief Financial Officer. As defined in Rules 13a-15(e)13a–15(e) and 15d-15(e)15d–15(e) under the Exchange Act, disclosure controls and procedures are controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure.

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Based upon that evaluation, the Company’s Chief Executive Officer and Chief Accounting Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2005.2006. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Changes in Internal Control Over Financial Reporting.Reporting

As required by Rule 13a-15(d)13a–15(d) under the Exchange Act, our management, including our Chief Executive Officer and Chief AccountingFinancial Officer, also conducted an evaluation of our internal control over financial reporting to determine whether any change occurred during the quarter ended December 31, 20052006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation during the quarter ended December 31, 20052006 there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

None.

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The following table sets forth the current officers and directors of MGT Capital Investments, Inc (formerly Medicsight, Inc:

Inc):

Directors are elected in accordance with the Company’s by-laws to serve until the next annual stockholders meeting and until their successors are elected in their stead. The Company does not currently pay compensation to directors for services in that capacity. Officers are appointed by the Board of Directors and hold office until their successors are chosen and qualified, until their death or until they resign or have been removed from office. All corporate officers serve at the discretion of the Board of Directors. There are no family relationships between any director or executive officer and any other director or executive officer of the Company.

Stephen Forsyth joined the Company in December 2003 as Chairman and Chief Executive Officer. He stood down as CEOChief Executive Officer in September 2004. Previously he was Chairman and Chief Executive of Leisure Investments PLC, a publicly quoted company registered in England and Wales between 1976 and 1989. He subsequently assisted the Phoenix Trust Company Limited between 1990 and 1999 with its various operations and investments. In January 1999, he established The International Cotton Company, in which he has been the principal financier of a number of new technology orientated companies from their inception, including Accsys Technologies PLC, Titan Wood Limited and Medicsight PLC.  The International Cotton Company changed its name to International Capital Corporation PLC in 2003. Stephen remains the Chairman of this investment holding company.  Stephen is a founding Trustee of the Medicsight Foundation (renamed “The Foundation for the Early Detection of Disease”), a United Kingdom registered charity, which is concerned with the relief of human suffering and poverty and the promotion of health and education.

Tim Paterson-Brown joined the Company in December 2003 as Director and was appointed Chief Executive Officer in September 2004. Tim qualified as a Chartered Surveyor with Strutt and Parker in 1984 following degrees at London University and Magdalene College, Cambridge. In 1987 Tim joined Leisure Investments PLC.  He subsequently worked closely with Stephen Forsyth for the Phoenix Trust Company Limited between 1990 and 1999 assisting with its various operations and investments. In 1999, he joined The International Cotton Company as a Director. The International Cotton Company has been the principal financier of a number of new technology orientated companies from their inception, including Accsys Technologies PLC (of which Tim is a non-executive Director), Titan Wood Limited and Medicsight PLC.  The International Cotton Company changed its name to International Capital Corporation PLC in 2003. Tim is also a founding Trustee of the Medicsight Foundation (renamed “The Foundation for the Early Detection of Disease”), a United Kingdom registered charity, which is concerned with the relief of human suffering and poverty and the promotion of health and education.

Paul GothardAllan Rowley has served joined the Company in April 2006 as Finance Director of both Medicsight plc and Medicexchange.com and was appointed Chief Financial Officer in August 2006.  Prior to joining, Allan served in a corporate development role at ComMedica Limited, a United Kingdom based medical software company specializing in Picture Archiving & Communication System (“PACS”) software. In this role he worked on financing and acquisition opportunities and on commercial proposals with the sales and finance group. Before joining ComMedica, Allan was revenue controller and a Directordirector of European Finance at Bea Systems, a NASDAQ-listed

