In re Medinex Systems, Inc.

Full title: IN RE MEDINEX SYSTEMS, INC., Chapter 11, Debtor

Court: United States Bankruptcy Court, D. Idaho

Date published: Jan 31, 2003

Case No. 02-21797 (Bankr. D. Idaho Jan. 31, 2003)

Opinion

Case No. 02-21797

January 31, 2003

ORDER RE: CONDITIONAL APPROVAL OF DISCLOSURE STATEMENT • AUTHORIZING SOLICITATION OF VOTES • SETTING FINAL HEARING ON DISCLOSURE STATEMENT • SETTING CONFIRMATION HEARING

MYERS, United States Bankruptcy Judge.

This matter having come before the Court upon the ex parte application of the Debtor and Plan Proponent, MEDINEX SYSTEMS, INC. ("Medinex"), for conditional approval of the Disclosure Statement filed by Medinex on January 29, 2003. and the Court having found that Medinex has property elected to be treated as a small business, and the Trustee having approved of the procedure requested in Medinex's application as evidenced by signature to this Order, and good cause appearing, it is hereby

ORDERED:

1. That Medinex's Disclosure Statement as filed on January 29, 2003, is conditionally approved in accordance with F.R.Bankr.P. 3016 and Local Rule 3017.1, subject to the conditions set forth herein.

2. A confirmation hearing on Medinex's proposed Plan of Reorganization, as filed January 29, 2003, is set for hearing on March 6, 2003, at 10:00 a.m. The hearing shall be held at the U.S. Bankruptcy Court, 205 N 4th St. — Room 202, Coeur D'Alene, ID 83814.

3. Pursuant to F.R.Bankr.P. 3016 and 3017 and Local Rule 3012.1, the hearing to consider final approval of the Disclosure Statement shall be held at the same time and date as the hearing scheduled for confirmation of the Plan on March 6, 2003, at 10:00 a.m.

4. The deadline for filing ballots in this case to accept or reject the proposed Plan shall be February 27, 2003.

5. Any objections to the Disclosure Statement or confirmation of the Plan shall be filed and served upon the U.S. Trustee, Medinex's counsel, and any party requesting notice by February 27, 2003.

6. Medinex shall serve a copy of this Order as well as prepare and serve the appropriate Notice of Hearing/Deadlines with the Plan, Disclosure Statement, Ballot, and Instructions to all interested parties.

UNITED STATES BANKRUPTCY COURT DISTRICT OF IDAHO

In Re )

) MEDINEX SYSTEMS, INC. ) Case No.: 02-21797 ) Debtor )

BALLOT FOR ACCEPTING OR REJECTING PLAN OF REORGANIZATION

1. The Plan of Reorganization referred to in this ballot was filed by the debtor, Medinex Systems, Inc., on January 29, 2003. The Court has conditionally approved a disclosure statement with respect to the Plan (the "Disclosure Statement"). The Disclosure Statement provides information to assist you in deciding how to vote your ballot. Court approval of the disclosure statement does not indicate approval of the Plan by the Court.

You should review the Disclosure statement and the Plan before you vote. You may wish to seek legal advice concerning the Plan and your classification and treatment under the Plan. Your claim or equity interest has been placed in a particular class under the Plan. (Refer to Plan, Disclosure Statement, and List Classifying Claims) If you hold claims or equity interests in more than one class, you may cast a ballot for each class in which you are entitled to vote,

If your ballot is not received by the Clerk, U.S. Bankruptcy Court, 205 N 4th St. — Rm 202, Coeur d'Alene, ID 83814, on or before February 27, 2003, and such deadline is not extended, your vote will not count as either an acceptance or rejection of the Plan. If the Plan is confirmed by the Bankruptcy Court it will be binding on you whether or not you vote.

The Plan of Reorganization can be confirmed by the court and thereby made binding on you if it is accepted by the holders of two-thirds in amount and more than one-half in number of claims in each class. In order for your vote to count you must complete and return this ballot within the time set forth herein.

2. The undersigned, a creditor or equity security holder of the above named debtor

( ) ACCEPTS (Check only one) ( ) REJECTS the Plan of Reorganization for the debtor.

3. The Plan of Reorganization places my claim or interest in Class #____

4. Name of creditor or equity security holder: _________________________________________________________ (type or print) By:______________________________________________________ (signature)

5. Address of creditor or equity security holder: _________________________________________________________ _________________________________________________________

6. Return the ballot on or before February 27 2003

7. Return the ballot to: Clerk U.S. Bankruptcy Court 205 N 4th St. — Rm 202 Coeur d'Alene, ID 83814

JOHN D. MUNDING JUDGE MYERS CRUMB MUNDING, P.S. 601 W. Riverside, #1950 Spokane, WA 99201 (509) 624-6464 Attorney for Debtor

UNITED STATES BANKRUPTCY COURT DISTRICT OF IDAHO

In Re: ) No. 02-21797 )) NOTICE OF: MEDINEX SYSTEMS, INC. )) 1) CONDITIONAL APPROVAL OF Debtor. ) DISCLOSURE STATEMENT) 2) SOLICITATION OF BALLOTS) FOR APPROVAL OF PLAN OF) REORGANIZATION) 3) PROPOSED SALE OF ALL) ASSETS, AND) 4) OTHER MATTERS RELATING) TO CONFIRMATION OF PLAN

TO ALL PARTIES IN INTEREST:

PLEASE TAKE NOTICE THAT:

1) The written Disclosure Statement filed by the Debtor, Medinex Systems, Inc. ("Medinex") was conditionally approved by an order signed by the Court on January 31, 2003. A copy of the Order Conditionally Approving the Disclosure Statement is enclosed herewith for your review. Pursuant to the Court's Order, the hearing to consider the final approval of the Disclosure Statement is set for March 6, 2003, at 10:00 a.m. The hearing shall be held at the U.S. Bankruptcy Court, 205 N. 4th Street, Room 2002, Coeur D'Alene, Idaho. PLEASE TAKE FURTHER NOTICE that any objections to the Disclosure Statement must be filed with the Court and served upon the undersigned counsel and the U.S. Trustee by February 27, 2003. Medinex is now seeking confirmation of the proposed Plan of Reorganization.

2) Enclosed herewith is a copy of the Disclosure Statement, the Plan of Reorganization, a Ballot For Accepting or Rejecting the Plan, Notice of Auction, and List Classifying Claims.

3) Parties in interest who wish to object to the confirmation of the Plan must file with the Clerk of the Bankruptcy Court on or before February 27, 2003, a written objection to confirmation and serve a copy on Debtor's counsel and the U.S. Trustee. The address of both counsel for Medinex and the U.S. Bankruptcy Court are set forth below.

4) A confirmation hearing concerning the Plan proposed by Medinex is scheduled for March 6, 2003, at 10:00 a.m. in open court.

5) Written ballots for accepting or rejecting the Plan must be filed with the Clerk of the Bankruptcy Court no later than February 27, 2003.

6) The Debtor is soliciting votes for acceptance of its Plan of Reorganization. Through the Plan, Medinex seeks to sell all of its assets, free and clear of all liens and encumbrances by way of a two phase process which includes an auction and controlled sale to be held prior to March 28, 2003.

7) As set forth in detail in the Plan and Disclosure Statement served herewith, Medinex intends to sell all of its assets by way of a two phase process involving an auction and a controlled sale. Should you have any interest in purchasing the assets of Medinex, participating in the auction or the proposed controlled sale, please contact counsel for Medinex at the address below for more information concerning the sale and pre-registration requirements.

DATED this 3rd day of February, 2003.

CRUMB MUNDING, P.S.

_________________________ JOHN D. MUNDING Attorney for Debtor, Medinex Systems, Inc. ISBA #04703

United States Bankruptcy Court Mr. Gary McClendon Office of the Clerk Office of U.S. Trustee 205 N 4th St. — Rm 202 PO Box 110 Coeur d'Alene, ID 83814 Boise, ID 83701

JOHN D. MUNDING JUDGE MYERS CRUMB MUNDING, P.S. 601 W. RIVERSIDE #1950 SPOKANE, WA 99201 (509) 624-6464

Attorney for Debtor

UNITED STATES BANKRUPTCY COURT DISTRICT OF IDAHO

In Re: ) No. 02-21797) NOTICE OF HEARING ON MEDINEX SYSTEMS, INC. ) MOTION FOR APPROVAL OF) SOLICITATION OF OFFERS Debtor. ) AND BIDS FOR ASSETS

TO: ALL CREDITORS AND PARTIES IN INTEREST

PLEASE TAKE NOTICE that a hearing will be held on February 19, 2003, at 2:00 p.m. before the Honorable T. Myers, U.S. Bankruptcy Judge for the District of Idaho. The hearing will be conducted at Judge Myers' courtroom, located at the Federal Building, 205 North 4th Street, Second Floor, Coeur D'Alene, Idaho. At hearing, Judge Myers will consider:

1. The Debtor's motion to seek bids and offers for the purchase of all of the Debtor's assets as described in the proposed Plan of Reorganization and Disclosure Statement, including marketing of such assets by mailing and publication.

If you object to the Debtor's motion regarding the soliciation of bids and offers for its assets, then you must do so in writing by filing your written objection with the U.S. Bankruptcy Court for the district of Idaho and upon John D. Munding, Crumb Munding, P.S., 601 W. Riverside, Suite 1950, Spokane, WA 99201, at least five (5) days prior to the scheduled hearing date of February 19, 2003. Failure to object may result in entry of Orders authorizing the relief requested.

DATED this 4th day of February, 2003.

CRUMB MUNDING, P.S.

_____________________ JOHN D. MUNDING Attorney for Debtor ISBA #04703

JOHN D. MUNDING JUDGE MYERS CRUMB MUNDING, P.S. 601 W. Riverside, #1950 Spokane, WA 99201 (509) 624-6464

Attorney for Debtor

UNITED STATES BANKRUPTCY COURT DISTRICT OF IDAHO

In Re: ) No. 02-21797 ) MEDINEX SYSTEMS, INC. ) MOTION FOR APPROVAL OF) SOLICITATION OF OFFERS Debtor. ) AND BIDS FOR ASSETS

I. MOTION

Medinex Systems, Inc., moves the Court for an order authorizing the solicitation of bids and offers for its assets as described in its proposed Plan and Disclosure Statement filed January 29, 2003, and based upon similar procedures and notices as those attached hereto as Exhibit "A" and incorporated herein by reference. The solicitation of offers and bids would provide for the caveat that final sale and auction are subject to Plan confirmation.

II. BASIS

1. On January 29, 2003, Medinex Systems, Inc., filed a proposed Plan of Reorganization that provides for sale of all of Medinex Systems, Inc.'s assets.

2. A confirmation hearing has been set for March 6, 2003, concerning the proposed Plan.

3. In order to maximize interest in the Debtor's assets, minimize depreciation and depletion of assets due to delay, and expedite the sale process assuming the proposed Plan is approved, Medinex Systems, Inc., would like to immediately commence noticing and marketing of the availability of its assets for sale.

III. RELIEF REQUESTED

WHEREFORE, Medinex Systems, Inc., seeks a Court Order authorizing it to:

1. Market the sale of its assets as described in the Plan and Disclosure Statement.

2. Solicit offers for both Phase I-Auction and Phase II-Sale of Assets.

3. Commence publication and mailing of proposed sale of assets to prospective bidders and purchasers.

DATED this 4th day of February, 2003.

CRUMB MUNDING, P.S.

____________________ JOHN D. MUNDING Attorney for Debtor ISBA #04703

EXHIBIT 5 ASSET SUMMARY

A. As to Phase I Sale of Assets Sold at Auction

1. All Accounts Receivable — $111,156

2. All Contingent Claims

• Claim to money held in trust in the amount of $53,088.

• Claim against Votenet, Inc., for $39,547 arising from unreturned deposit of leased facilities at 666 11th Street, 9th Floor, Washington, D.C.

• Claim for reimbursement against Anthony Paquin arising from unauthorized payment of insurance premiums of approximately $1,500.

3. All Patents/Copyrights/Intellectual Property

• Word Marks

Medinex Reg. #2365142, Ser. #75501627

Medinex.Com Reg #2414566, Ser. #75615015

Medinex Reg. #2350799, Ser. #75501628

• Patents (application pending) MX Secure Application #101107,935

• The name Medinex Systems, Inc.

4. All Internet Domains and Related Property

• Registered Internet Domain Names

Medinex.com and Medinex.net

MedinexSystems.com

MxOffice.net

MxSecure.com

Netivation.com

• Secure Certificates

www.mxofficd.ndt certificate issued by Thawte (Verisign)

www.mxsecure.com certificate issued by Thawte (Verisign)

NOTICE OF SALE OF ASSETS

Medinex Systems, Inc., a developer, designer, and marketer of software, services, and websites for health care providers, with a primary focus on digital transcription of medical records, proposes to sell all of its assets on or before March 28, 2003.

The sale of assets shall be completed through a two phase process. Included in the asset sale is an opportunity to purchase the corporate entity, which is a publicly traded company in good standing with the Securities and Exchange Commission. In addition to the corporate entity, all tangible and intangible assets of Medinex Systems, Inc., will be sold to the highest qualified bidder. Attached is a detailed list of property to be sold.

PLEASE NOTE:

1. This offer for sale of assets is subject to confirmation of the proposed Chapter 11 Plan of Reorganization of Medinex Systems, Inc.

2. Phase I Auction Sale of Assets Any person or entity desiring to bid on the property must pre-register with counsel for Medinex Systems, Inc., no later than March 21, 2003. To pre-register, prospective bidders must:

1. Provide a complete written disclosure of the bidder's principals and agents.

2. Provide a limited financial statement or letter of credit demonstrating the potential bidder's ability to close a sale at the minimum bid price of $217,500.00.

3. Provide a refundable bid deposit in the amount of $20,000.00 to be held in trust by counsel for Medinex Systems, Inc.

The foregoing Items, including bid deposit, must be received from all prospective bidders by close of business on March 21, 2003. Only registered bidders shall be allowed to bid at auction.

3. Phase II Sale of Corporate Entity

Pursuant to its proposed Plan of Reorganization, Medinex Systems, Inc., offers for sale the stripped publicly traded corporate entity. This will be accomplished by way of sale of unissued common stock and dilution of existing common stock through a reverse stock split.

The minimum bid for the corporate entity is set at $50,000.00 and must be received in writing by March 21, 2003, directed to John D. Munding, bankruptcy counsel, at the address below.

THIS PROPOSED SALE IS ALSO CONDITIONED UPON CONFIRMATION OF THE DEBTOR'S CHAPTER 11 PLAN OF REORGANIZATION.

Additional information concerning the property and the Phase I and Phase II sale may be obtained by contacting:

John D. Munding Crumb Munding, P.S. 601 W. Riverside Avenue, Suite 1950 Spokane, WA 99201 (509) 624-6464 (509) 624-6155 (fax)

5. All customer lists, customer agreements, marketing/sales databases

6. All agreements with resellers and consultants

7. All proprietary software, including all source code and object code in all forms and formats, database schemas, database objects, web server code and configuration files, client components, and all documentation. Proprietary software consists primarily of, but is not limited to, the following products and management tools:

• MxSecure product

• MxTranscribe product

• MxSites product

• Medinex Office Suite product

• Proprietary software for workflow management and reporting

8. All servers, computers, software, and office equipment and furnishings located in Florida, Idaho, and Arizona — see attached Depreciation Schedule

• Book value: $38,922 (as of 12/31/02)

9. Recorder Inventory — $8,000

10. All current operating bank accounts and other accounts of the Debtor as of the date of auction.

The Debtor's entire interests, rights, title, and claims in the foregoing assets shall be assigned/sold free of all liens, claims, encumbrances, or interest to the highest qualified bidder at auction.

B. Phase II Sale/Corporate Entity

The remaining corporate entity shall be sold pursuant to the issuance of stock as described in the Disclosure Statement and Plan. The corporate shell shall be sold without the right to use the corporate name, Medinex Systems, Inc. The name cannot be used as an operating business trade name.

The sale will include the:

• Reporting history of the Company with the Security and Exchange Commission including securities regulators.

• The existing and modified stock trading base.

• The Articles of Incorporation and existing Bylaws.

ALL OTHER TANGIBLE AND INTANGIBLE ASSETS ARE PART OF THE PHASE I SALE AND ARE NOT PART OF THE PHASE II SALE.

MEDINEX SYSTEMS, INC. SALE/AUCTION DISCLAIMER

By way of bid deposit and registration, the undersigned has acknowledged the desire to participate in the auction of the Debtor's assets in the capacity as a bidder and prospective purchaser at auction. As evidenced by the bidder's signature below, bidder has read this disclaimer and agrees to the terms set forth herein as a prerequisite to auction participation.

All property of Medinex Systems, Inc., is being sold "as-is" and "where-is" with absolutely no warranties or indemnification. The Debtor's property interests have been disclosed, and bidder has conducted its own investigation and due diligence regarding the same. The Debtor, its counsel, agents, and principal, make no warranties or representations concerning the same, with the exception of the removal of tax liens and consensual secured liens by way of Court Order.

Medinex Systems, Inc., has made available to the bidder an inventory of personal property but makes no warranties as to content, value, or description of personal property being sold at auction. All personal property is being sold "as-is" and "where-is", with no warranties or indemnification.

All leases for personal and real property have been rejected by the Debtor through its confirmed Plan. Any leased personal property is not being sold and shall be returned to its rightful owner or bidder shall make arrangements directly with owner to return such property.

The Debtor, its counsel, agents, and principals make no warranties or representations concerning tax ramifications of the sale/purchase or securities regulations concerning any sale or transfer described in the Plan and Disclosure Statement.

Only the assets of the Debtor, Medinex Systems, Inc., are being sold. The Debtor's business is not being sold as a going concern. Purchaser is responsible and shall bear all costs associated with any transfers, renewal, or applications for business licenses, technology licenses, and patent applications of any and all types currently held or used by the Debtor.

Neither the Debtor, its counsel, agents, principals, accountants, nor officers are engaged in the business of selling securities. As such, any Phase II purchaser assumes all responsibility associated with the Phase II purchase described in the Plan. The proposed transaction is clearly subject to risks and uncertainties. Phase II purchasers are strongly advised to seek their own tax and securities counsel's opinion and advice concerning the Phase II sale. The Debtor's legal counsel makes no representations or warranties concerning this proposed sale and auction.

The undersigned bidder acknowledges that it has received a copy of this disclaimer, understands its binding effect, and agrees to the terms set forth herein.

DATED: February _____ 2003.

AGREED TO BY:

________________________

Bidder Name:___________________________ Title:____________________________________ Company:__________________________________

BID PROCEDURE AND TERMS FOR PHASE I AUCTION SALE

The undersigned hereby desires to participate at auction of the assets of Medinex Systems, Inc., and hereby agrees to the following terms and conditions:

1. Bidder must deposit the sum of $20,000.00 in Crumb Munding, P.S's Trust Account by close of business on March 21, 2003. Any bidder failing to make a timely bid deposit shall be precluded from participating at auction. All bidders must also sign and return a copy of this agreement and the accompanying disclaimer to Crumb Munding via facsimile at (509) 624-6155 by March 21, 2003, to participate at auction.

