Equity Research DAILY COMMENT

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1 See back page for analyst certification and disclosures Equity Research DAILY COMMENT NIGHTINGALE INFORMATIX CORP. NGH-V, $.13 September 18, 214 Rating: STRONG BUY Target Price: $.65 Market Capitalization: $12.3M Risk Profile: SPECULATIVE COMPANY PROFILE Nightingale is a healthcare technology company that provides cloud-based electronic medical records (EMR) products and services to physicians and nurse practitioners at primary care practices, multi-physician outpatient clinics and hospitals, as well as government and regional health organizations. Coupled with integrated practice management and transcription, Nightingale's comprehensive service offering allows customers to enhance patient care, increase revenue opportunities, and optimize operations. PRICE CHART Source: BigCharts.com REVISIONS Rating/Target Revised Prior Rating Unchanged Strong Buy Target Unchanged $.65 Revenue (F15E) Unchanged $16.41 EBITDA (F15E) Unchanged $2.89 EPS (F15E) Unchanged $. FINANCIAL SUMMARY Last Price $.13 Price Target $.65, (+4.%) Div/ Yield $./.% 52-week Range $.12 - $.3 S/O Basic (M) 94.8 S/O FD (M) 16.5 Market Float (%) 57.5% Market Cap (M) $12.3 Net Debt (in $M) $8.4 Enterprise Value ($M) $2.8 Avg. Weekly Vol. (M).9 Fiscal YE 31-Mar TECHNOLOGY HEALTHCARE IT Ralph Garcea, P.Eng, MBA Analyst [email protected] Chris Thompson, CFA, P.Eng, MBA Associate [email protected] AGM REPORT NEXIA TO DRIVE REVENUE GROWTH EVENTS We attended NGH s annual general meeting (AGM) in Toronto and came away feeling confident in its business outlook, transition from the traditional licence/maintenance revenue model to a SaaS revenue model, and focus on its next generation product NightingaleEHR (Nexia ). IMPLICATIONS Positive. NGH believes it s at the tail-end of its transition phase from the traditional licence/maintenance revenue model to a SaaS revenue model. With the launch of Nexia in July, we expect the Company s user base and revenue to increase since many customers are on standby mode waiting for the commercial launch. NGH continues to believe that there is a significant long-term opportunity in the US market. NGH continues to reduce expenses in order to align expenses with the level of recurring revenue. With the commercial launch of Nexia, we expect the Company s R&D expenses to be lower as it shifts resources into Sales and Marketing. CATALYSTS The upcoming catalysts for NGH include the opportunity to leverage the new product to win new enterprise contracts as well as target small and medium-sized clinics. In the long term, there is an opportunity to capture a share of the current market from existing EMR providers given the consolidation in the Canadian EMR sector, enter the big data market, and continue to grow from strategic/accretive tuck-in acquisitions. VALUATION NGH is currently trading at a F216E EV/Sales of 1.1x and EV/EBITDA of 4.1x versus industry comparables at 2.7x and 13.2x, respectively on a C215E basis. Thesis: Nightingale, with its new platform, NightingaleEHR, has the opportunity to win new enterprise clients and expand its footprint in the small and medium-sized clinics market. Nightingale also has opportunities for accretive inorganic growth in the fragmented and growing healthcare IT market in both the US and Canada. Forecasts F212 F213 F214 F215E F216E Revenue ($M) $18.8 $2.92 $15.3 $16.41 $19.35 Adj. EBITDA ($M) $1.28 $3.73 $.93 $2.89 $5.1 EPS (FD) ($.2) $.2 ($.4) $. $.2 EPS (basic) ($.2) $.3 ($.4) $. $.2 CFPS $.3 ($.2) $.1 $.4 $.4 P/E NM 6.1x NM 31.4x 6.1x EV/ Sales 1.1x 1.x 1.4x 1.3x 1.1x EV/EBITDA 16.3x 5.6x 22.4x 7.2x 4.1x All figures in C$ unless otherwise noted.

