##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K/A
 (Mark One)
 þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For
the fiscal year endedMarch 31, 2006 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission file Number 1-08964
 Halifax Corporation
  Virginia
    
    54-0829246(State or other jurisdiction of incorporation of organization)
    
    (IRS Employer Identification No.)
 5250 Cherokee Avenue, Alexandria, VA
    
    22312(Address of principal executive offices)
    
    (zip code)
 (703) 658-2400
  Title of each classCommon Stock ($.24 par value)
    
    Name of each exchange on which registeredAmerican Stock Exchange
 None
 o þ
 o þ
 þ o
 o
  o o þ
 o þ
   Class
    
    Outstanding at June 10, 2006Common Stock $0.24 par value
    
    3,172,206




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##### 



Explanatory Note




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##### 



pagePART IItem 1.
    
    Business
    
    
    1Item 1A
    
    Risk Factors
    
    
    6Item 1B
    
    Unresolved Staff Comments
    
    
    12Item 2.
    
    Properties
    
    
    12Item 3.
    
    Legal Proceedings
    
    
    12Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    13Item 4A.
    
    Executive Officers of  the Registrant
    
    
    13PART IIItem 5.
    
    Market for Registrants Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    14Item 6.
    
    Selected Financial Data
    
    
    15Item 7.
    
    Managements Discussion and
Analysis of Financial Condition and Results of Operation
    
    
    16Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    31Item 8.
    
    Financial Statements and Supplementary Data
    
    
    33Reports of Independent Registered Public Accounting Firms
    
    
    33Consolidated statements of operations for the years ended March 31, 2006, 2005 and 2004
    
    
    35Consolidated balance sheets as of March 31, 2006 and 2005
    
    
    36Consolidated statements of cash flows for the years ended March 31, 2006, 2005 and 2004
    
    
    37Consolidated statements of changes
in stockholders equity for the years ended March 31, 2006, 2005 and 2004
    
    
    38Notes to consolidated financial statements
    
    
    39Schedule II, Valuation and Qualifying Accounts
    
    
    55Item 9.
    
    Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure
    
    
    55Item 9A.
    
    Controls and Procedures
    
    
    56Item 9B.
    
    Other Information
    
    
    56PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    57Item 11.
    
    Executive Compensation
    
    
    57Item 12.
    
    Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters
    
    
    57Item 13.
    
    Certain Relationships and Related Transactions
    
    
    58Item 14.
    
    Principal Accounting Fees and Services
    
    
    58PART IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    
    59Signatures
    
    
    62




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##### 



PART I
 Forward Looking Statements
    Item 1. Business
  Sale of Secure Network Services Business
  1




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##### 



Our Business
     
    
    High Availability Maintenance Services- 7 days a week, 24 hours a day, 365 days a year, multi-vendor support for
nationwide customers with demanding service level requirements
    
    Technology Deployment and Integration Services- nationwide deployment and integration support services.
 High Availability Maintenance Services
   2




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##### 



Technology Deployment and Integration Services
    -
    
    Reduce our clients total cost of ownership;-
    
    Improve service levels and response times;-
    
    Reduce the administrative costs for procurement;-
    
    Increase user productivity through decreased downtime;-
    
    Amortize costs across thousands of users;-
    
    Focus IT staff on core responsibilities;-
    
    Eliminate the time and expense of storage, sale, and disposal of surplus equipment;-
    
    Simplify accounting with one report, one invoice, and one charge per user; and-
    
    Create a single source of accountability for all PC desktop hardware, software, and services.
 Secure Network Services
   Acquisitions
    3




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##### 



Types of Customers
  Years Ended March 31,(Amounts in thousands)
    
    2006
    
    
    2005
    
    
    2004State/Municipal Government
    
    
    10,705
    
    
    
    19
    %
    
    $
    9,663
    
    
    
    20
    %
    
    $
    13,039
    
    
    
    33
    %Commercial
    
    
    43,383
    
    
    
    80
    %
    
    
    37,851
    
    
    
    78
    %
    
    
    26,279
    
    
    
    66
    %Federal Government
    
    
    823
    
    
    
    1
    %
    
    
    912
    
    
    
    2
    %
    
    
    738
    
    
    
    1
    %Total
    
    $
    54,911
    
    
    
    100
    %
    
    $
    48,426
    
    
    
    100
    %
    
    $
    40,056
    
    
    
    100
    %
    Types of Contracts
     4




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##### 




    
    Alexandria, Virginia;
    
    Harrisburg, Pennsylvania;
    
    Richmond, Virginia;
    
    Trenton, New Jersey;
    
    Charleston, South Carolina;
    