US-based software company.  Allan has several years of experience in public accounting in the Company since November 2002.United Kingdom and United States with Arthur Andersen and Ernst & Young, respectively. He obtainedis a BA (Hons) degree in 1989 and subsequently became a Membermember of the Institute of Chartered Accountants in 1993. He initially joined the Company in July 2001 as Group Financial Controller. His responsibilities have included corporate structuringEngland and fundraising as well as corporate managementWales and governanceholds a Master of Philosophy and managing the listinga Bachelor of the Company’s common stock on the American Stock Exchange. Prior to joining the Company Paul was the Group Financial ControllerScience degree from Aberystwyth University College of IP Powerhouse Ltd, a company involved in

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constructing and leasing of space in data centers across Europe. From May 1994 to October 1998, Paul served as the Finance Director of Merriman White solicitors.

David Mason co-founded in 1994 SpeedServe Inc, an on-line vendor of books, videos, DVDs and Video Game hardware and software.  Following SpeedServe Inc.’s merger with Buy.com, Inc in 1998, David served as  chief executive officer of Buy.com Europe, a joint venture between Buy.com, Softbank and Vivendi and developed and launched its French and German businesses.

Wales

Neal Wyman trained as a Chartered Accountant with Coopers and Lybrand before moving to KPMG where he worked in the Far East. He moved into the recruitment industry in London specializing in financial services, gaining experience with a diverse range of clients. He entered executive search in 1981, initially specializing in the financial services industry before broadening into general appointments and professional services. He now focuses on general management, finance and non-executive appointments in both private and quoted companies, with particular focus on venture capital. He is a graduate of the London School of Economics. Neal was appointed an independent director of the Company on November 23, 2004 and subsequently was appointed as Chairmana member of the Audit Committee onin November 26, 2004.

L. Peter Fielding, M.D. is an experienced physician who provides consulting services to healthcare and academic organizations, in addition to his departmental and institutional responsibilities at WellSpan Surgical Associates. His clients in the past five years have included, in the U.S.A. National Cancer Institute; American Joint Committee on Cancer; Taiko Post University – Connecticut; Purely Cotton Inc. – Seattle; Musculoskeletal Systems Inc. - Pittsburgh; University of Connecticut Medical School. , and, in the U.K.: Imperial College for Science, Technology and Medicine and the Association of Surgeons in the United Kingdom and Ireland.  Dr Fielding specializes in healthcare strategic planning, organizational structure and operational issues. He has participated in the organization and development of the Pain Relief Center; Hyperbaric Medicine and Advanced Wound Care Center; Clinical Weight Reduction Center; York Hospital Human Motion Institute and the Molecular Biology Research Laboratory.

Peter was appointed an independent director of the Company and a member of the Audit Committee in July 2005.

Peter Venton, OBE has over 30 years’ experience in the computing and telecommunications industry and holds several patents in the sector. He is a former Chief Executive of Plessey Radar and of GEC-Marconi Prime Contracts. Peter currently serves as the Technical Audit Chairman for the Defence Evaluation & Research Agency and joined the Board of MS- PLC as an independent director in November 2001. Peter was appointed an independent director of the Company on November 23, 2004 and subsequently was appointed asa member of the Audit Committee onin November 26, 2004.

Sir Christopher Paine was the President of the British Medical Association until 2001. He is currently the chairman of the Medical Advisory Board of the International Hospitals Group, chairman of Royal Society of Medicine Support Services Ltd and a trustee of the London Clinic.  He was Medical Director of the Advisory Committee on Distinction Awards for the National Health Service until the end of 1999 and has been President of the Royal College of Radiologists and The Royal Society of Medicine. Sir Christopher is a Medical Oncologist. He was a consultant clinical oncologist from 1970 at the Churchill Hospital in Oxford.  He also served as director of clinical studies at the medical school. He was district general manager of the Oxford Health Authority from 1984-88. In addition, he has served on the Animal Welfare Council and Imperial Cancer Research Fund. Sir Christopher was appointed an independent director of the Company onin November 23, 2004 and subsequently was appointed as member of the Audit Committee on November 26, 2004.