2 AGM REPORT NEXIA TO DRIVE REVENUE GROWTH AGM UPDATE On September 17, 214, we attended NGH s AGM in Toronto and came away feeling confident in its business outlook and transition from initial fixed cost licence and perpetual maintenance revenue model to a SaaS revenue model. The Company provided an overview of its current products, Nightingale on Demand (NOD) and practice management solution (PMS), and its next generation product Nexia. NGH s management also provided an overview of F214 s accomplishments and an outlook for F215. In F214, NGH s primary focus was on: 1) Rollout of the Association of Ontario Health Centres (AOHC) Contract, 2) Launch of Nexia, and 3) Aligning Expenses to Recurring Revenue. ROLLOUT OF THE AOHC CONTRACT In December 211, NGH signed a 1-year agreement with the AOHC to provide a provincial license for NOD and its PMS. At the time of signing, NGH expected to realize $9M in revenue over the first three years and $17M over life-of-contract. In 212, NGH signed an additional $2M contract with AOHC for associated professional services and data migration services. The original contract covered 3,5 practitioners in 82 centres comprising 1 locations, which has grown to now include 5, practitioners in 135 locations. As of August 214, 73 sites have been rolled out generating recurring revenue of $1.2M. The current plan has the remaining nine sites implemented by March 31, 215, which should positively impact recurring revenue. LAUNCH OF NEXIA On July 17, 214, NGH officially launched Nexia and rolled out the solution in Ontario and the US in August, with plans to implement in the other Canadian provinces by year-end. With the launch of Nexia, we expect the Company s user base and revenue to increase since many customers are on standby mode waiting for the commercial launch. Nexia was initially piloted with three customers in the US and now is also deployed at one large US customer in New York state and several smaller clients. Advantages of Nexia include its multilingual capabilities, both in English and French, with a Spanish version to follow, and the SaaS platform that enables the Company to readily scale up and down as demand changes. In the US, Nexia is already certified for Meaningful Use Stage 1 (MU1) and has completed two waves of Meaningful Use Stage 2 (MU2) with the last two waves scheduled to begin in October 214. The Company s focus in the US will be on generating revenue from new clients as it grows its US customer base. In the previous quarter, NGH reported that it generated 39% of its revenue from the US, up from 38% of its revenue in the previous quarter. NGH continues to believe that there is a significant longterm opportunity in the US market. In Canada, the transition of current NOD customers to Nexia will be a lengthy process and could take more than two years. The Company is also actively working on certification in Ontario incorporating pilot sites and the latest release of the software is scheduled for September 26,

3 ALIGNING EXPENSES TO RECURRING REVENUE NGH believes it s at the tail-end of its transition phase from an initial fixed cost licence and perpetual maintenance revenue model to a SaaS revenue model, where it will generate revenue from its users on a monthly subscription basis. In the previous quarter, revenue was flat y/y and negatively impacted by the decrease in non-recurring revenue that was only partially offset by an increase in recurring revenue. NGH management continues to reduce expenses in order to align expenses with the level of recurring revenue. In the previous quarter, operating expenses decreased 26% y/y to $2.9M from $3.2M; in F214, operating expenses decreased 19% y/y or $2.9M. NGH s R&D expense had tripled in the last two years as it focused on the development of Nexia but the Company expects that by FQ315 R&D expense will be back to more normal levels. With the commercial launch of Nexia, we expect the Company s R&D expenses to be lower as it shifts resources into Sales and Marketing. ORGANIC AND INORGANIC GROWTH NGH believes there is a large market of ~538K Primary Care and Non-Primary care providers in the US and Canada that are potential customers. Sales will be driven by NGH s dedicated sales team targeting enterprise customers as well as targeted sales tactics and website self-serve for the SMB market. In North America, legacy products are prevalent and we believe Nexia provides a platform to drive a roll-up strategy. There are several hundred vendors in the US with revenue of less than $3M that could be potential takeover candidates. In addition, companies with complementary solutions such as home monitoring or those providing clearinghouse capabilities could also be takeover targets. To capitalize on potential M&A opportunities, we believe the Company might require additional capital. FISCAL 215 GUIDANCE Our F215 estimates are for revenue of $16.4M, adj. EBITDA of $2.89M, and EPS of $.. In FQ215, we estimate revenue of $3.95M, adj. EBITDA of $.68M, and adj. EPS of $.. RATING AND TARGET We reiterate our Strong Buy rating and maintain our $.65 target price. EXHIBIT 1 F215 QUARTERLY ESTIMATES AND ACTUALS Jun Sep Dec Mar Mar Forecasts FQ115 FQ215E FQ315E FQ415E F215E Revenue ($M) $3.69 $3.95 $4.25 $4.52 $16.41 Adj. EBITDA ($M) $.33 $.68 $.93 $.94 $2.89 EPS (FD) ($.) $. $. $. $. EPS (basic) ($.) $. $. $. $. CFPS $.1 $. $.2 $. $.4 Source: Company reports; GMCI Estimates 3