2. Bidder hereby agrees to make a minimum bid of $217,500.00 at the auction to be held no later than March 28, 2003.

3. In the event that one or more bidders make a minimum bid, bidder shall be entitled to make another bid of $217,500.00 or higher in $5,000.00 increments.

4. In the event bidder is the unsuccessful bidder at auction or retracts its minimum bid prior to the date and time set for the auction, bidder shall receive the return of its bid deposit within seven (7) days after the auction date.

5. A successful bidder at the auction shall have two (2) business days after auction date to provide all necessary funds to consummate the auction sale based upon high bid price. Funds shall be wired or by certified check. In the event the high bidder is unable to produce such money necessary to support the high bid and close the transaction, their bid deposit shall become nonrefundable. In such an event, the next high bidder shall have the option to purchase the property at the next highest bid price.

6. The auction shall occur on or before March 28, 2003, at Crumb Munding, P.S., 601 W. Riverside, Suite 1950, Spokane, WA 99201, before John D. Munding, counsel for Medinex Systems, Inc.

I have read the foregoing bid procedures and terms and agree to be bound by the same.

DATED: ____________, 2003.

AGREED TO BY: _____________________

Bidder Name:___________________ Title:_________________________ Company:_______________________ Address:_______________________

JOHN D. MUNDING JUDGE MYERS CRUMB MUNDING, P.S. 601 W. Riverside, #1950 Spokane, WA 99201 (509) 624-6464

Attorney for Debtor

UNITED STATES BANKRUPTCY COURT DISTRICT OF IDAHO

In Re: ) No. 02-21797 ) MEDINEX SYSTEMS, INC. ) NOTICE OF HEARING RE:) CONTINUED USE OF: ) Debtor. ) • CASH COLLATERAL) • POST PETITION CREDIT

TO: ALL CREDITORS AND PARTIES IN INTEREST

PLEASE TAKE NOTICE that a hearing will be held on February 19, 2003, at 2:00 p.m. before the Honorable T. Myers, U.S. Bankruptcy Judge for the District of Idaho. The hearing will be conducted at Judge Myers' courtroom, located at the Federal Building, 205 North 4th Street, Second Floor, Coeur D'Alene, Idaho. At hearing, Judge Myers will consider:

1. The continued use of cash collateral in light of the recent Disclosure Statement and Plan of Reorganization which provide for the sale of assets; and

2. The Debtor's continued draw downs of Post Petition Credit

The debtor previously sought and obtained relief concerning the use of cash collateral and emergency financing on shortened limited and shortened notice. An evidentiary hearing was held on December 11, 2002, after which relief was granted and memorialized by written Orders entered by the Court on December 31, 2002. Final approval of the Debtor's use of cash collateral and continued financing were approved at subsequent hearing on January 22, 2003. The final Orders were conditioned upon a 30 day review by the Court. Said review will take place at hearing on February 19, 2003.

If you object to the Debtor's continued use of cash collateral and DIP financing, then you must do so in writing by filing your written objection with the U.S. Bankruptcy Court for the district of Idaho and upon John D. Munding, Crumb Munding, P.S., 601 W. Riverside, Suite 1950, Spokane, WA 99201, at least five (5) days prior to the scheduled hearing date of February 19, 2003. Failure to object may result in entry of Orders authorizing continued use of cash collateral and DIP financing.

DATED this 3rd day of February, 2003.

CRUMB MUNDING, P.S.

_____________________ JOHN D. MUNDING Attorney for Debtor ISBA #04703

JOHN D. MUNDING JUDGE MYERS CRUMB MUNDING, 601 W. Riverside, #1950 Spokane, WA 99201 (509) 624-6464

Attorney for Debtor

UNITED STATES BANKRUPTCY COURT DISTRICT OF IDAHO

In Re: )) No. 02-21797 MEDINEX SYSTEMS, INC., )) DISCLOSURE) STATEMENT RE DEBTOR'S Debtor. ) CHAPTER 11 PLAN

I. INTRODUCTION

Medinex Systems, Inc., a Delaware corporation ("Medinex", the "Company" or the "Debtor"), filed a voluntary petition (the "Petition") under Chapter 11 (Chapter 11) of Title 11 of the U.S. Code, 11 U.S.C. § 101 et seq. (the "Bankruptcy Code") on November 27, 2002 (the "Petition Date"), for the purpose of implementing an operational plan of reorganization that included financial restructuring of the Debtor's ongoing business affairs.

Upon filing, it became apparent that the restructuring efforts would require an immediate infusion of operating capital to sustain the Debtor's ongoing business operations until the Company is able to operate on a positive cash flow basis. It is anticipated that the Company will be cash flow positive by October, 2003, but unable to service any pre-petition liabilities. As of the Petition Date, Medinex had a book value of assets of approximately $286,000. However, the actual fair market value of the Company's assets as of the Petition Date was substantially less (approximately $75,000). The Company's assets consist mainly of used office equipment located throughout the country, questionable accounts receivable, and other miscellaneous tangible and intangible property. The Debtor's true value to its creditors and shareholders was and is as an ongoing operational business entity. However, the cash necessary to sustain business operations is substantial.

On the Petition Date, Medinex was clearly insolvent, as it was unable to meet its financial obligations as they became due. With monthly operating expenses of $70,000 and only $35,000 in the bank, Medinex was forced to seek protection from its creditors to protect its remaining assets from a few aggressive creditors.

In early December, 2002, Medinex sought and obtained approval for emergency debtor in possession financing (DIP financing) in an amount up to $145,000.00. The DIP financing is secured by a first priority lien upon all assets of Medinex.

By December 16, 2002, Medinex Systems, Inc., had drawn down upon the operating line (DIP Financing) in the amount of $53,500. In addition, the Company received a tax refund from the State of Delaware in the amount of $19,892 which was placed into the Debtor's general operating fund. Despite both cash infusions, the Debtor posted a net operating loss for December, 2002, of approximately $28,314.

Based upon the Company's post petition date cash flow statements, both actual and projected, the company has been forced to abandon a concept of a reorganization funded by operating revenues. In addition, due to the Company's lack of tangible assets, the Company cannot feasibly obtain additional funding to subsidize the monthly cash burn which is projected to continue through October, 2003.

After careful consideration, the Company has determined that a controlled, two phase, sale of the Debtor's assets will maximize distribution to creditors, prevent depletion of the estate assets due to negative cash flow, and end administrative insolvency.

The Debtor has prepared this Disclosure Statement pursuant to Bankruptcy Code § 1125 in connection with its solicitation of votes on the Plan. § 1125 of the Bankruptcy Code prohibits solicitation of acceptance or rejection of a Plan of Reorganization until interested parties are provided with a written Disclosure Statement that has been approved by the Court as containing adequate information. Such information must be of the kind, and in sufficient detail, to enable a hypothetical reasonable investor typical of each respective class of creditors to make an informed judgment whether to accept or reject the Plan. Neither the Debtor nor the Bankruptcy Court has authorized the communication of any information about the Plan other than the information contained in the Disclosure Statement and the related materials transmitted herewith or filed with the Bankruptcy Court.

This Disclosure Statement sets forth certain information regarding the Debtor's background and history, its assets and liabilities, the filing of the Chapter 11 petition, and significant events that have occurred during the Reorganization Case. The Disclosure Statement also describes the Plan, certain effects of Confirmation, and the manner in which distributions will be made under the Plan. Each holder of a claim in an impaired class should read this Disclosure Statement and the Plan in their entirety and should consider them with the holder's legal and financial advisors before voting on the Plan.

Medinex has elected treatment as a small business under Chapter 11, with aggregate, non-contingent, liquidated, secured, and unsecured debts of less than two million dollars. As a small business Chapter 11 debtor, Medinex requested conditional approval of this Disclosure Statement and consolidation of the final hearing on approval of the Disclosure Statement with the final hearing as to adequacy of this Disclosure Statement to be conducted at the same time as the hearing on confirmation of the Plan. You will be notified by separate notice if the Disclosure Statement is conditionally approved.

THE BANKRUPTCY COURT'S CONDITIONAL APPROVAL OF THIS DISCLOSURE STATEMENT, HOWEVER, DOES NOT CONSTITUTE A DETERMINATION BY THE BANKRUPTCY COURT AS TO THE FAIRNESS OR THE MERITS OF THE PLAN.

Unless otherwise specified herein, this Disclosure Statement is based upon information available to the Debtor as of January 21, 2003, and does not reflect events that may occur subsequent to that date, which may have a material impact on the information contained in the Disclosure Statement. Medinex will not make any effort to supplement or amend the Disclosure Statement to reflect changes beyond that date.

THIS DOCUMENT WAS COMPILED FROM INFORMATION OBTAINED BY THE DEBTOR. THE DEBTOR DOES NOT REPRESENT OR WARRANT THAT THIS DISCLOSURE STATEMENT IS COMPLETE OR THAT THE INFORMATION CONTAINED HEREIN IS FREE FROM ANY INACCURACY OR OMISSION.

NOTHING CONTAINED IN THIS DISCLOSURE STATEMENT SHALL BE DEEMED AN ADMISSION OR A DECLARATION AGAINST INTEREST BY THE DEBTOR FOR PURPOSES OF ANY EXISTING OR FUTURE LITIGATioN. ALTHOUGH THE DEBTOR'S PROFESSIONAL ADVISORS HAVE ASSISTED IN THE PREPARATION OF THIS DISCLOSURE STATEMENT BASED UPON THE FACTUAL INFORMATION AND ASSUMPTIONS FOR THE FINANCIAL, BUSINESS, AND ACCOUNTING DATA PROVIDED BY THE DEBTOR, THE DEBTOR'S PROFESSIONALS HAVE NOT INDEPENDENTLY VERIFIED THE INFORMATION SET FORTH IN THIS DISCLOSURE STATEMENT AND MAKE NO REPRESENTATIONS OR WARRANTIES AS TO SUCH INFORMATION,

CAUTIONARY STATEMENT

Certain information included in this Disclosure Statement contains forward looking statements within the meaning of the Securities Act of 1933 as amended and the Securities Exchange Act of 1934, as amended. Such forward looking information is based on information available when such statements are made and is subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statements.

A. Summary of Classification And Treatment.

The following is a summary of the classification of all claims and interests under the Plan and the proposed treatment of each such class under the Plan. This summary is qualified in its entirety by reference to more detailed provisions set forth in the Plan, the terms of which are controlling.

TYPE OF CLAIM CLASS NO.

Administrative Claims.

DIP Credit Agreement claim Class 1

Priority Claims Class 2

Contingent Secured Claim. Class 3

Unsecured Claims. Class 4

Equity Interests. Class 5

B. Summary of Voting On Plan.

Pursuant to the Bankruptcy Code, any holders of Allowed Claims in Classes 1 (Priority Claims), 2 (DIP Credit Agreement Claims), 3 (Secured Claims), 4 (Unsecured Claims), and 5 (Equity Interests) are entitled to vote on the Plan. For a description of the classes of claims and of the Equity Interests and their treatment under the Plan.

Except as described below, the Plan may be confirmed only if accepted by the Voting Class. The Bankruptcy Code defines "acceptance" with respect to a class of impaired claims as acceptance by holders of at least two-thirds (2/3) in dollar amount and more than one-half (1/2) in number of the Allowed Claims in such class whose holders actually cast ballots. Holders of impaired claims may vote either to accept or reject the Plan.

THE DEBTOR BELIEVES THAT THE PLAN PROVIDES THE BEST FEASIBLE RECOVERIES TO THE HOLDERS OF IMPAIRED CLAIMS AND THAT ACCEPTANCE OF THE PLAN IS IN THE BEST INTERESTS OF SUCH HOLDERS. THE DEBTOR THEREFORE RECOMMENDS THAT HOLDERS OF IMPAIRED CLAIMS VOTE TO ACCEPT THE PLAN.

The Debtor requests the Bankruptcy Court to confirm the Plan in accordance with § 1129(b) of the Bankruptcy Code, which permits confirmation of the Plan notwithstanding rejection by one or more impaired classes if the Court finds that the Plan does not discriminate unfairly and is "fair and equitable" with respect to the rejecting class or classes.

For a more detailed description of the requirements for acceptance of the Plan and of the criteria for confirmation notwithstanding rejection by certain classes, "Confirmation Procedure."

C. General Information.

Attached as Annexes to this Disclosure Statement are copies of the following:

1. Pro Forma Consolidated Results (Exhibit 1)

2. Pro Forma Sales (Exhibit 2)

3. Pro Forma Expenses (Exhibit 3)

4. Pro Forma Payroll (Exhibit 4)

5. List of Assets (Book Value) (Exhibit 5)

6. Minimum Bid Breakdown (Exhibit 6)

7. Liquidation Analysis (Exhibit 7)

8. December 2002 Balance Sheet/Income (Exhibit 8)

Also accompanying this Disclosure Statement are copies of the following:

1. A notice of the confirmation hearing containing the date and time of the confirmation hearing, the deadlines for ballots, and for objections to the Plan, and related matters. (The "Confirmation Notice")

2. The ballots for acceptance or rejection of the Plan.

At Confirmation Hearing, the Bankruptcy Court has scheduled the confirmation hearing for March 6, 2003, at a time to be set and provided under separate notice. The Court will direct that objections, if any, to confirmation of the Plan be served and filed on or before a specific date to be set forth in separate notice. The confirmation hearing may be continued from time to time by the Bankruptcy Court without further notice except for the announcement of the continuation date made at the confirmation hearing or any subsequent continued confirmation hearing.

After carefully reviewing this Disclosure Statement and the Plan, including the respective Annexes and Exhibits, each holder of an impaired claim should vote on the enclosed ballot and return it in the envelope provided.

TO BE COUNTED, YOUR BALLOT MUST BE COMPLETELY FILLED IN, SIGNED, AND TRANSMITTED IN THE MANNER SPECIFIED IN THE BALLOT SO THAT IT IS RECEIVED BY THE VOTING DEADLINE SPECIFIED IN THE BALLOT. PLEASE FOLLOW CAREFULLY ALL INSTRUCTIONS CONTAINED IN THE BALLOT. ANY BALLOTS RECEIVED WHICH DO NOT INDICATE EITHER AN ACCEPTANCE OR REJECTION OF THE PLAN OR WHICH INDICATE BOTH AN ACCEPTANCE AND REJECTION OF THE PLAN WILL NOT BE COUNTED.

If you have any questions about the procedure for voting, or if you did not receive a ballot, received a damaged ballot, or have lost your ballot, please write to John D. Munding, Crumb Munding, P.S., 601 W. Riverside, Suite 1950, Spokane, WA 99201, or call (509) 624-6464.

II. OVERVIEW

A. The Company.

The Company was incorporated in Delaware as Netivation.com in 1997. The name Netivation.com was subsequently changed to Medinex Systems, Inc., in July, 2000. The Company is a publicly traded company.

In 1999, the Company completed an Initial Public Offering that raised in excess of $25,000,000. The Company embarked upon a period of rapid expansion that included the acquisition of 10 subsidiaries.

The subsidiaries Included Raintree Communications Corporation; Public Disclosure, Inc.; Net.Capital, Inc.; U.S. Congress Handbooks, Inc.; MedMarket, Inc.; Discount MedBooks, Inc.; and Pinnacle Medsource, Inc.

Most of the Debtor's disputed debt obligations arise from these subsidiaries.

Unfortunately, continued growth and development of the Company required substantial amounts of cash and resources. By mid-2000, the Company recognized a need to divest itself of subsidiaries and focus on the rapidly developing healthcare technology market.

1. Divestitures.

On February 13, 2001, Medinex sold substantially all of the assets of its political division, which included the assets of its subsidiary corporations, Raintree Communications Corporation. Public Disclosure, Inc., Net.Capital, Inc., and U.S. Congress Handbooks, Inc., along with certain other political-related assets and liabilities, to Votenet Solutions, Inc. ("Votenet"), in exchange for cash consideration of $1,150,000 and an option by one of Votenet's shareholders to purchase 3,448,276 shares of the Company's common stock for $0.29 per share and 3,448,276 shares of the Company's common stock for $0.61 per share. Votenet, a Delaware corporation, was established for the purpose of this acquisition and will continue servicing the political and public policy communities formerly served by Medinex. The assets were sold to Votenet pursuant to an Asset Purchase Agreement dated as of February 13, 2001.

On August 30, 2001, Medinex Systems, Inc., formerly known as Netivation.com, Inc. ("Medinex"), sold substantially all of the assets of its subsidiary, Pinnacle Medsource, Inc., a Delaware corporation ("Pinnacle"), in exchange for cash consideration of $325,000. Anne Holcombe Associates, Inc., a Georgia corporation ("Purchaser"), was established by the Purchaser, for the purpose of this acquisition and will continue servicing the medical communities formerly served by Pinnacle. The assets were sold to Purchaser pursuant to an Asset Purchase Agreement dated as of August 30, 2001.

On June 28, 2002, Medinex sold all of the capital stock of MedMarket, Inc., DiscountMedBooks, Inc., and its former political division's subsidiaries, which included Net.Capital, Inc., Raintree Communications Corporation, Public Disclosure, Inc., and U.S. Congress Handbooks, Inc., to the Delta Group, Inc. The report filed with the Securities and Exchange Commission July 1, 2002, on form 8-K describes this sale in detail and includes as an exhibit the Stock Purchase Agreement by and between Delta Group, Inc., and Medinex Systems, Inc.

Medinex is now completely divested of its subsidiaries and disputes any obligations allegedly arising or related to its prior subsidiaries.

2. Operating Loss 2002.

For the three months ended September 30, 2002, operating expenses were $541,000 as compared to approximately $464,000 for the three months ended September 30, 2001. The Company incurred significant expenses outside of the normal course of its ongoing business during this period.

For the nine months ended September 30, 2002, operating expenses were $1,682,000 as compared to approximately $2,315,000 for the nine months ended September 30, 2001. Operating expenses were reduced primarily from divesting businesses, reducing personnel, decreasing expenditures for advertising, marketing programs, and professional service fees. However, the reduction in operating expenses was not sufficient to alleviate continued financial duress being experienced by the company.

For the three months and nine months ended September 30, 2002, sales and marketing expense was approximately $54,000 and $220,000 respectively as compared to no sales and marketing expense as such for the comparable periods in 2001. The increase was attributable to the increase in payroll expense for sales representatives who were selling the Company's products during the current periods. The Company did not have these payroll expenses in the prior periods as the products were not available for sale.

Operating expenses increased from approximately $464,000 for the three months ended September 30, 2001, to approximately $541,000, including the extraordinary expenses listed above, for the three months ended September 30, 2002, and declined from approximately $2,315,000 for the nine months ended September 30, 2001, to approximately $1,682,000 for the nine months ended September 30, 2002. The decrease was attributable to reductions in personnel and other cost reduction programs initiated by management.

During the three months and nine months ended September 30, 2001, amortization and impairment of intangible assets was zero and $264,000 respectively. With the sale of the Company's MedMarket division in June, 2002, the Company no longer had any intangible assets.

Depreciation expense on property and equipment for the nine months ended September 30, 2002, was $140,000 as compared to $264,000 for the nine months ended September 30, 2001.

Loss from continuing operations was $446,000 for the three months ended September 30, 2002, as compared with a loss from continuing operations of approximately $463,000 for the three months ended September 30, 2001. Loss from continuing operations for the nine months ended September 30, 2002, was $1,552,000 as compared with a restated loss from continuing operations of approximately $2,311,000 for the nine months ended September 30, 2001.

