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Letter to Shareholders

Dear Fellow Shareholders,

 For twenty-seven years, we have created, nurtured and grown technology-related companies.  Almost fifteen years ago, our 1986 Annual Report used the acorn and oak tree analogy to visualize the business strategy that has continued to guide us for many years. A review of our year 2000 activities will show how we continue to plant the seeds of new business opportunities, to nurture and guide them through early growth, and ultimately to reap the harvest of our efforts.

 Despite the volatility of the financial markets in 2000 and the significant decline in valuation of many technology businesses, several transactions yielded rewards from seeds planted in prior years:

·         We sold most of our interest in affiliate company, Risk Laboratories, for $8.8 million cash and a gain of $8.6 million.  Prior to the sale, we had been the largest shareholder in Risk, with over 30 percent ownership since 1997.

·         Two of our early companies, VerticalOne and 2Order.com, were acquired by public companies and we realized aggregate gains of $1.0 million on sales of their public securities during 2000.  We no longer own an interest in either company.

·         Atherogenics, an Atlanta-based emerging pharmaceutical company, completed its initial public offering.  We were part of the original investor group of Georgia-based institutions that supported Atherogenics, a company founded to commercialize certain inventions by researchers at Emory University.  We continue to own 246,506 shares of common stock of Atherogenics that we believe will grow in value as the company demonstrates the strength of its novel drugs for treatment of inflammatory diseases.

We shared part of the yield on these early investments with shareholders through a $0.52 per share special cash dividend in April 2000.  We also planted the seeds for future harvests by partnering with emerging companies that we believe can grow into promising, viable businesses.  As we have in the past, we look for companies with a strong technology base that are addressing a defined business need and that can support a realistic revenue and profit model.  Among our new partner companies are the following:

·         MediZeus is in Beta-test with its web-based artificial intelligence tool that enables radiologists to improve the accuracy of mammography exams.  Except for the founding team, which includes the Chair for Engineering Entrepreneurship at Georgia Tech, we are the largest shareholder in MediZeus and are actively helping the company execute its strategic and operational plans.

·         RF Solutions and Ardext Technologies, both early stage companies commercializing proprietary technologies developed at Georgia Tech, are part of the State of Georgia’s Yamacraw initiative in the wireless communications industry.

·         We are a small investor in NuTec Sciences, the first company in EmTech, the biotech incubator sponsored by Emory University and Georgia Tech.  NuTec, with the world’s most powerful supercomputer in commercial use, uses proprietary software to analyze complex data for the energy industries and the emerging bioinformatics industry.

Our role in nurturing and shaping early stage companies is tailored to the maturity and needs of each company.  We leverage our experience and contacts as we help develop strategic and operational plans and round out the management team.  In some cases we provide on-site advisory and infrastructure support at our technology incubator facility.

During 2000, both QS Technologies and ChemFree, our established consolidated subsidiaries, operated on a cash positive basis with moderate revenue growth.  In the fourth quarter of 2000, our PsyCare America subsidiary sold its principal operating assets (mainly contracts and intellectual property) rather than risk future losses in a very negative environment for delivering hospital-based mental health treatment programs.  One of our significant affiliate companies, VISaer, Inc., sold off its former Visibility product line to concentrate on more promising opportunities in maintenance, repair and overhaul (MRO) software and services for the aerospace industry.  We expect to continue to play an important role in building the VISaer business. 

As I write this letter in March 2001, we have announced an important transaction involving the pending sale of our interest in PaySys International, an affiliate company, to First Data Corporation.  We expect that the sale, slated to close no later than April 30, 2001 subject to satisfaction of various closing conditions, will yield cash proceeds to us of between $17.0 million and $19.0 million.  At the same time, PaySys will pay us $3.5 million plus interest related to short-term bridge loans.  We may receive additional cash proceeds based on amounts held in escrow for post-closing claims that may arise.  As part of the sale, we will also acquire a 32 percent interest in two development stage companies, Delos Payment Systems, Inc. and dbbAPPS, Inc., both spin-offs from PaySys, that will develop and market application software based on the proprietary software architecture that has been developed by PaySys over the past several years.

In 2000, we planted and nurtured a number of new opportunities.  We continued to prune and cultivate our more established companies. And we realized the fruits of seeds planted in earlier years.  We recognize that some of the seeds we plant may fall on rocky ground or succumb to harsh conditions.  We intend to be cautious as we evaluate new opportunities in the current business environment and believe our results represent solid validation of our long-term strategy.  With increased capital and generally lower valuations for technology businesses, we will have new opportunities to partner with emerging technology companies and to leverage our experience and resources to help them grow.

                         J. Leland Strange

          Chairman of the Board and President