4 EXHIBIT 2 REVENUE AND ADJ. EBITDA MARGIN Revenue ($, ') 6, 5, 4, 3, 2, 1, Revenue Adj. EBITDA Margin FQ112 FQ212 FQ312 FQ412 FQ113 FQ213 FQ313 FQ413 FQ114 FQ214 FQ314 FQ414 FQ115 FQ215E FQ315E FQ415E 5% 45% 4% 35% 3% 25% 2% 15% 1% 5% % EBITDA Margin (%) Source: Company reports EXHIBIT 3 RECURRING AND NON-RECURRING REVENUE 6, Non-Recurring Revenue Recurring Revenue 5, Revenue $M 4, 3, 2, 1, FQ11 FQ21 FQ31 FQ41 FQ111 FQ211 FQ311 FQ411 FQ112 FQ212 FQ312 FQ412 FQ113 FQ213 FQ313 FQ413 FQ114 FQ214 FQ314 FQ414 FQ115 Source: Company reports; GMCI Estimates EXHIBIT 4 CASH AND CASH FLOW Cash & Equiv ($,') ) 4, 3,5 3, 2,5 2, 1,5 1, 5 Cash & Equiv CFOPS $.3 $.2 $.1 $. -$.1 CFOPS ($) FQ112 FQ212 FQ312 FQ412 FQ113 FQ213 FQ313 FQ413 FQ114 FQ214 FQ314 FQ414 FQ115 FQ215E FQ315E FQ415E -$.2 Source: Company reports 4

5 EXHIBIT 5 R&D COSTS AND CAPITALIZED COSTS R&D costs ($, ') 1,6 1,4 1,2 1, R&D Costs Capitalized Development Costs FQ111 FQ211 FQ311 FQ411 FQ112 FQ212 FQ312 FQ412 FQ113 FQ213 FQ313 FQ413 FQ114 FQ214 FQ314 FQ414 FQ115 1,6 1,4 1,2 1, Capitalized R&D (in $, ') Source: Company reports, GMCI estimates EXHIBIT 6 CONSOLIDATED DEBT STRUCTURE Description Lender Amount Interest Rate Terms Operating Line Comerica 1,, Prime % Interest payable monthly Term Loan 1 - USD Comerica 1,24, Prime % Principal & Interest payable monthly, maturity Dec 215 Term Loan 2 - USD Comerica 1,52, Prime % Principal & Interest payable monthly, maturity Mar 216 Series C Convertible Debentures Various 5,, 1% Interest payable monthly, due Mar 14, 216 Term Loan Beedie Capital 3,5, 12% Interest payable monthly, due December 216 Total Debt 11,792, Source: Company reports, GMCI estimates EXHIBIT 7 TOP 2 US EMR VENDORS (HAVE 8% OF THE MARKET) # Company EHR System Name Annual Company Revenue 1 Cerner Corporation Cerner Pow erchart Ambulatory EHR $2.67 billion* 2 Epic Systems Corporation EpicCare Ambulatory - Core EMR $1.5 billion* 3 Allscripts Allscripts Professional EHR" $1.45 billion 4 NextGen Healthcare Information Systems Inc* NextGen Ambulatory EHR $429.8 million 5 athenahealth athenaclinicals $422.3 million 6 GE Healthcare Centricity $293. million* 7 eclinicalworks* eclinicalworks $259. million 8 McKesson iknow Med EHR, Horizon Ambulatory, Paragon $25. million* 9 Abraxas Medical Solutions (Merge Healthcare) iconnect Netw ork $248.9 million* 1 Vitera Healthcare Solutions Vitera Intergy, Vitera Stat, Vitera Medical Manager N/A 11 Computers Programs and Systems Inc. (CPSI) CPSI System $183.3 million* 12 Practice Fusion Practice Fusion 134. million 13 Greenw ay Medical Technologies Greenw ay PrimeSUITE $124. million 14 Platinum Systems Specialists, Inc. PlatinumEMR $1. million 15 Optum (Picis Inc) Optum Physician EMR Suite $78.5 million* 16 CompuGroup CGM Clinical, CGM Enterprise EHR, CGM w ebehr $5. million 17 T-System Inc T-System $46.2 million* 18 Meditab Softw are, Inc Intelligent Medical Softw are (IMS) Clinical $45.6 million* 19 CureMD CureMD All-in-One EMR $39.6 million* 2 Aprima Medical Softw are also Aprima PRM (PM+EHR), Aprima EHR (standalone), Aprima PM (standalone) N/A Source: 5