The cash previously obtained by investing activities was used to fund the Company's ongoing net operating losses.

3. Shareholder Loan.

In order to keep the Company operational, shareholder Charles and Donna Weaver Trust dated November 16, 1989, loaned the Company the sum of $760,000 during the spring and summer of 2002.

The loan accrued interest through September 30, 2002, at an annual rate of 12%. Accrued interest at September 30, 2002, was $31,307. The parties have negotiated a change in the terms and conditions of the loan. These changes have been approved by the Company's directors. Effective October 1, 2002, the principal balance of the loan was to commence accruing interest. The resulting principal balance of $791,307 will accrue interest at the federal rate of 3.75% per annum. The term of the loan has been extended to five years with payments of interest only to commence in January, 2003. This note was secured by all assets on November 15, 2002, both tangible and intangible of the Company held currently or acquired in the future.¹ The Weaver Trust has agreed to subordinate its lien against the Company's assets to any secured financing which meets the Company's budgeted financial needs for the next twelve months. The Weaver Trust has in fact subordinated its loan to DIP financing in the amount of $145,000.

1 Subject to avoidance action based upon a preferential transfer.

B. Current Operations.

Medinex currently develops, designs, and markets software, services and websites for health care providers. Its primary focus is upon digital transcription of medical records.

Effective November 1, 2002, Cohn Christie was appointed as the Chief Executive Officer and President of Medinex. Maureen Cantley was appointed as Interim Chief Financial Officer and Corporate Secretary of Medinex effective November 1, 2002.

The present Board of Directors consists of Anthony J. Paquin, R. Scot Haug, Donna Weaver, John H. Haehl, and Colin Christie.

In an effort to assess the Company's pre-petition date operations, post petition date operations, and future viability, the following Pro Formas have been prepared and annexed hereto:

• Consolidated Results (Exhibit 1)

• Sales (Exhibit 2)

• Expenses (Exhibit 3)

• Pro Forma Payroll (Exhibit 4)

The Pro Formas contain forward looking projections based upon factual assumptions and past actual operations of the Company. Based upon the Pro Formas and the December, 2002, balance sheet, it is readily apparent that the Company continues to operate as a negative cash flow on a monthly basis despite cost cutting revenue enhancement measures.

The Company does not have adequate tangible or intangible assets available to secure additional financing to take it through the projected period of negative cash flow. Based upon the Consolidated Results Pro Forma, it is estimated the Company will need at least $200,000 of additional funding just to keep its doors open through October, 2003.

In addition to the operating shortfalls, the Company is technically administratively insolvent, as it does not have financial resources available to pay professionals during the period of prolonged cash flow deficit. The initial concept of a Plan of Reorganization based upon future operating revenue is no longer feasible.

The Plan, as presently proposed, provides for the sale of the Debtor's assets in two phases. It is believed that a controlled sale of assets will maximize value for creditors and may provide a small residual benefit to equity holders. Pending the proposed two phase sale of assets described in this Disclosure Statement and the Plan, the Debtor will continue to operate as an ongoing entity.

C. Recommendations.

The Debtor believes that the Plan provides the greatest recoveries to holders of impaired claims and is in the best interest of such holders. ACCORDINGLY, THE DEBTOR RECOMMENDS THAT ALL SUCH HOLDERS VOTE TO ACCEPT THE PLAN.

III. THE CHAPTER 11 CASE

A. Creditors Committee.

The Office of the United States Trustee has not appointed an Official Unsecured Creditors Committee. The Debtor has moved the Court to postpone appointment of a creditors committee until after 90 days from the Petition Date.

B. Officers, Directors, and Management.

Effective November 1, 2002, Colin Christie was appointed as the Chief Executive Officer and President of Medinex. Maureen Cantley was appointed as Interim Chief Financial Officer and Corporate Secretary of Medinex effective November 1, 2002.

The present Board of Directors consists of Anthony J. Paquin, R. Scot Haug, Donna Weaver, John H. Haehl, and Colin Christie.

C. Retention of Debtor's Professionals.

John D. Munding, Crumb Munding, P.S., 601 W. Riverside, Suite 1950, Spokane, WA 99201 is general bankruptcy counsel. An application for approval of! employment of counsel is pending and an order approving such employment has been submitted without objection.

D. DIP Financing.

In connection with Medinex's filing of the Petition, the Debtor, with court approval, entered into a DIP Credit Agreement with lender, the Weaver Trust, for a credit line of up to $145,000. The line of credit will mature on March 31, 2003. The money derived from the line of credit is to be used for the payment of certain critical pre-petition trade vendors and expenses incurred during the normal course of business operations. It is anticipated that the interim financing will be exhausted by March/April, 2003. The Debtor does not have the ability to secure additional financing.

The Bankruptcy Court approved the financing on December 31, 2002, after an evidentiary hearing and substantial briefing on the issue. An Order was entered on December 31, 2002, memorializing the Court's approval of terms of DIP financing. The DIP financing is secured by a super priority lien upon all of the Debtor's property.

E. Critical Trade Vendors.

In connection with Medinex's filing of the Petition, the Debtor moved the Court for authority to pay certain pre-petition debt obligations owed to critical trade vendors. Medinex, being engaged in the business of digital transcription, relied exclusively upon foreign vendors to provide secure encrypted digital transcription of medical records. The Court authorized the payment of up to $21,197.81 to these critical vendors in order to allow Medinex to facilitate reorganization as an ongoing entity. Without payment of these critical vendors, the Debtor would have been forced to close its business operations and liquidate.

F. Sale of Assets/Auction.

The book value of the Debtor's assets are listed as of December 31, 2002, as $282,000. The fair market value of the assets are believed to be considerably less and are assigned an estimate value of approximately $100,000. A detailed list of the Debtor's assets are attached hereto as Exhibit 5.

As can be noted from Exhibit 5, the Debtor's assets consist of used office equipment, including computers, currently located at various offices throughout the country, totaling a value of $38,922.39. The Debtor also has accounts receivable of $111,156, which an estimated 10% are believed to be uncollectable.

All tangible and intangible assets are presently secured by the DIP Note and Order Approving DIP Financing dated December 31, 2002, in an amount of $53,500, not including the administrative carve out of $25,000. It is anticipated that at least another $25,000 will be advanced under the DIP Note by February 19, 2003.

1. Litigation Claims.

In addition to the foregoing assets, the Debtor has claims for monies owed against certain entities and individuals. Those claims will be initiated prior to consummation of the Plan for purposes of recovering money for the estate and operating revenue. In the event the litigation has not been resolved by sale date, the claims will be assigned as part of the assets of the Debtor being sold.

The Debtor intends to sell all of its remaining assets, including the corporate entity, through a two phase sale process that is designed to maximize return for creditors, minimize expense, and potentially provide equity holders with a residual value in the event of sale of the corporate entity, which will be stripped of all assets and liabilities through this Plan.

G. Bar Date and Claims.

The Bankruptcy Court has set April 10, 2003, as the last day for holders of claims against Medinex to file their proofs of claim. The Debtor anticipates that the total amount of claims (both secured and unsecured), including those arising from its prior subsidiaries, will total in excess of $3,000,000. It is estimated that $1,650,000 of the total debt is disputed and will be disallowed.

H. Defined Benefit Plan.

The Company does not have a defined benefit pension plan. Some officers and directors were promised or granted stock options which are now worthless.

IV. THE PLAN

The Debtor believes that through this Plan the holders of impaired claims will likely obtain a greater recovery than would be available if the Debtor's assets were liquidated under chapter 7 of the Bankruptcy Code. In a Chapter 7 liquidation setting, impaired unsecured claims would not receive a distribution. No other alterative appears feasible to the Debtor at this time.

THE SUMMARY OF THE PLAN SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED PROVISIONS SET FORTH IN THE PLAN, THE TERMS OF WHICH ARE CONTROLLING. The Plan is filed herewith and forms a part of this Disclosure Statement. Capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Plan.

A. General.

The Plan provides for the sale of all of the Debtor's assets, including the corporate operating entity, through a two phase process. The proceeds generated by the sale of assets will be distributed to the holders of Allowed Claims in cash, to the extent funds are available, in the manner more fully described below.

In accordance with the Bankruptcy Code, the Plan classifies claims and equity interests separately and provides separately for each. The treatment of Allowed Claims under the Plan, whether paid or not, will be in full settlement and satisfaction of all such claims.

B. Plan Funding.

After years of pre-petition operations at a negative cash flow and after two months of operations post-petition under a reduced overhead and business operations designed to increase revenue, it has been determined that the Company cannot sustain operations through the projected break even point of October, 2003. Even assuming the Company could somehow sustain operations through additional cash infusions, a Plan of Reorganization based upon future income or investment simply is not feasible and would be to the further detriment of all creditors and existing shareholders. The Debtor has determined it cannot feasibly reorganize using strictly future cash flow to fund a Plan. Accordingly, the Debtor proposes to sell all of its tangible and intangible assets which comprise Medinex Systems, Inc. The sale of assets shall be free and clear of all liens, encumbrances, claims, and interests.

1. Phase I — Sale of Assets by Way of Auction.

On or before March 28, 2003, the Debtor shall sell all of its remaining assets as identified in Exhibit 5 by way of auction to be conducted in the manner set forth at Section B, below. All expenses related to the administration and liquidation of the Debtor's assets shall be paid out of funds available for distribution under this Plan, including cash held on deposit for the Debtor and additional funds paid in accordance with the minimum bid set forth below.

A. Continued Operations.

The Debtor shall continue operating its business through the date of auction and until the auction sale is completely consummated. During the interim period, all operating revenue in excess of operating expenses, if any, shall be held in reserve for distribution under this Plan.

B. Auction.

By way of this Plan, the Debtor intends to conduct an auction on or before March 28, 2003, to sell all of its assets free and clear of all liens, interests, encumbrances, and claims. All such liens, interests, encumbrances, and claims shall attach to the sale of proceeds to the extent and in the priority they exist at the time of sale. All net sale proceeds shall be placed in trust and distributed in accordance with this Plan.

1. Advertising/Notice.

"Notice of Auction" and "Notice of Sale" shall be served to all parties previously expressing an interest in the Debtor's property and upon all prior investors and shareholders. In addition, a copy of the notice of auction or similar notice shall be published in a national business journal at least twice prior to the auction date.

2. Bidder Registration.

All parties desiring to make a minimum bid at the auction to purchase all of the Debtor's assets shall pre-register with Debtor's counsel. In order to pre-register, all bidders must provide the following to Debtor's counsel:

• A complete written disclosure of the prospective bidder's owners and agents.

• A limited financial statement/letter of credit demonstrating the bidder's ability to close a purchase bid in excess of the minimum bid.

• A refundable bid deposit in the amount of $20,000.00, with the exception of entities making credit bids. Presently, the only recognized secured claim entitled to make a "credit bid" is that of the Weaver Trust to the extent funds are advanced under the DIP Note.

The foregoing, including bid deposit, must be received from all prospective bidders by close of business five (5) days prior to the Auction Date.

3. Auction Date.

The auction shall be held on or before March 28, 2003. The auction shall be conducted by the Debtor's counsel at the law firm of Crumb Munding, P.S. 601 W. Riverside, Suite 1950, Spokane, WA 99201, and all registered bidders shall be notified of the exact procedure for the auction.

The current minimum bid amount is $217,500. See Exhibit 6 hereto for a breakdown of the minimum bid. The foregoing minimum bid is an estimate and subject to increase at time of auction to account for interest and penalty accrual related to taxes and secured liens.

Charles and Donna Weaver Trust has already committed to making the minimum bid set forth below at Section 4 herein. However, any registered bidder is allowed to open the auction with a matching minimum bid.

4. Minimum Bid and Overbid.

The minimum opening bid at the auction may be made by any registered bidder as follows:

1. The amount of the DIP Financing Agreement lien, which is estimated to be $145,000.

2. All administrative fees and costs as of the date of the auction, including the $25,000.00 administrative carve out. That amount is estimated at $47,500. Said payment of administrative expenses is subject to approval by the Court pursuant to the procedure for approval of administrative claims outlined in this Disclosure Statement and the Plan.

3. The sum of $25,000 which is earmarked for direct distribution to Class 2 Priority Tax Claims of the State of Idaho. The payment of $25,000 is conditioned upon the State of Idaho accepting said payment as payment in full accord and satisfaction of debt obligations in the event no additional funds are generated at auction for distribution.

* All bids thereafter shall exceed the minimum bid by at least $5,000.

** As part of their bid, any unsecured creditor may remove their claim against the Debtor from distribution of proceeds. However, no monetary consideration will be given towards the bid amount.

C. Bid Price/Refundable Deposit.

A successful bidder at the auction shall have two (2) business days following the Auction Date to provide all funds necessary to consummate the auction sale. Funds shall be wired or sent by certified check. In the event the high bidder is unable to produce such money to close the transaction, their bid deposit shall become non-refundable. In such event, the next highest bidder shall have the option of purchasing the property at the next highest price.

All remaining bid deposits shall be returned within seven (7) business days of the auction date.

2. Phase II.

It is recognized that Medinex Systems, Inc., is a publicly traded company in full compliance with all reporting requirements of the U.S. Securities and Exchange Commission. As such, the corporate entity/corporate shell of Medinex Systems, Inc., with existing unissued shares may have value to another company seeking to acquire a company that is already publicly traded. The value to the company seeking to acquire the Medinex corporate entity would be in the cost savings associated with not having to register a new company with the Securities and Exchange Commission.

The sale of the stripped corporate entity would take place by way of a merger/consolidation of Medinex Systems, Inc.'s corporate entity and the new prospective purchaser. Medinex would sell/issue to the purchaser its unissued common stock. The existing issued common stock would also have to be severely diluted through a reverse stock split.

It is anticipated that the proposed transfer will require an 80% or greater change in control of the ownership of the Company. As such, the Debtor will have to rely upon the broad powers of the Bankruptcy Court to accomplish a reverse stock split of outstanding shares of Common Stock. Furthermore, existing unissued stock of the corporation will need to be issued to the extent necessary to complete the merger/change of control.

Section 1145 of the Code exempts securities transactions in exchange for claims. However, to avoid any potential problems, a registration of the shares to be issued should take place.

The approval of the Plan will be deemed to be approval of the merger/sale of shares and dilution of existing common stock just as if a shareholders meeting had been called and approved the merger pursuant to the Bylaws of Medinex and in accordance with Delaware law.

In order to maximize potential funds available for distribution, the Debtor will explore, market, and attempt to consummate a sale/merger through transfer of unissued shares of Medinex to a purchaser. The Debtor will start seeking offers immediately.

The transaction would be administratively taxing and complicated. It is estimated that administrative costs will run as high as $20,000. As such, only upon receipt of a minimum verified and committed offer for purchase of at least $50,000 will the Debtor proceed with a sale of the unissued stock, the dilution of equity interest through a reverse stock split, and consummation of the merger of debt stripped operating corporate entity.

1. Distribution of Proceeds.

Any funds derived from a controlled sale of the corporate entity/shell will be distributed to creditors in accordance with the Plan as described below.

2. Cancellation of Common Stock in the Event of No Offers to Purchase.

In the event a minimum offer to purchase/merge the operating shell of the corporate entity is not received within twenty (20) days after the Effective Date of the Plan, all Common Stock shall be automatically cancelled. No holder of Common Stock shall receive or retain any property under the Plan on account of Common Stock. EQUITY WILL NOT RETAIN OWNERSHIP OR RECEIVE DISTRIBUTION UNDER THE PLAN.

C. Continued Operations.

The Debtor shall continue to operate its business affairs during the course of this reorganization and post confirmation. The Company shall remain a publicly traded company and maintain current reporting to the Securities and Exchange Commission during the consummation of the Plan or until further order of this Court.

D. Litigation as to Secured Status of Weaver Loan.

The secured status of the pre-petition loan to the Company made by the Charles and Donna Weaver Trust in the amount of $791,000 will not be challenged or set aside through this Plan of Reorganization. For purposes of this Plan only, the Weaver Trust has agreed to be treated as a general unsecured claim for purposes of distribution. The Weaver Trust reserves the right to withdraw its claim from distribution and assume the liability should it or one of its related entities be the successful bidder at auction.

E. Unclassified Claims.

1. Administrative Claims. a. Nature and Amounts.

Administrative Claims generally are comprised of the actual and necessary costs and expenses of preserving the Estate and operating the Debtor's business after the Petition Date. Because Administrative Claims result from matters that occur after the Petition Date and continue through the Effective Date, the Debtor is not presently in a position to estimate the total amount of Administrative Claims that will eventually be allowed in the Reorganization Case.

The Debtor is presently aware of at least three types of Administrative Claims that may exist in this case. The first type consists of debt incurred by the Debtor in the ordinary course of its business since the Petition Date, including trade debt and operational expenses. Such Administrative Claims have been and will continue to be paid currently by the Debtor pursuant to the terms and conditions of a particular transaction giving rise to such Administrative Claim.

The second type of Administrative Claim consists of Administrative Claims of governmental units for taxes and penalties and/or interest on such taxes. The Debtor is not in a position to estimate the amount of such claims (if any) because no tax returns have been filed to date. The Debtor in Possession has, however, timely satisfied all tax obligations for payroll, sales and excise taxes incurred since the Petition Date.

The third type of Administrative Claims consist of claims for fees and expenses as allowed by order of the Bankruptcy Court for (a) professionals employed by the Debtor, (b) professionals employed by the Committee; and (c) expenses incurred by other parties making a "substantial contribution" in the Chapter 11 Case. These Administrative Claims will run through and including the Effective Date and, consequently, the Debtor is not in a position to estimate the total amount of Allowed Administrative Claims in this category. All Administrative Claims of professionals employed at the expense of the Estate will be subject to allowance by the Bankruptcy Court pursuant to Bankruptcy Code sections 330 and 331. The Debtor is not presently aware of the extent to which any party in interest may seek compensation for making a "substantial contribution" in the Chapter 11 Case under section 503(b) of the Bankruptcy Code.

Pursuant to Section 503(b)(2) of the Bankruptcy Code, compensation and reimbursement of expenses and such amounts to be paid (after application of retainers) to the following professionals, for the period commencing with the filing of the case and ending no later than some time in 2003, as set forth below:

John D. Munding Bankruptcy Counsel for Estimated Crumb Munding, P.S. Debtor Fees: $40,000.00 Costs: $7,500.00

Currently, administrative expenses exceed the administrative carve out provided for in the DIP Note.

b. Bar Date for Administrative Claims.

i. General Provisions.

Except for (i) non-tax liabilities incurred in the ordinary course of business by the Debtor in Possession, and (ii) claims by governmental units for payment of taxes (and interest and/or penalties related to such taxes), all requests for payment of Administrative Claims must be filed and served on counsel for the Debtor and any other party specifically requesting a copy in writing, no later than thirty (30) days after the Effective Date.

Holders of Administrative Claims (including professionals requesting compensation or reimbursement of expenses and the holders of any claims for taxes) that are required to file a request for payment of such claims and that do not file and serve such requests by the applicable bar date shall be FOREVER BARRED from asserting such claims against the Debtor or its property.

ii. Professionals' Fees and Requests for "Substantial Contribution."