Dr Allan Miller qualified in medicine at St Bartholomew’s Hospital Medical School, London in 1961. In 1965 Dr MillerAllan was admitted to the Royal College of Physicians. After spending eight years in general practice he joined, Hoffman La Roche where he held the positions of Head of Clinical Cardiovascular Research Worldwide, Head of Dermatological Research Worldwide and Head of Clinical Research UK. Dr MillerAllan spent 14 years as Medical Director for Napp Pharmaceuticals Ltd and four years as European Medical Research Director of the Purdue Pharma, Mundipharma, Napp group based in Cambridge, England. Dr MillerAllan is a Member of the British Medical Association and a Fellow of the Royal Society of Medicine.

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Significant Employees

Significant employees of MS-PLC are:

Adam Boyse Allan was appointed Chief Operating Officer in June 2005. Adam has been with Medicsight since May 2005 and has nearly 15 years experience in the software development sector. With diverse experience covering markets such as automotive, telecommunications and pharmaceuticals, Adam has the strategic and operational experience to bring software products into commercial reality. Prior to Medicsight, Adam served as Vice President of Software Development for IDBS, a market-leading life sciences software company, where he oversaw the growthan independent director of the development group and steered the company to ISO 9001 and TickIT certification. Adam has also been a part time lecturer at Birmingham University and presented at a number of computing conferences. Adam has a First Class BSc(Hons), Computer Science from Coventry University, United Kingdom.

Jonah Aburrow-Jones was appointed Vice President of Commercial DevelopmentCompany in July 2005. Jonah has more than 12 years of product management and sales experience, most recently serving as the senior product line manager for the Voxar Product Group of Barco. Prior to Barco, Jonah was the international product manager for E-Z-EM, Inc, an international manufacturer of contrast agents for gastrointestinal radiology. He has extensive industry and clinical experience and experience in developing and managing sales, marketing and product development teams.December 2002.

Dr John Costellohas been a Consultant Physician in general and respiratory medicine at King’s College Hospital since 1977 and senior lecturer in Medicine at Guy’s Kings and St Thomas’s School of Medicine. Between 1982 and 1998 he was Director of the academic department of respiratory medicine. He specializes in bronchial asthma and its treatment and has authored many books and articles in the area.. He studied at University College, Dublin and has since held appointments at a number of hospitals in the United Kingdom and the United States. He has been Founder President of the Respiratory Medicine Section at the Royal Society of Medicine and a member of Council at the British Thoracic Society. He was the first Medical Director at Kings and served as its Clinical Director of Medicine.In February 2002 he was appointed as Director of Medical Science at MS-PLC, with responsibility for developing innovative technology for radiological population pre-emptive scanning for early detection of cancer and coronary heart disease.

Dr Jamshid Dehmeshki was appointed Chief Scientific Officer in July 2001. He holds a PhD from Nottingham University and an MSc in Applied Mathematics and Computer Science. The main subject of his PhD was a stochastic model-based approach to image processing. He has written widely on the recognition, classification and segmentation of textured images into different regions based on their statistical characteristics. Dr Dehmeshki worked as a research fellow in the Centre for Industrial and Medical Information (“CIMI”) for two years where he developed ‘image processing’ algorithms for various medical and industrial applications, such as MRI and CT scan.. From March 1999 to July 2001, he worked as a senior research fellow in the NMR Research Unit at the Institute of Neurology, National Hospital for Neurology and Neurosurgery, University College London.

Section 16(a) Beneficial Ownership Reporting Compliance

Under the securities laws of the United States, the Company’s directors, its executive officers, and any persons holding more than ten percent of the Company’s common stock are required to report their initial ownership of the

Company’s common stock and any subsequent changes in that ownership to the Securities and Exchange Commission (the “Commission”). Specific due dates for these reports have been established and the Company is required to disclose any failure to file by these dates. The Company can report that there were no delinquent filings to report in Fiscal 2005.

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