6 EXHIBIT 8 TOP CANADIAN EMR VENDORS (WHO WILL TELUS BUY NEXT?) Source: # of Verified Raters We note that Telus Health Solutions (T-T, Hold, TP $42) has acquired Med Access (3/3/14), MD Physician Services PS Suite EMR (2/26/13), Kinlogix Medical (1/1/12), Wolf Medical Systems (2/2/12), and Emergis (11/29/7). QHR Technologies (QHR-V, Not Rated) acquired Healthscreen Solutions software business in October 211. Most Recent Rating Vendor Name Product Name PS Suite EMR - TELUS Health PS Suite 152 3/1/214 Jonoke Software Development Inc JonokeMed 114 8/14/213 QHR Technologies QHR Technologies Accuro EMR 85 5/2/214 Nightingale Informatix Corporation Nightingale On Demand ASP 63 4/22/214 OSCAR EMR OSCAR 58 11/12/213 Applied Informatics For Health Society MOIS 53 6/26/214 ABELMed Inc. ABELMed EHR-EMR/PM 5 4/16/214 Healthscreen Solutions Inc. HSpractice 45 5/31/213 Wolf EMR - TELUS Health Wolf EMR by TELUS Physician Soluti 43 6/4/214 P & P Data Systems Inc P&P Clinic Information System 38 4/22/214 Canadian Health Systems Inc. CHS EMR Advantage 18 6/3/213 Osler Systems Inc. OSLER Practice Manager 17 1/22/214 Intrahealth Canada Ltd. Profile by Intrahealth 16 6/16/213 Med Access med access 15 11/15/213 Microquest Inc. Healthquest 11 1/9/213 YMS YMS EMR 1 4/2/214 AlphaGlobal it Inc. UHM (AlphaGlobal-iT) 6 5/2/214 KinLogix KinLogix Médecin 1 1/23/213 Purkinje Purkinje Dossier 1 7/5/213 Plexia Electronic Medical Systems Inc. PLEXIA EMR 1 8/23/213 Oscar Host Oscar Host - 5/7/212 YMS HERO CMS - 6/15/211 Telin Systems Ltd. mediplan (Telin) - 3/22/211 Dymaxion Research Ltd. Practimax Plus - 4/2/211 6

7 EXHIBIT 9 HEALTHCARE IT COMPARABLES Local Price Div. Mkt. Cap. Revenue (USD) P/E EV/Sales EV/EBITDA GLOBAL IT HEALTHCARE COMPS Ticker 17-Sep Target Yield (US$M) C14E C15E C14E C15E C14E C15E C14E C15E Nightingale Informatix Corp NGH-V Athenahealth Inc ATHN-US , NMF NMF Allscripts Healthcare Solutions Inc MDRX-US ,587 1,413 1, Quality Systems Inc QSII-US Emis Group Plc EMIS-LN % Computer Programs And Systems Inc CPSI-US % NMF Merge Healthcare Inc MRGE-US Qhr Corp QHR-V Medworxx Solutions Inc MWX-V N/A NMF NMF NMF NMF NMF NMF Source: Thomson One, Price Targets are consensus except for NGH-V Mean (excluding NGH) 29.5x 19.1x 3.x 2.7x 15.6x 13.2x Mean 32.6x 17.6x 2.8x 2.5x 14.6x 12.x Median 23.3x 17.4x 2.2x 2.x 11.4x 9.6x 7

8 RESEARCH DISCLOSURES Analyst Certification The Global Maxfin Capital Inc ( GMCI ) research analyst whose name appears on the front page of this research report hereby certifies that (i) the recommendations and opinions expressed in the research report accurately reflect the research analyst s personal views about the company and the securities that are the subject of this report and all other companies and securities mentioned in this report and (ii) no part of the research analyst s compensation was, is, or will be directly or indirectly, related to the specific recommendations or views expressed by the research analyst in this report. Analyst Ethics As a condition of employment, analysts are required to adhere to the Code of Ethics and Standards of Professional Conduct of The CFA Institute. Analyst Trading GMCI permits analysts to own and trade in the securities and/or derivatives of those companies under their research coverage, subject to the following restrictions. No trades can be executed in anticipation of the initiation of coverage or a change in recommendation, until 48 hours after the dissemination of such information to our clients. A transaction against an analyst s recommendation can only be executed for a reason unrelated to the outlook for the stock and with the prior approval of the Chief Compliance Officer. Conflicts of Interest The research analyst and/or associates who prepared this report are compensated based on the overall profitability of GMCI, which includes the overall profitability of investment banking and related services. In the normal course of its business, GMCI or its affiliates may provide financial advisory and/or investment banking services for the issuers mentioned in this report in return for remuneration and may seek to become engaged for these services from any of the issuers mentioned in this report. GMCI may buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. GMCI, and/or its respective officers, directors or employees may from time to time acquire, hold or sell the securities discussed herein or in related securities or in options, futures or other derivative instruments based thereon. Dissemination of Research GMCI uses its best efforts to disseminate its equity research to all clients on a timely and effective basis in electronic form, via fax, mail and through its website ( Please contact your GMCI representative for more information. Equity Research Rating System The rating system is based on the stock s expected absolute total return over the next 6 to 12 months. STRONG BUY is expected to produce a total return of 25% or more, BUY a total return of 1% to 25%, HOLD a total return of % to 1%, and SELL a negative total return. The risk rating is a summary measure of the authoring analyst's subjective assessment of the underlying fundamental risks of the issuer and the business environment in which it operates. In general, we regard large capitalization stocks with a consistent dividend history as being at the low end of the risk continuum and small capitalization early stage companies as speculative. Our rating system has four categories: LOW, MEDIUM, HIGH and SPECULATIVE. 8