All professionals or other entities requesting compensation or reimbursement of expenses pursuant to Bankruptcy Code sections 327, 328, 330, 331, 503(b), or 1103 for services rendered before the Effective Date (including any compensation requested by any professional or any other entity for making a substantial contribution in the Chapter 11 Case) shall file and serve on counsel for the Debtor and any other party specifically requesting a copy in writing an application for final allowance of compensation and reimbursement of expenses no later than thirty (30) days after the Effective Date. Any interested party desiring to object to applications of professionals for compensation or reimbursement of expenses must file and serve its objection on the Debtor and the professionals to whose application the objections are addressed in accordance with Local Rules. Debtor does not anticipate any such claims.

iii. Administrative Ordinary Course Liabilities.

Holders of Administrative Claims based on liabilities incurred in the ordinary course of the Debtor's business (other than claims of governmental units for taxes (and interest or penalties related to such taxes)) shall not be required to file any request for payment of such claims. Such Administrative Claims, unless objected to by the Debtor or the Committee shall be assumed and paid by the Debtor pursuant to the terms and conditions of the particular transaction giving rise to such Administrative Claim. Debtor does not anticipate any such claims.

iv. Administrative Tax Claims.

All requests for payment of Administrative Claims by a governmental unit for taxes (and for interest and/or penalties related to such taxes) for any tax year or period, all or any portion of which occurs or falls within the period from and including the Petition Date through and including the Effective Date ("Postpetition Tax Claims") and for which no bar date has otherwise been previously established, must be filed and served on the Debtor, and any other party specifically requesting a copy in writing on or before the later of (i) ten (10) days following the Effective Date; and (ii) 120 days following the filing of the tax return for such taxes for such tax year or period with the applicable governmental unit, unless an application is filed under 11 U.S.C. § 505 (b), and if such application is filed, the sixty-first (61st) day after the filing of such application. Any holder of any Postpetition Tax Claim that is required to file a request for payment of such taxes and does not file and properly serve such a claim by the applicable bar date shall be forever barred from asserting any such Postpetition Tax Claim against the Debtor or its property, regardless whether any such Postpetition Tax Claim is deemed to arise prior to, on, or subsequent to the Effective Date. Any interested party desiring to object to an Administrative Claim for taxes must file and serve its objection on counsel to the Debtor, the Committee, and the relevant taxing authority no later than the deadline for objecting to Administrative Claims.

c. Treatment.

On the Initial Distribution Date, the Reorganized Debtor shall pay each Allowed Administrative Claim in full from Plan funds unless otherwise agreed to.

F. Classification and Treatment of Claims and Interests.

1. Class 1 — DIP Credit Agreement Claims.

Class 1 is impaired under the Plan and consequently, the holder of the Allowed Class 1 Claim is entitled to vote on this Plan. The legal, equitable and contractual rights of the holder of the Allowed Class 1 Claim, the Weaver Trust, will have its Class 1 Secured Claim in the amount equal to the amount advanced under the DIP Financing Order, with interest to the extent funds are available from auction. It is anticipated that Class 1 will be paid in full from Cash Available, post Auction.

Class 1 shall continue to receive monthly payments pursuant to the DIP Note and DIP Financing Order until close of auction.

2. Class 2 — Priority Tax Claims.

Priority tax claims include certain unsecured income, employment, and other taxes described by Code § 507(a)(8). The Code requires that each holder of a § 507(a)(8) priority tax claim receive the present value of such claim in deferred cash payments, over a period not exceeding six years from the date of the assessment of such tax.

The Class 2 claim of the State of Idaho is presently disputed as to amount. The State of Idaho shall be paid, without penalties, on the Initial Distribution Date under the Plan using Plan funds available, if any.

Class 2 consists of the claim of the State of Idaho, which is presently disputed as to amount only. Class 2 is impaired under the Plan and, consequently, the holder of a Class 2 Claim is entitled to vote on this Plan. On the Distribution Date, the State of Idaho will receive a distribution to the extent of its allowed claim, with remaining funds available after payment of administrative expenses, the Class 1 Claim, and the Class 3 Claim to the extent it is secured. Class 2 is impaired and shall be entitled to vote on the Plan.

3. Class 3 — Secured Claims.

Class 3 consists of the pre-petition secured claim of the Charles and Donna Weaver Trust dated November 16, 1989. The secured status of the claim of the Weaver Trust is in question. Class 3 is impaired under the Plan and, consequently, the holder of the sole Allowed Class 3 Claim is entitled to vote on this Plan.

For purposes of this Plan only, the secured status of the pre-petition claim of Weaver Trust will be treated as a general unsecured claim as set forth in Class 4. It is understood that Weaver Trust has agreed to waive its secured claim status as to pre-petition debt in order to minimize administrative expense and provide an opportunity for distribution to priority tax claims and general unsecured claims. As such, on the Distribution Date, Weaver Trust shall receive a pro rata distribution of final Cash Available in equal percentages with Class 4 allowed claims.

4. Class 4 — Unsecured Claims.

Class 4 consists of Allowed Unsecured Claims which are other than Administrative Claims, and Priority Tax Claims.

The Debtor estimates that the aggregate outstanding amount of Allowed Claims in Class 4, as of the Effective Date, will be in the range of $500,000 to $700,000. Class 4 is impaired under the Plan, and consequently, the holders of Allowed Class 4 Claims are entitled to vote on this Plan.

On the Distribution Date, each holder of an Allowed Class 4 Claim as of the Distribution Date will receive a pro rata distribution of final Available Cash. Class 4 will only receive a distribution under this Plan upon payment in full of all administrative expenses, Class 1, Class 2, and Class 3 Claims. Class 4 is impaired under the Plan and, consequently, the holders of Allowed Class 4 Claims are entitled to vote on this Plan.

Percentage distribution to Class 4 is entirely dependent upon the outcome of claims litigation between Medinex and holders of disputed claims. Allowed Class 4 Claims will be paid on a pro rata basis, without interest, with remaining Plan fund, if any, available after payment of all other allowed claims.

5. Class 5 — Equity Interests.

Class 5 consists of the issued and outstanding shares of Common Stock of the Company as currently shown on the Company's share registry. Class 5 is impaired as the shares of Common Stock will be modified and diluted by this Plan at reorganization.

Class 5 will not receive or retain any property under this Plan other than an equity interest in the "shell" corporation that survives after the auction of all assets. The "corporate shell" is the continuing reporting entity for securities matters, including reporting, history, articles of incorporation, and bylaws. The essential nature of the value is the trading base of outstanding common stock. The Company "shell," including diluted common stock interest of Class 5, shall be sold to the highest bidder of a subsequent separate auction. All proceeds derived through such auction shall be distributed in accordance with the terms of distribution contained in this Plan. A subsequent auction of the corporate shell shall only occur upon receipt of a minimum qualified bid of at least $50,000. In the event a minimum qualified bid is not received, all common stock shall be cancelled.

Class 5 is impaired under this Plan and, consequently, the holders of Allowed Class 5 Claims are entitled to vote on this Plan. For purposes of voting for or against this Plan, shares shall be valued at $.01 per share of existing Common Stock.

G. Summary of Certain Other Provisions of The Plan.

1. Executory Contracts And Unexpired Leases.

Subject to the approval of the Bankruptcy Court, the Bankruptcy Code empowers the debtor in possession to assume, assume and assign, or reject executory contracts and unexpired leases. As a general matter, an "executory contract" is a contract under which material performance (other than the payment of money) is due by each party. If an executory contract or unexpired lease is rejected by the debtor in possession. the other party to the agreement may file a claim for any damages incurred by reason of the rejection. In the case of rejection of employment agreements and leases of real property, such damage claims are subject to certain limitations imposed by the Bankruptcy Code. If an executory contract or unexpired lease is assumed, the debtor generally has the obligation to perform its obligations thereunder in accordance with the terms of such agreement. If an executory contract is assumed and assigned, the assignee generally has the obligation to perform the obligations of the debtor thereunder in accordance with the terms of such agreement.

a. Assumption of Real Property Lease.

The debtor has remained current on all lease obligations currently occupied.

b. Rejection.

Effective immediately before the Effective Date, all executory contracts or unexpired leases of the Debtor that have not previously been assumed or rejected by the Debtor in Possession and that are not assumed pursuant to Section IV.B. of the Plan are rejected, to the extent (if any) that they constitute executory contracts or unexpired leases, and without conceding that they constitute executory contracts or unexpired leases or that the Debtor has any liability under them.

The Confirmation Order shall constitute an Order of the Bankruptcy Court approving all such rejections as of the Effective Date. Any claim for damages arising from the rejection under the Plan of an executory contract or unexpired lease must be filed within thirty (30) days after the Effective Date or be forever barred and unenforceable against the Debtor and its properties and barred from receiving any distribution under the Plan. 2. Sale of Assets, Wind Up.

The Debtor shall liquidate and reduce to cash all of the estate's assets and attempt to maximize any value in the debt stripped corporate entity for the benefit of creditors as expeditiously as possible, in a manner consist with the realization of fair value for such assets.

In the event the corporate shell does not generate any offers for purchase, the Company shall be dissolved and wound up as soon as feasible after the Final Decree.

3. Retention of Jurisdiction.

The Plan provides for the retention by the Bankruptcy Court of jurisdiction over the Chapter 11 Case as specified in the Plan.

4. Amendment And Revocation of The Plan.

The Debtor may amend or modify the Plan before or after the Effective Date in accordance with the Plan and provisions of section 1127 of the Bankruptcy Code subject to the written consent of the Committee. The Debtor may revoke or withdraw the Plan at any time prior to Confirmation.

5. Limitation of Liability.

As specified in section 1125(e) of the Bankruptcy Code, persons who solicit acceptances or rejections of the Plan in good faith and in compliance with the applicable provisions of the Bankruptcy Code, are not liable, on account of such solicitation or participation, for violation of any applicable law, rule, or regulation governing the solicitation of acceptances or rejections of the Plan. Except as otherwise provided in any Operative Document, neither the Debtor nor any of its respective employees, officers, directors, shareholders, agents, or representatives, nor any professional persons employed by the Debtor, the debtor-in-possession, shall have or incur any liability to any person or entity for any act taken or omission made in good faith in connection with or related to negotiating, formulating, implementing, confirming, or consummating the Plan, this Disclosure Statement, or any contract, instrument, security, release, or other agreement, instrument or document created in connection with the Plan.

6. Rights of Action; Preferences.

Except as otherwise specified in this Plan, the Confirmation Order or the Operative Documents, or any contract, instrument, release or other agreement entered into accordance with the Plan, any and all rights and causes of action accruing to the Debtor or its estate will remain assets of and re-vest in the Debtor, whether or not litigation relating thereto is pending on the Effective Date. The Debtor may pursue all rights and causes of action, in accordance with what is in the best interests, and for the benefit, of holders of Allowed Claims under the Plan. The Debtor does not waive, relinquish, or abandon any right or cause of action which constitutes property of the Debtor's estate, whether or not such right or cause of action has been listed or referred to in the Schedules or in this Disclosure Statement and whether or not such right or cause of action is currently known to the Debtor.

a. Potential Disputed Claims.

The Debtor intends to commence a detailed analysis of the disputed claims which are anticipated to be filed in this case. This analysis will not be completed until after the Claims Bar Date. All holders of disputed claims shall be notified by separate notice.

b. Potential Preferential Transfers.

The Debtor is Investigating preferential transfers during the year prior to the commencement of this bankruptcy proceeding. The Debtor anticipates action to avoid or recover property pursuant to sections 547 or 550 of the Bankruptcy Code if necessary.

c. Recovery of Property.

The Debtor believes it is entitled to the sum of approximately $53,000 which currently is held in escrow controlled by the State of Florida and State of New York. The money is subject to claim of various entities. The Debtor intends to seek release of said money.

Any items of the Debtor's personal property are presently believed to be in the possession of third parties. The Debtor shall institute the necessary legal actions to recover such property.

The Debtor also believes that certain payments were made with company money for the benefit of insiders. The Debtor intends to pursue these claims if necessary. The value of said claim is $1,538.32 or more. These claims are still being investigated.

The Debtor also believes it has a claim in an amount of approximately $39,547 against a company called Votenet arising from a prior sale of the Company's subsidiaries and a prior commercial lease deposit that was required to be returned.

d. Litigation Pending.

With respect to all other pending litigation, it shall be resolved by way of the claims process and the Plan. All other pending litigation shall be deemed dismissed upon confirmation of the Plan. The claims of such litigants shall be deemed disputed Unsecured Claims.

H. Corporate Matters Regarding the Debtor.

1. Dissolution and Wind Down.

As of the Effective Date, the Debtor will continue to be governed by its board of directors as provided for in the existing certificate of incorporation and by-laws. The board of directors is authorized to take all actions necessary to effect the liquidation of the Remaining Assets and the wind down of the Debtor.

2. Management.

The Debtor is currently managed by Colin Christie, CEO of the Debtor. Colin Christie will continue to receive compensation and as previously approved by the Court will continue to do so throughout the reorganization process.

Mr. Christie shall oversee the sale of the Debtor's assets and the overall operations of the Debtor. The day-to-day management of the Debtor will continue to be the responsibility of the Board and officers.

Mr. Christie shall have the authority to take all action necessary to effectuate the terms and conditions of the Plan.

3. Indemnification of Officers and Directors of the Debtor/Release.

Under Section 145 of the General Corporation Law of the State of Delaware, a Delaware corporation has the power, under specified circumstances, to indemnify its directors, officers, employees, and agents in connection with actions, suits, or proceedings brought against them by a third party or in the right of the corporation, by reason of the fact that they were or are such directors, officers, employees, or agents, against liabilities and expenses incurred in any such action, suit or proceeding. The bylaws provide that the Company shall indemnify its present and future officers and directors to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware. In addition, under the Plan, all directors, officers, employees, and agents shall be released and discharged from all liability, responsibilities, and obligations related to and arising from and in connection with pre-petition debt, equity, financing activities, and the Chapter 11 Case.

1. Nondischarge of Debtor, Injunction, Other Releases And Limitation of Liability.

While the Plan does not provide for the discharge of the Debtor, it does provide for an injunction of certain actions against the Debtor, its successors or respective property, and releases of and limitation of liability for the Debtor's present and former directors and officers. THE PROVISIONS GOVERNING THE DISCHARGE, INJUNCTION, RELEASES AND LIMITATION OF LIABILITY ARE LONG AND COMPLICATED AND NOT EASILY SUBJECT TO SUMMARY. PARTIES IN INTEREST SHOULD MAKE REFERENCE TO THE PLAN. J. Exemption From Certain Transfer Taxes And Further Transactions.

Pursuant to section 1146(c) of the Bankruptcy Code, the issuance or exchange of any security, or the making or delivery of any instrument of transfer under, in furtherance, or in connection with the Plan, including, but not limited to, any deeds, bills of sale, assignments or other instruments of transfer, shall not be subject to any stamp tax, real estate transfer tax or similar tax.

K. Corporate Action and Effectuating Documents.

The liquidation of the Debtor and the other matters provided for under the Plan involving the corporate structure of the Debtor or corporate action to be taken by or required of the Debtor shall be deemed to have occurred and be effective as provided herein and shall be authorized and approved in all respects, without any requirement of further action by stockholders or directors of the Debtor. The Debtor shall be authorized to execute, deliver, file or record any Operative Document and take such other action as may be necessary to effectuate and further evidence the terms and conditions of the Plan.

L. Revesting of Assets.

Except as otherwise provided in the Plan or any Operative Documents, on the Effective Date all property of the Estate (including all causes of action), shall revest in the Debtor free and clear of all claims, liens, charges, encumbrances and interests of creditors and equity security holders, for distribution in accordance with this Plan. As of the Effective Date, the Debtor may conduct its affairs and use, acquire, and dispose of property and settle and compromise claims or interests without supervision by the Bankruptcy Court and free of any restrictions of the Bankruptcy Code or Bankruptcy Rules, other than those restrictions expressly imposed by this Plan and the Confirmation Order. Without limiting the foregoing, the Debtor may pay the reasonable charges that it incurs after the Effective Date for professional fees, disbursements, expenses (including claims litigation expense) or related support services without application to the Bankruptcy Court.

M. Distribution of Funds/Claims Litigation.

1. Prosecution of Objections To Claims. a. Time To Object.

Unless another date is established in the Plan by the Bankruptcy Court, any objection to a claim (whether the claim was filed or deemed filed) shall be filed and served on the holder of the claim by the later of: (a) ten days after the Effective Date, and (b) thirty (30) days after the applicable proof of claim (or any amendment thereto) is timely filed and served on the Debtor.

b. Authority To Prosecute Objections.

Unless otherwise ordered by the Bankruptcy Court, only the Debtor shall have the sole authority to file objections to, settle, compromise, withdraw or litigate to judgment Disputed Claims. On and after the Effective Date, the Debtor (in the case of an objection filed by the Debtor) may settle or compromise any Disputed Claim subject to the final approval of the Bankruptcy Court.

2. Disbursing Agent.

The Debtor, through Debtor's counsel, shall act as Disbursing Agent under this Plan and make all distributions required under this Plan. Unless otherwise determined, the Debtor and counsel shall serve without bond.

3. Distributions.

a. Distribution Dates. (i) Initial Distributions to Classes 2 and 4.

Notwithstanding anything to the contrary contained herein, no distributions will be made under this Plan on account of any claim until the "Initial Distribution Date," which, with regard to any individual claim in Classes 2 and 4, shall (unless the Debtor and the Committee agree otherwise) be the latest of the following: (a) as soon as practicable after the Effective Date, but in no event more than one hundred twenty (120) days after the Effective Date; (b) as soon as practicable after the day upon which such claim becomes an Allowed Claim, but in no event more than one hundred twenty (120) days after the entry of a Final Order allowing such claim; or (c) the date upon which the claim became due and payable under applicable non-bankruptcy law.

Due to anticipated claims litigation, the Debtor may seek an extension of time to make distributions as necessary to effectuate Class 4 distribution on a pro rata basis.

(ii) Subsequent Distributions to Holders of Allowed Class 4 Claims.

Upon payment of administrative expenses, all allowed Class 1, 2 and 3 claims, the Plan funds that remain shall be set aside in a separate account to pay allowed Class 4 claims. Within 60 days of resolution of all Class 4 claims litigation, the reorganized Debtor shall effect a pro rata distribution to holders of all Allowed Class 4 Claims from the funds remaining available for distribution.

Claims dispute resolution is anticipated to take at least 120 days from the Effective Date of the Plan. However, the actual amount of distribution is entirely dependent upon the amount of allowed claims and funds available for distribution as derived form the sale of the Debtor's assets.

b. Delivery of Distributions.

Distributions to holders of Allowed Claims shall be distributed by mail as follows: (1) at the addresses set forth on the respective proofs of claim by such holders; (2) at the addresses set forth in any written notices of address changes delivered to the Debtor after the date of any related proof of claim; or (3) at the address reflected on the Schedules if no proof of claim or proof of interest is filed and the Debtor has not received a written notice of a change of address.

c. Unclaimed Distributions.

The Disbursing Agent will hold until the first anniversary of the Effective Date any unclaimed distributions to be made to the holders of Allowed Claims under this Plan. Any unclaimed cash will be deposited in trust for the sole benefit of the holders of the Allowed Claims who have failed to claim such property. Upon the second anniversary of the Effective Date, any unclaimed distributions to be made to holders of Allowed Claims will be turned over to the reorganized Debtor.

d. Manner of Payment Under The Plan.

Cash payments made pursuant to the Plan shall be in United States dollars by checks drawn on a domestic bank selected by the Debtor or by wire transfer from a domestic bank, at Debtor's option. Said cash payments do not include "credit bids."

e. Compliance With Tax Requirements.

In connection with the Plan, to the extent applicable, the Debtor shall comply with all withholding and reporting requirements imposed on it by any governmental unit, and all distributions pursuant to the Plan shall be subject to such withholding and reporting requirements.

4. Disputed Claims.

a. No Distributions.

Except as approved by the Court with respect to any Disputed Claim, no payment or distribution will be made with respect to all or a portion of any Disputed Claim until such claim is an Allowed Claim. Payments and distributions to each holder of a Disputed Claim (to the extent that it ultimately becomes an Allowed Claim) will be made in accordance with this Plan.

5. Liquidation Provision/Foreclosure Remedy.

In the event there is a substantial default by the Reorganized Debtor in the consummation of the Plan, the secured DIP lender Weaver Trust shall be authorized to immediately commence an election of remedies under applicable status law to foreclose upon its secured interest in Debtor's assets,

V. CERTAIN FEDERAL INCOME TAX CONSEQUENCES

A. Introduction.

The implementation of the Plan may have federal, state and local tax consequences to Debtor and Debtor's creditors and stockholders. No tax opinion has been sought or will be obtained with respect to any tax consequences of the Plan. This Disclosure Statement does not constitute and is not intended to constitute either a tax opinion or tax advice to any person, and the summary contained herein is provided for informational purposes only.

The discussion below summarizes only certain of the federal income tax consequences associated with the Plan's implementation. This discussion does not attempt to comment on all aspects of the federal income tax consequences associated with the Plan, nor does it attempt to consider various facts or limitations applicable to any particular creditor or stockholder which may modify or alter the consequences described herein. This discussion does not address or alter the consequences described herein. This discussion does not address state, local or foreign tax consequences or the consequences of any federal tax other than the federal income tax.

The following discussion is based upon the provisions of the Internal Revenue Code, the regulations promulgated thereunder, existing judicial decisions and administrative rulings. In light of the numerous recent amendments to the Internal Revenue Code, no assurance can be given that legislative, judicial or administrative changes will not be forthcoming that would affect the accuracy of the discussion below. Any such changes could be material and could be retroactive with respect to the transactions entered into or completed prior to the enactment or promulgation thereof. The tax consequences of certain aspects of the Plan are uncertain due to the lack of applicable legal authority and may be subject to judicial or administrative interpretations that differ from the discussion below.

CREDITORS AND STOCKHOLDERS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES TO THEM AND TO DEBTOR OF THE TRANSACTIONS CONTEMPLATED BY THE PLAN, INCLUDING FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES.

B. Federal Income Tax Consequences To Debtor.

Section 368 defines certain tax reorganizations under the Internal Revenue Code, including reorganizations under the Bankruptcy Code. Tax reorganizations usually involve exchanges of stock and tax securities in which the issuing corporation (or another corporation that is a party to the reorganization) and the holders of stock and tax securities participate.

Debtor does not believe that the transactions contemplated by the Plan constitute a tax reorganization.

1. Net Operating Losses.

a. General.

The Debtor's net operating loss ("NOL") and NOL carryovers aggregate approximately $47 million. However, the actual NOL for IRS purposes is approximately $33 million. Debtor's NOL and NOL carryover amounts are subject to review and significant adjustment upon audit by the IRS. In addition, the foregoing estimates of the Debtor's NOLs and NOL carryovers are subject to legal and factual uncertainty.

b. Section 382.

Internal Revenue Code section 382 places potentially severe limitations upon the use of a corporation's NOLs, NOL carryovers, and certain other tax attributes if an "ownership change" occurs with respect to such corporation's stock Based upon Plan provisions that provide for the dilution or cancellation of all stock interests in Debtor, the Debtor believes that an "ownership change" under Internal Revenue Code section 382 will occur under the Plan. It should also be recognized that shifts (deemed or actual) in the ownership of Debtor's stock may occur outside the context of the Plan and that such owner shifts may trigger (or may have already triggered) an "ownership change" under Internal Revenue Code section 382. Moreover, Debtor may not learn that an "ownership change" has occurred until after the fact (some times months after the fact). Because the federal income tax consequences of any such "ownership change" or owner shift would depend on the particular facts and circumstances at such time and the application of complex legislation and regulations, Debtor expresses no views as to the effect of any transactions outside the scope of the Plan. The Debtor expects the survival of any NOLs to be extremely diminimus in nature if the corporate entity is purchased as described in Phase II, other carryovers, and tax attributes to the reorganized Debtor.

2. Reduction of Indebtedness.

As a result of the Plan's implementation, a portion of Debtor's aggregate outstanding indebtedness may be considered discharged for tax purposes (although not for bankruptcy purposes) to the extent a creditor holding a claim constituting indebtedness for tax purposes fails to file a proof of claim and thereafter does not recover such claim. (Any amount of discharged indebtedness for tax purposes will be referred to herein as a "Debt Discharge Amount.")

In general, the Internal Revenue Code provides that a taxpayer must include the Debt Discharge Amount in its gross income in the taxable year of discharge to the extent that the Debt Discharge Amount exceeds any consideration given for such discharge. No income from the discharge of indebtedness is realized to the extent that payment of the liability being discharged would have given rise to a deduction

If a taxpayer is in a case under Title 11 of the United States Code and the discharge of indebtedness occurs pursuant to a plan approved by the court, such discharge of indebtedness is specifically excluded from gross income. A discharge of indebtedness may also be excludable from gross income if it occurs when the debtor is insolvent.

Debtor will not receive a discharge pursuant to the Plan. However, it is likely Debtor will be insolvent on the Effective Date. Accordingly, Debtor likely will be entitled to exclude from income any Debt Discharge Amount as a result of the implementation of the Plan.

The Internal Revenue Code requires certain tax attributes of Debtor to be reduced by the Debt Discharge Amount excluded from income. Tax attributes are reduced in the following order of priority: net operating losses and net operating loss carryovers; general business credits; minimum tax credits; capital loss carryovers; basis of property of the taxpayer; passive activity loss or credit carryovers; and foreign tax credit carryovers. Tax attributes are generally reduced by one dollar for each dollar excluded from gross income, except that general tax credits, minimum tax credits and foreign tax credits are reduced by 33.3 cents for each dollar excluded from gross income.

An election can be made to alter the order of priority of attribute reduction by first applying the reduction against depreciable property held by the taxpayer in an amount not to exceed the aggregate adjusted basis of such property. Debtor has yet decided whether to make such election. The deadline for making such election is the due date (including extensions) of Debtor's federal income tax return for the taxable year in which such debt is discharged pursuant to the Plan.

C. Tax Consequences To Creditors.

The tax consequences of the Plan's implementation to a creditor will depend on whether the creditor reports income on the cash or accrual method, whether the creditor receives consideration in more than one tax year of the creditor, and whether all the consideration received by the creditor is deemed to be received by that creditor in an integrated transaction. Certain tax consequences upon the receipt of cash or other property allocable to interest are discussed below under "Receipt of Interest."

1. Receipt of Interest

Income attributable to accrued but unpaid interest will be treated as ordinary income, regardless of whether the creditor's existing Claims are capital assets in its hands.

A creditor who, under its accounting method, was not previously required to include in income accrued but unpaid interest attributable to existing Claims, and who exchanges its interest Claim for Cash, or other property pursuant to the Plan, will treated as receiving ordinary interest income to the extent of any consideration so received allocable to such interest, regardless of whether that creditor realizes an overall gain or loss as result of the exchange of its existing Claims. A creditor who had previously included in income accrued but unpaid interest attributable to its existing Claims will recognize a loss to the extent such accrued but unpaid interest is not satisfied in full For purposes of the above discussion, "accrued" interest means interest which was accrued while the underlying Claim was held by creditor. The extent to which consideration distributable under the Plan is allocable to such interest is uncertain.

2. Other Tax Considerations.

a. Market Discount.

If a creditor has a lower tax basis in a Debtor obligation than its face amount, the difference may constitute market discount under section 1276 of the Internal Revenue Code. (Certain Debtor obligations are excluded from the operation of this such as obligations with a fixed maturity date not exceeding year from the date of issue, installment obligations to which Internal Revenue Code section 453B applies and, in all likelihood, demand instruments.)

Holders in whose hands Debtor obligations are market discount bonds will be required to treat as ordinary income any gain recognized upon the exchange of such obligations to the extent of the market discount accrued during the holder's period of ownership, unless the holder has elected to include such market discount in income as it accrued.

b. Withholding

The Reorganized Debtor will withhold any amounts required by law from payments made to creditors. This may require payments by certain creditors of the required withholding tax on the non-Cash consideration issuable under the Plan. In addition, creditors may be required to provide general tax information to Reorganized Debtor or a Disbursing Agent.

c. Taxation of Certain Reserves.

Section 468B(g) of the Internal Revenue Code provides that escrow accounts, settlement funds or similar funds are subject to current taxation. It also provides that the IRS shall prescribe regulations for the taxation of any such account or fund, whether as a grantor trust or otherwise. The IRS issued final regulations regarding settlement funds on December 18, 1992. However, such regulations specifically reserve the tax treatment of settlement funds in bankruptcy and the treatment of stock of the issuer to satisfy such obligations. It is thus uncertain as to who is responsible for reporting income generated by the funds in any unclaimed property or Disputed Claims Reserve formed pursuant to the Plan. If any reserves are treated as a grantor trust created by Debtor, then the income generated by such reserves would likely be reported on the Debtor's federal income tax return. If the reserves are not treated as such a grantor trust, they will likely be treated as a partnership for tax purposes. It is also possible that the reserves could be treated as a grantor trust for which the creditor beneficiaries are treated as grantors. In either event, the creditor beneficiaries or creditor partners would be subject to current taxation on the income generated by such reserves. Pursuant to the Plan and related documents, any party responsible for administering such reserves will also be required to file appropriate income tax returns and pay any tax due out of such reserves as a result of any income earned in such reserves.

VI. CONFIRMATION PROCEDURE

In order for the Plan to be confirmed by the Bankruptcy Court, all of the applicable requirements of section 1129 of the Bankruptcy Code must be met. These include, among others, the requirements that the Plan: (i) is accepted by all impaired classes of claims or, if rejected or deemed rejected by an impaired class, "does not discriminate unfairly" and is "fair and equitable" as to each rejecting class; (ii) is feasible; and (iii) is in the "best interest" of holders of claims in each class impaired under the Plan.

A. Solicitation of Votes; Acceptance.

Any holder of a claim in Classes 1 through 5 is entitled to vote if either (i) such holder's claim has been scheduled by the Debtor in the schedules filed with the Bankruptcy Court (provided that such claim has not been scheduled as disputed, contingent, unknown, or unliquidated), or (ii) such holder has filed a proof of claim on or before the deadline fixed by the Bankruptcy Court and such claim is deemed allowed pursuant to section 502 of the Bankruptcy Code or has been allowed by the Bankruptcy Court, unless such claim has been disallowed for voting purposes by the Bankruptcy Court. A vote may be disregarded if the Bankruptcy Court determines, after notice and a hearing, that an acceptance or rejection was not solicited or procured or made in good faith or in accordance with the provisions of the Bankruptcy Code.

The Voting Classes will be deemed to have accepted the Plan if the Plan is accepted by holders of at least two-thirds in dollar amount and more than one-half in number of the claims of each class (excluding certain claims designated under section 1126(e) of the Bankruptcy Code) that have voted to accept or reject the Plan.

B. Confirmation Hearing.

Section 1128(a) of the Bankruptcy Code requires the Bankruptcy Court, after notice, to hold a hearing on confirmation of the Plan after the ballots have been cast. The Confirmation Hearing may be postponed from time to time by the Bankruptcy Court without further notice except for an announcement of the postponement made at the Confirmation Hearing. Section 1128(b) of the Bankruptcy Code provides that any party in interest may object to confirmation of the Plan. Objections must be made in writing, specifying in detail the name and address of the person or entity objecting, the grounds for the objection, and the nature and amount of the claim or Equity Interest held by the objector, and otherwise complying with the requirements of the Bankruptcy Rules and Local Bankruptcy Rules. Objections must be filed with the Clerk of the Bankruptcy Court, with two copies to chambers of the bankruptcy judge, together with proof of service, and served upon the parties so designated in the Notice in the manner set forth therein, on or before the time and date designated in the Notice as being the last date for serving and filing objections to confirmation of the Plan. UNLESS AN OBJECTION TO CONFIRMATION IS TIMELY SERVED AND FILED IN ACCORDANCE WITH THE NOTICE, IT WILL NOT BE CONSIDERED BY THE BANKRUPTCY COURT.

At the Confirmation Hearing, the Bankruptcy Court will determine, among other things, whether the following confirmation requirements specified in section 1129 of the Bankruptcy Code have been satisfied:

1. The Plan complies with the applicable provisions of the Bankruptcy Code.

2. The Debtor has complied with the applicable provisions of the Bankruptcy Code.

3. The Plan has been proposed in good faith and not by any means proscribed by law.

4. Any payment made or promised by the Debtor for services or for costs and expenses in, or in connection with, the Chapter 11 Case, or in connection with the Plan and incident to the Chapter 11 Case, has been disclosed to the Bankruptcy Court, and any such payment made before the confirmation of the Plan is reasonable or, if such payment is to be fixed after the Confirmation of the Plan, such payment is subject to the approval of the Bankruptcy Court as reasonable.

5. Each holder of an impaired claim either has accepted the Plan or will receive or retain under the Plan on account of such holder's claims, property of a value, as of the Distribution Date, that is not less than the amount that such entity would receive or retain if the Debtor were liquidated on such date under chapter 7 of the Bankruptcy Code. See section VI.C. below, "Best Interests Test."

6. Each class of claims has either accepted the Plan or is not impaired under the Plan.

7. Except to the extent that the holder of a particular claim has agreed to a different treatment of such claim, the Plan provides that Allowed Administrative Claims, Allowed Other Priority Claims and Allowed Priority Tax Claims will be paid in full on the Distribution Date.

8. At least one class of claims has accepted the Plan, determined without including any acceptance of the Plan by any insider holding a claim in-such class.

9. All fees payable under section 1930 of title 28 as determined by the Court at the Confirmation Hearing have been paid or the Plan provides for payment of all such fees on the Effective Date, unless otherwise agreed to by the claimants.

The Board of Directors of the Debtor believes that, upon acceptance of the Plan by the Voting Classes, the Plan will satisfy all the statutory requirements of Chapter 11 of the Bankruptcy Code, that the Debtor has complied or will have complied with all of the requirements of Chapter 11, and that the Plan is being proposed and will be submitted to the Bankruptcy Court in good faith.

C. Best Interests Test.

Confirmation requires, among other things, that each holder of a claim in an impaired class and each holder of an interest either: (i) accepts the Plan; or (ii) receives or retains under the Plan property of a value, as of the Effective Date, that is not less than the value such holder would receive or retain if the Debtor was liquidated under chapter 7 of the Bankruptcy Code. This requirement is commonly referred to as the "Best Interests Test".

If this Chapter 11 Case were converted to a Chapter 7 liquidation, the primary difference would be that unsecured creditors would not have any hope of receiving any distribution from the estate and all equity interests would be entirely wiped out with no hope for residual value in the stripped corporate entity.

All administrative expenses of the chapter 7 case, including the trustee's fees (which can be as high as 3% of the total amount collected and disbursed) would have to be paid in full before payment of the unpaid administrative expenses from the prior Chapter 11 Case. Unpaid Chapter 11 administrative expenses would, in turn, be paid in full before any distribution could be made to unsecured creditors. It is unusual for distributions to be made within one year of the appointment of a chapter 7 trustee in a case involving substantial assets or claims. In addition, the chapter 7 trustee would not have the expertise and familiarity with the Debtor's business operations to assist in any litigation that would occur during the claims objection process.

Thus, in a chapter 7 liquidation, it is likely the total liquidation proceeds would be only sufficient to pay administrative claims up to the administrative carve out and a portion of the DIP Note Claim (Class 1). Therefore, the Debtor believes that the Plan satisfies the requirements of the "best interests" test and provides creditors at least as much present value as they would receive in a chapter 7 liquidation. (Attached hereto as Exhibit 7 is a liquidation analysis.)

D. Feasibility And Risk Considerations.

The Bankruptcy Code requires that a plan proponent demonstrate that the consummation of the Plan is not likely to be followed by liquidation or the need for further financial reorganization of the Debtor, unless that liquidation is proposed in the Plan. In the context of a liquidating Chapter 11 plan, the feasibility test essentially requires the proponent demonstrate that it has sufficient ability to make the payments required under the Plan. This Plan is based entirely upon the liquidation of all the Debtor's assets through a controlled sale.

YOU SHOULD CONSULT YOUR LEGAL AND FINANCIAL ADVISORS REGARDING THE RISKS ASSOCIATED WITH THE PLAN AND THE DISTRIBUTIONS YOU MAY RECEIVE THEREUNDER.

E. Classification.

In accordance with Bankruptcy Code section 1122, the Plan provides for the classification of four (4) classes of claims and one class of interests Section 1122(a) permits a plan to place a claim or an interest in a particular class only if the claim or interest is substantially similar to the other claims or interests in that class. The Debtor believes that the classification of claims and interests under the Plan is appropriate and consistent with applicable law.

1. No Unfair Discrimination.

A plan of reorganization "does not discriminate unfairly" if (a) the legal rights of a nonaccepting class are treated in a manner that is consistent with the treatment of other classes whose legal rights are intertwined with those of the nonaccepting class, and (b) no class receives payments in excess of that which it is legally entitled to receive for its claims. Since the Plan funds will not pay the holders of Allowed Classes 1 through 4 Claims in full and the legal rights of such holders are superior to those of the holders of Allowed Interests in Class 5, the Debtor believes that Class 5 is not treated in an unfair discriminatory manner. Moreover, no class of claims will receive payments or property with an aggregate value greater than the aggregate value of the Allowed Claims in such class.

2. Fair And Equitable Test.

The Bankruptcy Code establishes the "fair and equitable" test for holders of interests which provides that such holders must receive on the Effective Date property of a value equal to the greatest of the allowed amount of any fixed liquidation preference or redemption price to which the holder is entitled (or the value of such interest) or no holders of a junior interest may receive or retain anything under the Plan.

VII. SUMMARY OF ADDITIONAL SOURCES OF INFORMATION

Additional sources of information regarding the Debtor and documents relating to the Plan are available to holders of claims and Equity interests. The following is a summary of certain documents and the places they can be reviewed or obtained:

1. Orders of the Bankruptcy Court and related papers pertaining to transactions outside of the Debtors ordinary course of business may be inspected at the office of the Clerk of the Bankruptcy Court at 550 West Fort Street, Room 400, Boise, ID 83724.