9 General Disclosures NGH-V The opinions, estimates and projections contained in this report are those of GMCI as of the publication date of this report and are subject to change without notice. GMCI endeavours to ensure that its research reports are compiled or derived from sources that it believes are reliable and contain information and opinions that are accurate and complete. However, GMCI makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. This report is not to be construed as an offer or solicitation to buy or sell any security. Applicable Disclosures for Issuer (Nightingale Informatix Corp) (Yes / No ): NGH-V 1) As of the end of the month immediately preceding the date of issuance of this research report or the end of the second most recent month if the issue date is less than 1 calendar days after the end of the most recent month, GMCI and its affiliates collectively beneficially own 1% or more of any class of the issuer's equity securities. 2) The authoring analyst and/or an associate of the analyst are long/short in any of the issuer s securities directly or through derivative. 3) A GMCI partner, director or officer has provided services to the issuer for remuneration during the preceding 12 months other than investment advisory or trading services. 4) GMCI has provided investment banking services for the issuer during the 12 months preceding the date of issuance of the report. 5) List name(s) of any partner, director, officer, employee or agent of GMCI, who is also an officer, director or employee of the issuer. 6) The authoring analyst has visited the material operations of the issuer. 7) The authoring analyst received reimbursement for travel expenses. Distribution of Recommendations Strong Buy Buy Hold Sell Under Review Suspended The particulars contained herein were obtained from sources, which we believe to be reliable, but are not guaranteed by us and may be incomplete or inaccurate. The opinions expressed are based upon our analysis and interpretation of these particulars and are not to be construed as a solicitation or an offer to buy or sell the securities mentioned herein. GMCI may act as financial advisor, fiscal agent or underwriter for certain of the companies mentioned herein, and may receive remuneration for its services. GMCI and/or its principals, officers, directors, representatives, associates may have a position in the securities mentioned herein and may make purchases and/or sales of these securities from time to time in the open market or otherwise. This report may not be reproduced in whole or in part, or further distributed or published or referred to in any manner whatsoever nor may the information, opinions or conclusions contained herein be referred to without in each case the prior written consent of GMCI. 9

10 CORPORATE DIRECTORY Equity Research Ralph Garcea, P. Eng, MBA Managing Director, Head of Equity Research Tel: (647) D. Joseph Mackay, CA, CFA Senior Vice President, Equity Research Analyst Tel: (647) Chris Thompson, CFA, P. Eng, MBA Equity Research Associate Tel: (647) Institutional Sales & Trading Fabiene Evans, CPA, CA Managing Director, Head of Institutional Sales Tel: (416) Steve Duenkler, CFA Managing Director, Head of Institutional Trading Tel: (416) Peter Byrne Senior Vice President, Institutional Trading Tel: (647) Nick Savona Senior Vice President, Institutional Trading Tel: (416) Jonathan Samahin, CFA, CMT Senior Vice President, Institutional Sales and Trading Tel: (647) Investment Banking Dean McPherson, MBA, CFA Managing Director, Head of Investment Banking Tel: (647) Lily Tran Analyst, Investment Banking Tel: (647) Electronic Trading Steve Burns Vice President, Electronic Trading Tel: (647) Kent Learoyd Vice President, Electronic Trading Tel: (647) Jennifer Russell Syndication Tel: (647) Bay Street, Suite 8 Toronto, ON M5H 2S6 1