2. The Debtor's Schedules of Assets and Liabilities, Statement of Affairs, List of Equity Security Holders, and Schedules of Executory Contracts and Unexpired Leases may be inspected at the office of the Clerk of the Bankruptcy Court, at 550 West Fort Street, Room 400, Boise, ID 83724.

3. Periodic post-Petition financial reports as filed with the United States Trustee may be inspected at the office of the United States Trustee, PC Box 110, Boise, ID 83701.

4. The foregoing documents may also be viewed and copied over the court's website at www.id.uscourts.gov.

VIII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN OF REORGANIZATION

The Debtor believes that the Plan, through a controlled sale, affords holders of Allowed Claims the potential for a fair realization of the value of the Debtor's assets that is more than would be realized under a chapter 7 liquidation and therefore is in the best interest of such holders. The Debtor considered and dismissed alternatives to the Plan. The Debtor has also analyzed the likely results of a liquidation in the context of chapter 7. In the opinion of the Debtor, at this time, no other feasible alternatives presently known to the Debtor would afford holders of Allowed Claims in the Voting Classes the potential returns that may be achieved under the Plan.

If no plan can be confirmed, the Debtor's Chapter 11 Case may be converted to a case under chapter 7 of the Bankruptcy Code, under which a trustee would be appointed to liquidate the Debtor's assets for distribution to creditors in accordance with the priorities established by the Bankruptcy Code. A discussion of the effects that a chapter 7 liquidation would have on the recovery by holders of claims and interests is set forth above, "Best Interests Test." Based on the liquidation analysis discussed in that section, the Debtor believes that a chapter 7 liquidation would not result in distributions to holders of Allowed Unsecured Claims.

THE DEBTOR BELIEVES THAT CONFIRMATION AND IMPLEMENTATION OF THE PLAN IS PREFERABLE TO ANY OF THE ALTERNATIVES DESCRIBED HEREIN BECAUSE IT IS EXPECTED TO PROVIDE GREATER RECOVERIES AND INVOLVE LESS DELAY AND UNCERTAINTY AND LOWER ADMINISTRATIVE COSTS. ACCORDINGLY, THE DEBTOR URGES HOLDERS OF IMPAIRED CLAIMS TO VOTE TO ACCEPT THE PLAN BY SO INDICATING ON THEIR BALLOTS AND RETURNING THEM AS SPECIFIED IN THE NOTICE.

DATED this 29 day of January, 2003.

MEDINEX SYSTEMS, INC. A Delaware corporation

______________________ By: COLIN CHRISTIE Its: CEO

SUBMITTED BY: CRUMB MUNDING, P.S.

__________________________ JOHN D. MUNDING Attorney for Debtor ISBA #04703

THE DEBTOR URGES HOLDERS OF IMPAIRED CLAIMS TO VOTE TO ACCEPT THE PLAN BY SO INDICATING ON THEIR BALLOTS AND RETURNING THEM AS SPECIFIED IN THE NOTICE.

DATED this 29 day of January, 2003.

MEDINEX SYSTEMS, INC. A Delaware corporation

______________________ By: COLIN CHRISTIE Its: CEO

SUBMITTED BY:

______________________________ JOHN D. MUNDING Attorney for Debtor ISBA #04703

Medinex Systems, Inc. 2002 Pro Forma Consolidated Results

Medinex Systems, Inc. Income Statement Cash Basis

EXHIBIT 5 ASSET SUMMARY

A. As to Phase I Sale of Assets Sold at Auction

1. All Accounts Receivable — $111,156

2. All Contingent Claims

• Claim to money held in trust in the amount of $53,088.

• Claim against Votenet, Inc., for $39,547 arising from unreturned deposit of leased facilities at 666 11th Street, 9th Floor, Washington, D.C.

• Claim for reimbursement against Anthony Paquin arising from unauthorized payment of insurance premiums of approximately $1,500.

3. All Patents/Copyrights/Intellectual Property

• Word Marks

Medinex Reg. #2365142, Ser. #75501627

Medinex.Com Reg #2414566, Ser. #75615015

Medinex Reg. #2350799, Ser. #75501628

• Patents (application pending) MX Secure Application #101107,935

• The name Medinex Systems, Inc.

4. All Internet Domains and Related Property

• Registered Internet Domain Names

Medinex.com and Medinex.net

MedinexSystems.com

Mxoffice.net

MxSecure.com

Netivation.com

• Secure Certificates

www.myoffice.net certificate issued by Thawte (Verisign)

www.mxsecure.com certificate issued by Thawte (Verisign)

5. All customer lists, customer agreements, marketing/sales databases

6. All agreements with resellers and consultants

7. All proprietary software, including all source code and object code in all forms and formats, database schemas, database objects, web server code and configuration files, client components, and all documentation. Proprietary software consists primarily of, but is not limited to, the following products and management tools:

• MxSecure product

• MxTranscribe product

• MxSites product

• Medinex Office Suite product

• Proprietary software for workflow management and reporting

8. All servers, computers, software, and office equipment and furnishings located in Florida, Idaho, and Arizona see attached Depreciation Schedule

• Book value: $38,922 (as of 12/31/02)

9. Recorder Inventory — $8,000

10. All current operating bank accounts and other accounts of the Debtor as of the date of auction.

The Debtor's entire interests, rights, title, and claims in the foregoing assets shall be assigned/sold free of all liens, claims, encumbrances, or interest to the highest qualified bidder at auction.

B. Phase II Sale/Corporate Entity

The remaining corporate entity shall be sold pursuant to the issuance of stock as described in the Disclosure Statement and Plan. The corporate shell shall be sold without the right to use the corporate name, Medinex Systems, Inc. The name cannot be used as an operating business trade name.

The sale will include the:

• Reporting history of the Company with the Security and Exchange Commission including securities regulators.

• The existing and modified stock trading base.

• The Articles of Incorporation and existing Bylaws.

ALL OTHER TANGIBLE AND INTANGIBLE ASSETS ARE PART OF THE PHASE I SALE AND ARE NOT PART OF THE PHASE II SALE.

EXHIBIT 6

MINIMUM BID

1. Administration Carve Out. Pursuant to the DIP Note and Order Approving Financing (12/31/02), an administrative carve out of $25,000 was made from secured indebtedness. As such, the administrative carve out of $25,000 is part of the minimum bid.

2. DIP Note. Pursuant to Court Order dated December 31, 2002, the Debtor was authorized to incur secured indebtedness on a super priority basis. As of the date of this Disclosure Statement, the Debtor has drawn down upon $53,500 of the $145,000 authorized. By the date of auction, it is anticipated that the Debtor will draw an additional $91,500. As such, the sum of $145,000 will be included in the minimum bid.

3. Additional Administrative Fxpenses. An amount equal to the outstanding balance of all administrative claims and expenses as of the date of sale, not including those provided for in the administrative carve out.

4. Priority Claim Payment. The amount of $25,000 to be distributed to the State of Idaho in accord and satisfaction of its Class 2 Claim should the minimum bid be the only bid.

EXHIBIT 7 LIQUIDATION ANALYSIS

Tangible Assets

• Accounts Receivable $100,041 (10% no collection assumption)

• Office Equipment $38,922

• Records $8,000

Contingent Claims

• Trust Money $53,088

• Votenet, Inc. $39,547

• Paquin (estimated) $1,500

Intangible Assets

• Word Mars — Medinex Name

• Patent Application — MX Secure

1. Chapter 7

Assuming a Chapter 7 liquidation occurs, a Chapter 7 Trustee will be appointed to administer the Debtor's tangible and intangible assets.

The book value of tangible assets is approximately $145,000. The assets are located throughout the country. As such, the cost of selling all tangible assets could run as high as 20% of their value. Furthermore, it is doubtful that such assets could be sold on a liquidation basis for the book value. Instead, liquidation sale prices generally will bring between 30% to 60% of state value. Assuming best case scenario, the assets could be sold for a price in the range of $60,000 to $85,000. Assuming 20% cost of sale ($16,000) for advertising, auction, insurance, and other related costs, liquidation of the Debtor's tangible assets would only realize $69,000.

Under a best case liquidation scenario, a Chapter 7 Trustee would generate $163,135 assuming all contingent claims paid 100%. However, the Chapter 7 Trustee would also need to be compensated for his/her time and expense (3% gross). Accordingly, the amount of funds available for distribution would be reduced by $4,894, leaving $158,241 available.

The $158,241 of estate funds would be first used to retire the secured debt of $145,000. The remaining balance would be used to partially pay administrative expenses, which already exceed $25,000.

Under a Chapter 7 liquidation setting, there would not be sufficient funds available to pay administrative expenses in full. There would be no distribution to unsecured creditors.

Chapter 11 Sale

The Debtor has already received a commitment for a minimum bid which pays administrative expenses in full and retires all secured DIP financing and makes a substantial distribution towards unsecured priority claims. It is anticipated that the proposed controlled sale of assets through the Plan will solicit offers greater than the minimum bid. As such, priority unsecured creditors and possibly general unsecured will receive even a greater distribution under the Plan.

Furthermore, the proposed sale of the corporate entity (Phase II) may also generate funds for distribution through controlled sale, Because of the continued reporting requirements for the Phase II sale, a Chapter 7 Trustee would not have the ability to continue with Phase II.

MEDINEX SYSTEMS, INC. Balance Sheet As of December 31, 2002

MEDINEX SYSTEMS, INC. U.S. TRUSTEE REPORT BALANCE SHEET DECEMBER 31, 2002

December 31, 2002 (UNAUDITED)

ASSETS

Current Assets

Checking/Savings

Cash and cash equivalents 62,775

Restricted cash 53,179

Accounts Receivable 111,157

Allowane for Doubtful Accounts (5,222)

Inventory-Recorders 8,000

Total Current Assets 229,889

Property and equipment, net 38,922

Investments 3,498

Deposits 9,779

Total Assets 282,088

LIABILITIES EQUITY

Current Liabilities

Accounts Payable 23,279

DIP Financing 53,500

Accrued Expense 132

Accrued Vacation 845

Sales Tax — ID 64,655

Sales Tax — DC 1,076

Total Current Uabilities 143,487

Long Term Liabilities

Pre-Petitlon L.T. Liabilities 3,129,734

Total Long Term Liabilities 3,129,734

Total Liabilities 3,273,221

Equity

Common Stock 213,288

Warrants 40,625

Additional Paid in Capital 44,735,039

Retained Earnings (46,160,165)

Net Income (1,819,919)

Total Equity (2,991,133)

TOTAL LIABILITIES EQUITY 282,088

MEDINEX SYSTEMS INC. U.S. TRUSTEE REPORT CASH BASIS PROFIT AND LOSS STATEMENT MONTH OF DECEMBER 2002

DECEMBER 2002 (UNAUDITED)

Revenues, net 77,465

Total Cost of Revenue 52,693

Gross Profit 24,772

Operating expenses:

Payroll Expense 43,721

General and administrative 9,365

Total operating expenses 53,086

Net Operating income (Loss) — cash basis (28,314)

Tax Refund 19,712

Net Ordinary income (Loss) — cash basis (8,602)

JOHN D. MUNDING JUDGE MYERS CRUMB MUNDING, P.S. 601 W. Riverside, #1950 Spokane, WA 99201 (509)624-6464

Attorney for Debtor

UNITED STATES BANKRUPTCY COURT DISTRICT OF IDAHO

In Re: ) MEDINEX SYSTEMS, INC., ) No. 02-21797 ) Debtor. ) DEBTOR'S CHAPTER 11 PLAN

Medinex Systems, Inc., the debtor, hereby proposes its Chapter 11 plan (the "Plan") for the resolution of the Debtor's outstanding creditor claims and equity interests. This Plan is submitted pursuant to 11 U.S.C. § 1127 and is submitted in conjunction with a Disclosure Statement served concurrently herewith.

I. PRELIMINARY STATEMENT

The following Plan is submitted by the Debtor and is believed to provide the only economical solution to the Debtor's continued cash flow problems. The Plan provides for the liquidation of all of the Debtor's assets, both tangible and intangible, and the distribution of proceeds derived therefrom to holders of allowed claims in cash to the extent funds are available for distribution.

Specifically, the Plan provides for the auction sale of all of the Debtor's assets free and clear of all liens by March 28, 2003. The method and procedure for the proposed auction is set forth in detail below. Despite extreme overhead cutting measures, the Debtor cannot currently sustain operations as an ongoing entity without continued capital infusions. Based upon forward looking projections, it does not appear that the Debtor will experience a positive monthly operating cash flow until October, 2003.

The Debtor's cash shortage, inability to obtain outside credit. and lack of assets leaves the Debtor with no choice but to maximize return for creditors through the liquidation of all of its assets as an ongoing entity.

II. DEFINITIONS, INTERPRETATION, AND RULES OF CONSTRUCTION

A. Definitions.

In addition to such other terms as are defined in other sections of this Plan, the following terms (which appear in this Plan as capitalized terms) have the following meanings as used in this Plan:

1. "Administrative Claim" means a claim for costs and expenses of administration allowed under Bankruptcy Code section 503(b) and referred to in section 507(a)(1) including: (a) the actual and necessary costs and expenses incurred after the Petition Date of preserving the Estate and operating the business of the Debtor (such as wages, salaries, and commissions for services); (b) compensation for legal, financial or management consulting, accounting, and other services and reimbursement of expenses awarded or allowed by the Bankruptcy Court, including under Bankruptcy Code sections 330(a) or 331, and (c) all fees and charges assessed against the Estate under 28 U.S.C. § 1930.

2. "Allowed Claim" means a claim against the Debtor to the extent that

a. a proof of the claim

(1) was timely filed; or

(2) is deemed filed under applicable law or by reason of an order of the Bankruptcy Court; and

b. (1) the Debtor does not file an objection within a time fixed by this Plan and the claim is not otherwise a Disputed Claim (but only to the extent that such claim is not a Disputed Claim);

(2) the claim is allowed (and only to the extent allowed) by a Final Order; or

(3) the claim is allowed under this Plar.

Unless otherwise specified in this Plan, "Allowed Claim" shall not include interest such claim accruing on or after the Petition Date.

3. "Allowed ____ Claim" means an Allowed Claim: (a) in the specified class (as described in the Plan); or (b) of the type of unclassified claim that is specified.

4. "Auction" means a public sale of all of the Debtor's assets to be conducted by the Debtor at the direction and under the supervision of the Court by way of sale to the highest bidder on the auction date.

5. "Auction Date" means the date on which the actual auction of the Debtor's assets is to be held. The present auction date is March 28, 2003.

6. "Available Cash" means all cash and cash equivalents held by the Debtor after the auction sale date, including all net sale proceeds.

7. "Bankruptcy Code" means title 11 of the United States Code, as now in effect or hereafter amended.

8. "Bankruptcy Court" means the United States Bankruptcy Court for the District of Idaho, or, if such court ceases to exercise jurisdiction over the Chapter 11 Case, such court or adjunct thereof that exercises jurisdiction over the Chapter 11 Case in lieu of the United States Bankruptcy Court for the District of Idaho.

9. "Bankruptcy Rules" means, collectively the (a) Federal Rules of Bankruptcy Procedure; and (b) local rules of the Bankruptcy Court, as applicable from time to time in the Chapter 11 Case.

10. "Business Day" means any day that is not a Saturday, Sunday or "legal holiday" as that term is defined in Bankruptcy Rule 9006(a).

11. "Chapter 11 Case" means the Debtor's case under chapter of the Bankruptcy Code.

12. "Common Stock" means all common stock in the Debtor, including all Stock that was issued or held and outstanding as of the Petition Date.

13. "Confirmation" means the entry of the Confirmation Order.

14. "Confirmation Date" means the date on which the Bankruptcy Court enters the Confirmation Order on its docket.

15. "Confirmation Hearing" means the hearing held pursuant to Bankruptcy Rule 3020(b)(2), including any continuances thereof, at which the Bankruptcy Court will consider Confirmation of the Plan.

16. "Confirmation Order" means the Order of the Bankruptcy Court confirming this Plan under Bankruptcy Code section 1129.

17. "Debtor" means Medinex Systems, Inc., a Delaware corporation.

18. "Debtor in Possession" means the Debtor when acting in the capacity of representative of its estate in the Reorganization Case.

19. "DIP Credit Agreement" means the agreement entered into between the Debtor and Charles and Donna Weaver Trust as authorized by Order of Court December 11, 2002, and its assigns, in order to provide financing to the Debtor for the lease cure amount.

20. "Disbursing Agent" means the Debtor or any other entities designated by Debtor to distribute property under this Plan.

21. "Disclosure Statement" means the "Disclosure Statement Re Debtor's Chapter 11 Plan" (and all supplements, annexes, exhibits, and schedules annexed thereto or referred to therein) that relates to the Plan, as it may have been modified, amended or supplemented from time to time.

22. "Disputed claim" means a claim as to which (a) a proof of claim has been filed or deemed filed under applicable law, and (b) an objection has been or may be timely filed, which objection, if timely filed, has not been overruled or denied by a Final Order or withdrawn. Prior to the time that an objection has been or may be timely filed, and except to the extent a claim may have been allowed or deemed allowed by a Final Order or this Plan, for the purposes of this Plan a claim shall be considered a Disputed Claim in its entirety if: (1) the amount of the claim specified in the proof of claim exceeds the amount of any corresponding claim Scheduled by the Debtor; (2) any corresponding claim Scheduled by the Debtor has been Scheduled with a different level of priority or different status as secured or unsecured; (3) any corresponding claim Scheduled by the Debtor has been Scheduled as disputed, contingent, or unliquidated, irrespective of the amount Scheduled; or (4) no corresponding claim has been Scheduled by the Debtor.

23. "Effective Date" means the ten (10) business days after the Confirmation Date.

24. "Equity Interests" means, collectively, the Common Stock and Other Interests.

25. "Plan Funds" means all money funded into the Debtor through this Plan as of the Effective Date pursuant to Plan funding.

26. "Final Decree" means the Order entered by the Bankruptcy Court pursuant to Bankruptcy Code section 350(a) and Bankruptcy Rule 3022 to close the Reorganization Case.

27. "Final Order" means an order or judgment of the Bankruptcy Court as to which the time to appeal, petition for certiorari, or move for reargument or rehearing has expired and as to which no appeal, petition for certiorari, or other proceedings for reargument or rehearing shall then be pending, or as to which any right to appeal, petition for certiorari, or right of reargument or rehearing shall have been waived in writing in form and substance approved by the Debtor or, in the event that an appeal, writ of certiorari, reargument, or rehearing thereof has been sought, such order or judgment of the Bankruptcy Court shall have been affirmed by the highest court to which such order or judgment of the Bankruptcy Court was appealed, or from which reargument or rehearing was sought, or certiorari has been denied, and the time to take any further appeal, petition for certiorari, or move for reargument or rehearing shall have expired.

28. "Operative Documents" means any contract, instrument, release, settlement agreement or other agreement or document, if any, that is reasonable and necessary to effectuate the transactions provided for in this Plan.

29. "Order" means an order or judgment of the Bankruptcy Court as entered on the docket.

30. "Other Priority Claim" means any claim entitled to priority under section 507(a) of the Bankruptcy Code, except for Administrative Claims and Priority Tax Claims.

31. "Other Interests" means all equity interests in the Debtor other than the Common Stock.

32. "Petition Date" means November 27, 2002, the date on which the Reorganization Case was commenced.

33. "Plan" means this chapter 11 plan and all exhibits and schedules annexed hereto or referred to herein, as such may be amended, modified, or supplemented as provided herein.

34. "Priority Tax Claim" means an Allowed Claim for an amount entitled to priority under Bankruptcy Code section 507(a)(8).

35. "Pro Rata" means proportionately according to the same percentage of allowed claims of a particular class.

36. "Remaining Assets" means all non-cash assets of the Debtor on the Auction Date.

37. "Scheduled" means as set forth in the Schedules.

38. "Schedules" means the Schedules of Assets and Liabilities been filed by the Debtor with the Bankruptcy Court pursuant to Bankruptcy Rule 1007(b), as the same may be amended from time to time.

39. "Secured Claim" means any claim that is secured by a lien on property in which the Estate has an interest or that is subject to setoff under Bankruptcy Code section 553, to the extent of the value of the claimholder's interest in the estate's interest in such property or to the extent of the amount subject to setoff, as applicable, as determined pursuant to Bankruptcy Code section 506(a).

40. "Unsecured Claim" means any claim that is not an Administrative Claim, Other Priority Claim, Priority Tax Claim, or Secured Claim.

41. "Weaver Trust" means the Charles and Donna Weaver Trust dated November 16, 1989.

B. Interpretation And Computation of Time.

1. Defined Terms.

Any term used in this Plan that is not defined in this Plan, either in Article I (Definitions) or elsewhere, but that is used in the Bankruptcy Code or the Bankruptcy Rules, has the meaning assigned to that term in the Bankruptcy Code or the Bankruptcy Rules.

2. Rules of Interpretation.

For purposes of this Plan: (a) whenever from the context it is appropriate, each term, whether stated in the singular or the plural, shall include both the singular and the plural; (b) to the extent a reference or description in this Plan to an Operative Document is inconsistent with the terms or conditions of that Operative Document, the terms and conditions of the Operative Document shall govern over the reference or description contained in the Plan; (c) any reference in this Plan to an existing document, schedule, Operative Document, or Exhibit filed or to be filed means such document, schedule, Operative Document, or Exhibit, as it may have been or may be amended, modified, or supplemented as of the Confirmation Date; (d) unless otherwise specified in a particular reference, all references in this Plan to Sections, Articles, and Exhibits are references to Sections, Articles, and Exhibits of or to this Plan; (e) the words "herein," "hereof," "hereto," "hereunder," and others of similar import refer to this Plan in its entirety rather than to only a particular portion of this Plan; (f) the word "all" shall mean "any and all"; (g) captions and headings to Articles and Sections are inserted for convenience of reference only and are not intended to be a part of or to affect the interpretations of this Plan; (h) the rules of construction set forth in Bankruptcy Code section 102 shall apply, including that the terms "includes", "shall include", and "including" are not limiting; (i) reference to a pleading. request, or document being "filed" means duly and properly filed with the Bankruptcy Court as reflected on the docket of the Bankruptcy Court; (j) all exhibits and schedules to this Plan are incorporated into this Plan, and shall be deemed to be included in the Plan, regardless of when they are filed; (k) any service or notice provided for in this Plan shall be provided at the addresses specified herein; (l) except to the extent that the Bankruptcy Code or other federal law is applicable, or to the extent the Exhibits or Operative Documents provide otherwise, the rights, duties and obligations under this Plan shall be governed, construed and enforced in accordance with the laws of the State of Idaho; and (m) to the extent a reference or description in the Disclosure Statement to this Plan or an Operative Document is inconsistent with the terms or conditions of the Plan or Operative Document, the terms and conditions of the Plan or Operative Documents shall govern over the reference contained in the Disclosure Statement.

3. Time Periods.

In computing any period of time prescribed or allowed by this Plan, the provisions of Bankruptcy Rule 9006(a) shall apply.

II. DESIGNATION OF CLASSES OF CLAIMS AND INTERESTS

The following is the designation of the classes of claims and Equity Interests under this Plan. In accordance with Bankruptcy Code section 1123(a)(1), Administrative Claims have not been classified and are excluded from the following classes. A claim or Equity Interest is classified in a particular class only to the extent that the claim or Equity Interest qualifies within the description of that class, and is classified in another class or classes to the extent that any remainder of the claim or interest qualifies within the description of such other class or classes. A claim or Equity Interest is classified in a particular class only to the extent that the claim or Equity Interest has not been paid, released, or otherwise satisfied before the Effective Date. Notwithstanding anything to the contrary contained in this Plan: (a) no distribution shall be made on account of any claim that is not an Allowed Claim.

A. Secured Claims.

1. DIP Credit Agreement (Class 1).

Class 1 consists of the claim arising under or related to the DIP Credit Agreement.

2. Priority Tax Claims (Class 2)

Class 2 consists of all Priority Tax Claims owed to Idaho state taxing agencies.

3. Other Secured Claims (Class 3).

Class 3 consists of all Secured Claims other than those in Class 1.

B. General Unsecured Claims (Class 4).

Class 4 consists of all General Unsecured Claims.

C. Interests/Common Stock (Class 5).

Class 5 consists of all Common Stock and any other equity interest claimed in the Debtor.

IV. TREATMENT OF CLAIMS AND INTERESTS

A. Unclassified Claims. 1. Administrative Claims. a. Generally.

Subject to the bar date provisions herein, on the Distribution Date, the Debtor shall pay to each holder of an Allowed Administrative Claim, on account of the Allowed Administrative Claim and in full satisfaction thereof, cash equal to the amount of such Allowed Administrative Claim, unless the holder agrees or shall have agreed to other treatment of such claim.

The Plan provides for the liquidation of the Debtor's principal asset. Administrative claimants may elect to forego payment in full until consummation of sale.

b. Payment of Statutory Fees.

On or before the Effective Date, all fees payable pursuant to 28 U.S.C. § 1930 shall be paid in cash equal to the amount of such Allowed Administrative Claim, unless agreed to otherwise by the claimant.

c. Bar Date For Administrative Claims.

i. General Provisions.

Except for (i) non-tax liabilities incurred in the ordinary course of business by the Debtor in Possession, and (ii) claims by governmental units for payment of taxes (and interest and/or penalties related to such taxes), all requests for payment of Administrative Claims must be filed and served on counsel for the Debtor, and any other party specifically requesting a copy in writing within 10 days of the Effective Date. Holders of Administrative Claims (including professionals requesting compensation or reimbursement of expenses and the holders of any claims for taxes) that are required to file a request for payment of such claims and that do not file and serve such requests by the applicable bar date set forth herein or in the following subsections shall be forever barred from asserting such claims against the Debtor, or its property.

ii. Professionals' Fees And Requests For "Substantial Contribution"

All professionals or other entities requesting compensation or reimbursement of expenses pursuant to Bankruptcy Code sections 327, 328, 330, 331, 503(b), or 1103 for services rendered before the Effective Date (including any compensation requested by any professional or any other entity for making a substantial contribution in the Chapter 11 Case) shall file and serve on counsel for the Debtor, the Committee, and any other party specifically requesting a copy in writing an application for final allowance of compensation and reimbursement of expenses within 10 days of the Effective Date. Any interested party desiring to object to applications of professionals for compensation or reimbursement of expenses must file and serve its objection on the Debtor and the professionals to whose application the objections are addressed in accordance with Local Rules.

iii. Administrative Ordinary Course Liabilities,

Holders of Administrative Claims based on liabilities incurred in the ordinary course of the Debtors business (other than claims of govemmental units for taxes (and interest or penalties related to such taxes)) shall not be required to file any request for payment of such claims. Such Administrative Claims, unless objected to by the Debtor, shall be assumed and paid by the Debtor pursuant to the terms and conditions of the particular transaction giving rise to such Administrative Claim.

iv. Administrative Tax Claims.

All requests for payment of Administrative Claims by a governmental unit for taxes (and for interest and/or penalties related to such taxes) for any tax year or period, all or any portion of which occurs or falls within the period from and including the Petition Date through and including the Effective Date ("Postpetition Tax Claims") and for which no bar date has otherwise been previously established, must be filed and served on the Debtor, the Committee, and any other party specifically requesting a copy in writing on or before the later of (i) ten (10) days following the Effective Date; and (ii) 120 days following the filing of the tax return for such taxes for such tax year or period with the applicable governmental unit; unless an application is filed under 11 U.S.C. § 505 (b), and if such application is filed, the sixty-first (61st) day after the filing of such application. Any holder of any Postpetition Tax Claim that is required to file a request for payment of such taxes and does not file and properly serve such a claim by the applicable bar date shall be forever barred from asserting any such Postpetition Tax Claim against the Debtor, or its property, regardless whether any such Postpetition Tax Claim is deemed to arise prior to, on, or subsequent to the Effective Date. Any interested party desiring to object to an Administrative Claim for taxes must file and serve its objection on counsel to the Debtor, the Committee, and the relevant taxing authority no later than the deadline for objecting to Administrative Claims.

B. Treatment of Priority Tax Claims.

The Debtor has one priority tax claim arising from the State of Idaho. The claim is presently estimated between $40,000 and $80,000. Upon resolution of the dispute as to the exact amount of the claim, the Debtor intends to pay this claim, as allowed for principal and interest from cash available. Any penalties associated with this priority tax will not be paid as a priority claim, but instead, treated as a general unsecured claim.

Class 2 is impaired under the Plan and, consequently, the holder of Allowed Class 2 Claim is entitled to vote on this Plan. On the Initial Distribution Date, the holder of an Allowed Class 2 Claim will be paid to the extent funds are available and only to the extent principal and interest are deemed allowed. Penalties associated with the priority tax shall not be allowed or paid as a Class 2 Claim.

C. Treatment of Secured Claims

1. Class 1 (DIP Credit Agreement).

Class 1 is impaired under the Plan and consequently, the holder of the Allowed Class 1 Claim is entitled to vote on this Plan. The legal, equitable and contractual rights of the holder of the Allowed Class 1 Claim, the Weaver Trust, will have its Class 1 Secured Claim in the amount equal to the amount advanced under the DIP Financing Order, with interest to the extent funds are available from auction. It is anticipated that Class 1 will be paid in full from Cash Available, post Auction.

Class 1 shall continue to receive monthly payments pursuant to the DIP Note and DIP Financing Order until close of auction and distribution of proceeds therefrom.

2. Class 3 (Other Secured Claims).

Class 3 consists of the pre-petition secured claim of the Charles and Donna Weaver Trust dated November 16, 1989. The secured status of the claim of the Weaver Trust is in question. Class 3 is impaired under the Plan and, consequently, the holder of the sole Allowed Class 3 Claim is entitled to vote on this Plan.

For purposes of this Plan only, the secured status of the pre-petition claim of Weaver Trust will be treated as a general unsecured claim as set forth in Class 4. It is understood that Weaver Trust has agreed to waive its secured claim status as to pre-petition debt in order to minimize administrative expense and provide an opportunity for distribution to priority tax claims and general unsecured claims. As such, on the Distribution Date, Weaver Trust shall receive a pro rata distribution of final Cash Available with Class 4 allowed claims.

D. Class 2 (Priority Tax Claim).

Class 2 consists of the claim of the State of Idaho, which is presently disputed as to amount only. Class 2 is impaired under the Plan and, consequently, the holder of a Class 2 Claim is entitled to vote on this Plan. Under the Plan as proposed, the minimum bid includes a set aside of $25,000 for distribution to allowed Class 2 Claim. Any distribution under this Plan shall be deemed a full accord and satisfaction of the claim.

As such, on the Distribution Date, the State of Idaho will receive a distribution of a minimum of $25,000 to the extent of its allowed claim. If additional funds are available, Class 2 will continue to receive payment to the full extent of its allowed claim.

E. Class 4 (Treatment of General Unsecured Claims).

Class 4 consists of Allowed Unsecured Claims which are other than Administrative Claims, and Priority Tax Claims.

The Debtor estimates that the aggregate outstanding amount of Allowed Claims in Class 4, as of the Effective Date, will be in the range of $500,000 to $700,000. Class 4 is impaired under the Plan, and consequently, the holders of Allowed Class 4 Claims are entitled to vote on this Plan.

On the Distribution Date, each holder of an Allowed Class 4 Claim as of the Distribution Date will receive a pro rata distribution of final Available Cash. Class 4 will only receive a distribution under this Plan upon payment in full of all administrative expenses, Class 1, Class 2, and Class 3 Claims.

Percentage of distribution and amount are entirely dependent upon Plan Funds available and the aggregate amount of allowed claims.

F. Treatment of Equity Interests (Class 5).

Class 5 consists of the issued and outstanding shares of Common Stock of the Company as currently shown on the Company's share registry. Class 5 is impaired as the shares of Common Stock will be modified and diluted by this Plan at reorganization.

It is anticipated that the proposed transfer will require an 80% or greater change in control of the ownership of the Company. As such, the Debtor will have to rely upon the broad powers of the Bankruptcy Court to accomplish a reverse stock split of outstanding shares of Common Stock.

The "corporate shell" is the continuing reporting entity for securities maters, including reporting history, articles of incorporation, and bylaws. The essential nature of the value is the trading base of outstanding common stock.

Class 5 will not receive or retain any property under this Plan other than an equity interest in the "shell" corporation that survives after the auction of all assets. The Company "shell," including diluted common stock interest of Class 5, shall be sold to the highest bidder of a subsequent separate auction. All proceeds derived through such auction shall be distributed in accordance with the terms of distribution contained in this Plan. A subsequent auction of the corporate entity shall only occur upon receipt of a minimum qualified bid of at least $50,000. In the event a minimum qualified bid is not received, all common stock shall be cancelled.

V. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES

A. Rejection.

Effective immediately before the Effective Date, all executory contracts or unexpired leases of the Debtor that have not previously been assumed or rejected by the Debtor in Possession and that are not assumed pursuant to Section B below, are rejected, to the extent (if any) that they constitute executory contracts or unexpired leases, and without conceding that they constitute executory contracts or unexpired leases or that the Debtor has any liability under them.

The Confirmation Order shall constitute an Order of the Bankruptcy Court approving all such rejections as of the Effective Date. Any claim for damages arising from the rejection under this Plan of an executory contract or unexpired lease must be filed within thirty (30) days after the Effective Date or be forever barred and unenforceable against the Debtor and its properties and barred from receiving any distribution under the Plan.

B. Non-Assumption.

1. Leasehold Property: The Debtor shall continue to make monthly lease payments through the date of auction for its leased property located in Arizona and Idaho.

The Debtor's office space located at 16042 N. 32 Street, Suite D1, Phoenix, Arizona, is on a month to month tenancy. The Debtor shall continue to pay its obligations under this month to month tenancy through the Sale Date proposed in the Plan.

The Debtor's office space located at 804 N. Lincoln Street, #2, Post Falls, Idaho, is a six month lease, with only three months remaining. The monthly rental amount is $550.00. By the time a hearing was held on assumption or rejection of the lease, it would have only 30 days remaining. To save administrative expense, this lease will not be assumed. The Debtor shall continue to make payments in accordance with the lease through the date of sale.

V. MEANS OF IMPLEMENTATION

A. Sale of Assets By Way of Auction.

The Debtor shall sell all of its assets in the manner set forth at Section A.2, below. All expenses related to the administration and liquidation of the Debtor's assets shall be paid out of funds available for distribution under this Plan, including cash held on deposit for the Debtor and additional funds paid in accordance with the minimum bid set forth below.

1. Continued Operations.

The Debtor shall continue operating its business through the date of auction and until the auction sale is completely consummated. During the interim period, all operating revenue in excess of operating expenses, if any, shall be held in reserve for distribution under this Plan.

2. Auction Phase I.

By way of this Plan, the Debtor intends to conduct an auction on or before March 28, 2003, to sell all of its assets free and clear of all liens, interests, encumbrances, and claims. All such liens, interests, encumbrances, and claims shall attach to the sale of proceeds to the extent and in the priority they exist at the time of sale. All net sale proceeds shall be placed in trust and distributed in accordance with this Plan.

a. Advertising/Notice.

"Notice of Auction" shall be served to all parties previously expressing an interest in the Debtor's property and upon all prior investors and shareholders. In addition, a copy of the notice of auction or similar notice shall be published in a national business journal at least twice prior to the auction date.

b. Bidder Registration.

All parties desiring to make a minimum bid at the auction to purchase all of the Debtor's assets shall pre-register with Debtor's counsel. In order to pre- register, all bidders must provide the following to Debtor's counsel:

• A complete written disclosure of the prospective bidder's owners and agents.

• A limited financial statement demonstrating the bidder's ability to close a purchase bid in excess of the minimum bid.

• A refundable bid deposit in the amount of $20,000.00, with the exception of entities making credit bids.

c. Auction Date.

The auction shall be held on or before March 28, 2003. The auction shall be conducted by the Debtor's counsel at the law firm of Crumb Munding, P.S. 601 W. Riverside, Suite 1950, Spokane, WA 99201, and all registered bidders shall be notified of the exact procedure for the auction.

The current minimum bid amount is $217,500. (See Exhbit 6 of the Disclosure Statement for a breakdown of the minimum bid.) The foregoing minimum bid is an estimate and subject to increase at time of auction to account for interest and penalty accrual related to taxes and secured liens.

The Weaver Trust has committed to making the minimum bid set forth herein. However, any registered bidder is allowed to open the auction with a matching minimum bid.

d. Minimum Bid and Overbid.

The minimum opening bid at the auction may be made by any registered bidder as follows:

1. The amount of the DIP Financing Agreement lien which is estimated to be $145,000.

2. All administrative fees and costs as of the date of the auction, including the $25,000 administrative carve out. The amount of administrative expenses and costs at time of sale is estimated to be $47,500. Said expenses are subject to Court approval.

3. The sum of $25,000 which is set aside as a minimum distribution to the State of Idaho Class 2 Tax Claim. This minimum set aside is conditioned upon the State of Idaho accepting any payment under this Plan in full accord and satisfaction of its claim.

* All bids after the minimum bid shall exceed the minimum bid by $5,000.

** Any unsecured creditor may remove their claim against the Debtor from distribution of proceeds under the Plan as part of their bid. However, no monetary consideration will be given for such removal of claim towards the bid amount.

3. Bid Price/Refundable Deposit.

A successful bidder at the auction shall have two (2) business days following the Auction Date to provide all funds necessary to consummate the auction sale. Funds shall be wired or sent by certified check. In the event the high bidder is unable to produce such money to close the transaction, their bid deposit shall become non-refundable. In such event, the next highest bidder shall have the option of purchasing the property at the next highest price.

All remaining bid deposits shall be returned within seven (7) business days of the auction date.

4. Phase II.

It is recognized that Medinex Systems, Inc., is a publicly traded company in full compliance with all reporting requirements of the U.S. Securities and Exchange Commission. As such, the corporate entity/corporate shell of Medinex Systems, Inc., with existing unissued shares may have value to another company seeking to acquire a company that is already publicly traded. The value to the company seeking to acquire the Medinex corporate entity would be in the cost savings associated with not having to register a new company with the Securities and Exchange Commission.

The sale of the stripped corporate entity would take place by way of a merger/consolidation of Medinex Systems, Inc.'s corporate entity and the new prospective purchaser. Medinex would sell/issue to the purchaser its unissued common stock. The existing issued common stock would also have to be severely diluted through a reverse stock split.

It is anticipated that the proposed transfer will require an 80% or greater change in control of the ownership of the Company. As such, the Debtor will have to accomplish a reverse stock split of the existing shares of Common Stock. The existing shares of Common Stock will also have to be issued. Confirmation of this Plan will authorize the Court to enter such orders as necessary to effectuate the issuance of unissued and complete the reverse stock split as needed to achieve an 80% or greater change in control of the Company.

Section 1145 of the Code exempts securities transactions in exchange for claims. However, to avoid any potential problems, a registration of the shares to be issued should take place.

The approval of the Plan will be deemed to be approval of the merger/sale of shares and dilution of existing common stock just as if a shareholders meeting had been called and approved the merger pursuant to the Bylaws of Medinex and in accordance with Delaware law.

In order to maximize potential funds available for distribution, the Debtor will explore, market, and attempt to consummate a sale/merger through transfer of unissued shares of Medinex to a purchaser. The Debtor will immediately commence seeking offers for the corporate entity,

The transaction would be administratively taxing and complicated. As such, only upon receipt of a minimum verified and committed offer for purchase of at least $50,000 will the Debtor proceed with a sate of the unissued stock, the dilution of equity interest through a direct stock split, and consummation of the merger of debt stripped operating corporate entity. The costs of such a transaction for legal, accounting, and other administrative expenses will likely be $20,000.

1. Distribution of Proceeds.

Any funds derived from a controlled sale of the corporate entity/shell will be distributed to creditors in accordance with the Plan as described below.

2. Cancellation of Common Stock in the Event of No Offers to Purchase.

In the event a minimum offer to purchase/merge the operating shell of the corporate entity is not received within twenty (20) days after the Effective Date of the Plan, all Common Stock shall be automatically cancelled. No holder of Common Stock shall receive or retain any property under the Plan on account of Common Stock. EQUITY WILL NOT RETAIN OWNERSHIP OR RECEIVE DISTRIBUTION UNDER THE PLAN.

5. Auction/Sale Proceeds and Distribution.

a. Proceeds of Sale.

In the event that a minimum bid is received, all money bid above those liabilities specifically assumed or made in the form of a credit bid shall be placed into the Crumb Munding Trust Account and immediately disbursed in accordance with subpart (b) below.

b. Distribution of Proceeds.

The net proceeds of the auction and any cash remaining in Debtor's accounts or held in trust on behalf of the Debtor shall be distributed on a pro rata basis as follows:

1. First, the sum of $25,000.00 of the first money received from auction shall be set aside to pay administrative claims pursuant to the administrative carve out contained in the DIP Note.

2. Second, to immediately pay the secured DIP Financing claim of Weaver Trust, as described in Class I. Said disbursement shall be made within 72 hours of receipt of funds.

3. Third, to pay any unpaid administrative claims not satisfied by the administrative carve out described in paragraph 1.

4. Fourth, $25,000 or greater payment to satisfy in full the Class 2 Claim of the State of Idaho.

5. Fifth, upon resolution of all outstanding claims litigation, the remaining funds, if any, shall be distributed to pay the Allowed Class 4 Claims, including the Allowed Class 3 Claims, on an equal pro rata basis determined by the amount of each allowed claim.

D. 363 Transactions.

So long as a 363 Order has been entered that is not the subject of any stay, the Debtor shall consummate all 363 Transactions on the terms and conditions approved by the respective 363 Order, notwithstanding the occurrence of the Confirmation Date and Final Decree.

E. Corporate Matters Regarding The Debtor.

1. Retention of Equity Interests.

After completion of the auction of the sale of all of the Debtor's assets, all common stock shall remain in effect as to an equity interest in the "corporate shell." Said common stock shall be diluted as necessary to attract offers for purchase at a subsequent auction of the "corporate entity."

2. Management.

At all times prior to the Final Decree Date, the Debtor will be governed by its new CEO, Colin Christie. Mr. Christie shall continue to exercise his authority as CEO of the Company through the date of auction and Final Disbursement Date. Mr. Christie will have all necessary authority to execute required documents for purposes of completing the subsequent sale of the corporate shell.

F. Revesting of Assets/Automatic Stay.

Pursuant to this Plan and as allowed by 11 U.S.C. § 1141 (b), pending dissolution of the Debtor and the sale of all of its assets, the Debtor shall continue to exist as an entity, with all the powers of a corporation under applicable law. All property of the Estate shall remain property of the Estate, subject to the jurisdiction of the Bankruptcy Court. The automatic stay shall remain in place pursuant to 11 U.S.C. § 362, prohibiting any act to obtain control over property of the Debtor and its estate. The Debtor, subject to the supervision of the court, shall retain management and control over the Debtor's ongoing business operations, the auction of the Debtor's property, and final distribution under the Plan. G. Preservation of Rights of Action.

Except as otherwise specified in this Plan, the Confirmation Order or Operative Documents or any contract, instrument, release, or other agreement entered into in connection with the Plan, in accordance with section 1123(b) of the Bankruptcy Code, the Debtor shall retain and the Debtor may enforce any claims, rights or causes of action that the Debtor or the Estate may hold against any entity, including any claims that arise under or relate to section 544 through 550 of the Bankruptcy Code or any similar process of state law The Debtor specifically reserves all defenses, rights of offset, objections to claims, and other causes of action as they may relate to this reorganization proceeding and plan.

H. Nondischarge And Injunction.

1. Nondischarge of Debtor.

Pursuant to section 1141(d)(3) of the Bankruptcy Code, the Confirmation Order shall not discharge claims against the Debtor. However, no creditor of the Debtor or holder of an Equity Interest may receive any payment from or seek recourse against any assets that are to be distributed under this Plan. As of the Effective Date, all entities are precluded from asserting against any property that is to be distributed under this Plan any claims, rights, causes of action, liabilities or equity interests based upon any act or omission, transaction or other activity of any kind or nature that occurred prior to the Effective Date, other than as expressly provided in this Plan, the Confirmation Order or the Operative Documents, regardless of the filing, lack of filing, allowance or disallowance of such a claim or Equity Interest and regardless of whether such an entity has voted to accept this Plan.

2. Injunction.

Except as otherwise provided in the Plan or the Confirmation Order, on and after the Effective Date all entities that have held, currently hold or may hold a debt, claim, other liability or interest against or in the Debtor that would be discharged upon Confirmation of this Plan and the Effective Date but for the provisions of section 1141(d)(3) of the Bankruptcy Code are permanently enjoined from taking any of the following actions on account of such debt, claim, liability, interest or right: (a) commencing or continuing in any manner any action or other proceeding on account of such debt, claim, liability, interest or right against property that is to be distributed under this Plan, other than to enforce any right to a distribution with respect to such property under the Plan; (b) enforcing, attaching, collecting or recovering in any manner any judgment, award, decree, or order against any property to be distributed to creditors under this Plan.

On and after the Effective Date, each holder of an equity interest in the Debtor is permanently enjoined from taking or participating in any action that would interfere or otherwise hinder the Debtor from implementing this Plan, the Confirmation Order or any Operative Documents.

I. Limitation of Liability.

Except as otherwise provided in any Operative Document, neither the Debtor nor any of its respective officers, directors, members or employees (acting in such capacity), nor any professional persons or consultants employed by any of them shall have or incur any liability to any entity or person for any action taken or omitted to be taken in connection with or related to the formulation, preparation, dissemination, Confirmation or consummation of the Plan, the Disclosure Statement or any Operative Document, or any other action taken or omitted to be taken in connection with the Plan; provided however, that the foregoing provisions of this section shall have no effect on the liability of any entity that would otherwise result from any such act or omission to the extent that such act or omission is determined in a Final Order to have constituted gross negligence or willful misconduct.

J. Exemption From Certain Transfer Taxes And Further Transactions.

Pursuant to section 1146(c) of the Bankruptcy Code, the issuance or exchange of any security, or the making or delivery of any instrument of transfer under, in furtherance, or in connection with the Plan, including, but not limited to, any deeds, bills of sale, assignments or other instruments of transfer, shall not be subject to any stamp tax, real estate transfer tax or similar tax.

K. Corporate Action.

The liquidation of the Debtor's assets, the sale of the corporate shell, dilution of the Equity Interests, and the other matters provided for under the Plan involving the corporate structure of the Debtor or corporate action to be taken by or required of the Debtor shall be deemed to have occurred and be effective as provided herein and shall be authorized and approved in all respects, without any requirement of further action by stockholders or directors of the Debtor. The Debtor and Debtor in Possession shall be authorized to execute, deliver, file or record the Operative Documents and take such other action as may be necessary to effectuate and further evidence the terms and conditions of the Plan.

L. Final Decree.

Notwithstanding otherwise applicable bankruptcy law, no party in interest shall file a motion or application requesting that the Bankruptcy Court enter the Final Decree, unless and until:

1. all adversary proceedings and contested matters pending before the Bankruptcy Court have been resolved by a Final Order;

2. all claims have either: (a) become Allowed Claims and have been paid pursuant to this Plan; or (b) have been disallowed by a Final Order; and

3. all 363 Transactions have been consummated.

M. Retention of Jurisdiction.

Following Confirmation of this Plan, the Bankruptcy Court shall retain such jurisdiction as is legally permissible after Confirmation, including, without limitation, for the following purposes:

1. To determine the allowability, amount, classification, or priority of claims upon objection by the Debtor or any other party in interest;

2. To construe and to take any action to execute and enforce this Plan, the Confirmation Order, or any other order of the Bankruptcy Court, to issue such orders as may be necessary for the implementation, execution, performance, and consummation of this Plan and all matters referred to herein, and to determine all matters that may be pending before the Bankruptcy Court in the Reorganization Case on or before the Final Decree;

3. To rule on any and all applications for allowance of compensation and expense reimbursement of professionals;

4. To rule on any other request for payment of any Administrative Claim;

5. To resolve any dispute regarding the implementation, execution, performance, consummation, or interpretation of this Plan;

6. To resolve all applications, adversary proceedings, contested matters, and other litigated matters instituted on or before the Final Decree;

7. To determine such other matters and to perform other functions as may be provided in the Confirmation Order.

8. To modify this Plan under section 1127 of the Bankruptcy Code, to remedy any apparent nonmaterial defect or omission in this Plan, or to reconcile any nonmaterial inconsistency in the Plan so as to carry out its intent and purposes;

9. To issue injunctions or take such other actions or make such other orders as may be necessary or appropriate to restrain interference with this Plan or its execution or implementation by any entity;

10. To issue such orders in aid of execution of the Plan and the Confirmation Order, notwithstanding any otherwise applicable nonbankruptcy law, with respect to any entity, to the full extent authorized by the Bankruptcy Code; and

11. To designate, if necessary, pursuant to Bankruptcy Rule 9001(5), an individual to act on behalf of the Debtor after the Effective Date.

12. To determine and enter such orders as deemed necessary to effectuate the issuance of unissued common stock and to effectuate the reverse stock split necessary to consummate the sale of the corporate entity as described in the Phase II sale.

N. Successors And Assigns.

The rights, benefits and obligations of any entity named or referred to in this Plan are binding on, and will inure to the benefit of, any permitted heirs, executors, administrators successors or assigns of such entity.

O. Amendment, Modification And Severability.

1. This Plan may be amended or modified before the Effective Date by the Debtor to the extent provided by section 1127 of the Bankruptcy Code.

2. The Debtor reserves the right to modify or amend the Plan upon a determination by the Bankruptcy Court that the Plan, as it is currently drafted, is not confirmable pursuant to section 1129 of the Bankruptcy Code. To the extent such a modification or amendment is permissible under section 1127 of the Bankruptcy Code without the need to resolicit acceptances, the Debtor reserves the right to sever any provisions of the Plan that the Bankruptcy Court finds objectionable.

3. Notwithstanding anything to the contrary herein or other applicable bankruptcy law, on and after the Distribution Date, the Debtor may move to amend this Plan under Bankruptcy Code section 1127; provided however no such amendment will attempt to recoup, recover, rescind or otherwise require the return of any distribution already made under this Plan.

P. Notices.

Any document or pleading to be served or otherwise provided under this Plan shall be deemed to have been served or provided (a) on the date of personal service if served personally on the party to whom directed; or (b) on the next Business Day if served via telecopier or overnight courier, properly addressed as follows:

For the Debtor:

John D. Munding Crumb Munding, P.S. 601 W. Riverside, Suite 1950 Spokane, WA 99201 Phone: 509-624-6464 Fax: 509-624-6155

VI. DISTRIBUTION OF CONSIDERATION

A. Prosecution of Objections To Claims. 1. Time To Object.

Unless another date is established herein or by the Bankruptcy Court, any objection to a claim (whether the claim was filed or deemed filed) shall be filed and served on the holder of the claim by the later of: (a) ten (10) days after the Effective Date, and (b) sixty (60) days after the applicable proof of claim (or any amendment thereto) is timely filed and served on the Debtor.

2. Authority To Prosecute Objections.

Unless otherwise ordered by the Bankruptcy Court, only the Debtor and any other party in interest shall have the authority to file objections to, settle, compromise, withdraw or litigate to judgment Disputed Claims. On and after the Effective Date, the Debtor (in the case of an objection filed by the Debtor or any other party in interest), may only settle or compromise any Disputed Claim or Disputed Interest with the approval of the Bankruptcy Court, after proper notice and opportunity to object.

B. Disbursing Agent.

The Debtor and counsel shall act as Disbursing Agent under this Plan and make all distributions required under this Plan. Unless otherwise determined by the Court, each Disbursing Agent shall serve without bond.

C. Disputed Claims.

Except as approved by the Court with respect to any Disputed Claim, no payment or distribution will be made with respect to all or a portion of any Disputed Claim until such claim is an Allowed Claim.

D. Distributions.

The net proceeds of the auction and any cash remaining in Debtor's accounts or held in trust on behalf of the Debtor shall be distributed on a pro rata basis as follows:

1. First, the sum of $25,000.00 of the first money received from auction shall be set aside to pay administrative claims pursuant to the administrative carve out contained in the DIP Note.

2. Second, to immediately pay the secured DIP Financing claim of Weaver Trust, as described in Class I. Said disbursement shall be made within 72 hours of receipt of funds.

3. Third, to pay any unpaid administrative claims not satisfied by the administrative carve out described in paragraph 1.

4. Fourth, $25,000 or greater payment to satisfy in full the Class 2 Claim of the State of Idaho.

5. Fifth, upon resolution of all outstanding claims litigation, the remaining funds, if any, shall be distributed to pay the Class 3 Claim and Allowed Class 4 Claims on a pro rata basis.

1. Delivery of Distributions.

Distributions to holders of Allowed Claims shall be distributed by first class mail as follows: (1) at the addresses set forth on the respective proofs of claim by such holders; (2) at the addresses set forth in any written notices of address changes delivered to the Debtor or Disbursing Agent after the date of any related proof of claim; or (3) at the address reflected on the Schedules if no proof of claim is filed and the Debtor or Disbursing Agent has not received a written notice of a change of address. Any distribution so mailed but returned as undeliverable shall be retained as an unclaimed distribution.

2. Unclaimed Distributions.

The Disbursing Agent will hold until the first anniversary of the Effective Date any unclaimed distributions to be made to the holders of Allowed Claims under this Plan. Any unclaimed cash will be deposited by the Disbursing Agent in a segregated account for the sole benefit of the holders of the Allowed Claims who have failed to claim such property. Upon the second anniversary of the Effective Date, any unclaimed distributions to be made to holders of Allowed Claims will be distributed to the Debtor.

3. Manner of Payment Under The Plan.

Cash payments made pursuant to the Plan shall be in United States dollars by checks drawn on a domestic bank selected by the Debtor or by wire transfer from a domestic bank, at Debtor's option.

4. Compliance With Tax Requirements.

In connection with the Plan, to the extent applicable, the Disbursing Agent shall comply with all withholding and reporting requirements imposed on it by any governmental unit, and all distributions pursuant to the Plan shall be subject to such withholding and reporting requirements.

VIII. CONDITIONS TO EFFECTIVE DATE

A. Conditions.

The Effective Date of the Plan shall occur upon entry of the Confirmation Order.

IX. CONFIRMATION REQUEST

The Debtor hereby requests confirmation of this Plan under section 1129(b) of the Bankruptcy Code with respect to any objecting class of creditors.

DATED this 29 day of January, 2003.

MEDINEX SYSTEMS, INC. A Delaware corporation

______________________ By: COLIN CHRISTIE Its: Authorized Officer/CEO

SUBMITTED BY:

CRUMB MUNDING P.S.

___________________________ JOHN D. MUNDING Attorney for Debtor ISBA #04703

JOHN D. MUNDING JUDGE MYERS CRUMB MUNDING. P.S. 601 W. Riverside, #1950 Spokane, WA 99201 (509) 624-6464

Attorney for Debtor

UNITED STATES BANKRUPTCY COURT DISTRICT OF IDAHO

In Re: ) Chapter 11 ) MEDINEX SYSTEMS, INC. ) Case No.: 02-21797 ) Debtor. ) LIST CLASSIFYING CLAIMS AND) INTERESTS FOR VOTING/BALLOTS

The following is a list of creditors and security interest defined by class as set forth in MEDINEX SYSTEMS, INC.'s proposed Plan of Reorganization filed January 29, 2003, a copy of which is served herewith. This list classifying claims and interest is provided to assist in the balloting process descried in the Plan and the Ballot which is served herewith.

class 1

Charles and Donna weaver Trust dated November 16, 1989. This class consists entirely of the DIP Note amount up to $145,000 and is secured by a priority lien upon all assets.

Class 2

The Idaho State Tax Commission is the sole member of Class 2, which provides for treatment of the State of Idaho's Priority Claim. The amount of tax claimed, including penalties and interest is $85,726. The claim is disputed as to exact amount owing.

Class3

The Charles and Donna Weaver Trust dated November 16, 1989, is the sole member of Class 3. The Class 3 claim's secured status has been consensually resolved for purposes of this Plan only and allowed as an unsecured loan to the Company of $791,000, not including interest accruals.

Class 4

If you believe you are a creditor of Medinex Systems, Inc., or hold any type of claim against Medinex Systems. Inc., and you are not specifically identified in Class 1. 2, or 3 above, then your claim has been classified as a general unsecured claim, Class 4.

In addition to general unsecured claims against Medinex Systems, Inc., directly. Class 4 includes any claims against Medinex Systems. Inc., arising from its prior subsidiaries:

• MedMarket, Inc.

• DiscountMedBooks, Inc.

• Net.Capital, Inc.

• Raintree Communications Corporation

• Public Disclosure, Inc.

• U.S. Congress Handbooks. Inc.

Class 5

Class 5's members consist entirely of holders of issued and outstanding shares of Common Stock of Medinex Systems, Inc. For purposes of balloting under the proposed Plan, shares of Common Stock are valued at $.01 for voting purposes.

If you are the holder of a Class 1, 2, 3, 4, or 5 claim, you are encouraged to complete and return your Ballot concerning acceptance or rejection of the proposed Plan of Reorganization. Be sure to properly identify your class of claim on the Ballot.

DATED this 3rd day of February, 2003.

CRUMB MUNDING, P.S.

_____________________ JOHN D. MUNDING Attorney for Debtor ISBA #04703