    Seattle, Washington; and
    
    Ft. Worth, Texas.
  Accounts Receivable
  Backlog
  Selling
   5




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##### 



Competition
   Personnel
  Item 1A Risk Factors
 Investing in our common stock involves risks. You should carefully consider all of the information
contained in this Annual Report on Form 10-Ks and, in particular, the risks described below.
Additional risks and uncertainties not presently known to us or those we currently deem immaterial
may impair our business operations in the future. If any of the following risks actually occur,
our business, financial condition or results of operations could be materially harmed and you may
lose part or all of your investment.
 We experienced a loss from continuing operations of $1.3 million in fiscal 2006, and continued
losses may negatively impact our financial position and value of our common stock.
   Our revenues are derived from a few major customers, the loss of any of which could cause our
results of operations to be adversely affected.
  6




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##### 



If we experience a decline in cash flow or are unable to maintain compliance with the covenants
contained in our revolving credit facility, our ability to operate could be adversely affected.
  We operate in a highly competitive market. If we are unable to offer competitive products and
services, our business may be adversely affected.
    7




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##### 



Our revenues and results of operations may vary period to period, which may cause the common stock
price to fluctuate.
  
    
    changes in economic conditions;
    
    disruptions or downturns in general economic activity resulting from terrorist
activity and armed conflict;
    
    competitive pricing pressure;
    
    lengthening sales cycles;
    
    obsolescence of technology;
    
    increases in prices of components used to support our enterprise maintenance solutions;
    
    loss of material contracts; and
    
    the success of our business strategy in providing improved operating results.
       If we are unable to generate sufficient revenues, we may have to further down size.
  8




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##### 



If we are unable to retain and attract highly qualified personnel to fulfill our contract
obligations, our business may be harmed.
  We are subject to risks related to fluctuations in interest rates.
  We incur significant costs in connection with the start-up of new contracts before receiving
related revenues, which could result in cash shortfalls and fluctuations in quarterly results from
period to period.
  
    
    could increase our vulnerability to general adverse economic and industry
conditions;
    
    will require us to dedicate a substantial portion of our cash flow from
operations to service payments on its indebtedness; reducing the availability of
our cash flow to fund future capital expenditures, working capital, execution of
its growth strategy, research and development costs and other general corporate
requirements;
    
    could limit our flexibility in planning for, or reacting to, changes in its
business and industry, which may place us at a competitive disadvantage compared
with competitors; and
    
    could limit our ability to borrow additional funds, even when necessary to
maintain adequate liquidity.
  Some of our contracts contain fixed-price provisions that could result in decreased profits if we
fail to accurately estimate our costs.
  9




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##### 



If we are unable to effectively and efficiently reduce costs and replace the revenues lost as a
result of the sale of our secure network services business, our results of operations may be
adversely affected.
  
    
    our ability to complete these on-going efforts,
    
    our ability to generate the level of savings we expect and/or that are necessary
to enable us to effectively compete,
    
    decrease in employee personnel,
    
    ability to generate sufficient revenue and or reduce operating expenses to
offset the contribution that was generated from the secure network services
business which was sold on June 30, 2005, and
    
    the performance of other parties under arrangements on which we rely to support
parts or components.
 If we fail to maintain an effective system of internal controls, we may not be able to accurately
report our financial results or prevent fraud. As a result, current and potential stockholders and
customers could lose confidence in our financial reporting, which could harm our business, the
trading price of our stock and our ability to retain our current customers or obtain new customers.
  If we make future acquisitions of companies, technology and other assets that involve numerous
risks such as difficulty integrating acquired companies, technologies and assets or generating an
acceptable return on its investments.
  
    
    diversion of managements attention from normal daily operations of our
business;
    
    difficulties in entering markets in which we have no or limited direct prior
experience and where competitors in such markets have stronger market positions;
    
    initial dependence on unfamiliar supply chains or relatively small supply partners;
    
    insufficient revenues to offset increased expenses associated with acquisitions; and
    
    the potential loss of key employees of the acquired companies.
 10




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##### 




    
    issue common stock or preferred stock or assume stock option plans that would
dilute current shareholders percentage ownership;
    
    use cash, which may result in a reduction of our liquidity;
    
    assume liabilities;
    
    record goodwill and non-amortizable intangible assets that would be subject to
impairment testing and potential periodic impairment charges;
    
    incur amortization expenses related to certain intangible assets;
    
    incur large and immediate write-offs; and
    
    become subject to litigation.
  We do not expect to pay dividends on our common stock.
  Shareholders of our common stock may face a lack of liquidity.
    Provisions in our corporate charter documents could delay or prevent a change in control.
  11




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##### 



Item 1B. Unresolved Staff Comments
  Item 2. Properties
   Item 3. Legal Proceedings
     12




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##### 



Item 4. Submission of Matters to a Vote of Security Holders
  Item 4-A. Executive Officers of the Registrant
      13




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##### 



PART II
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    Fiscal Year 2006
    
    Fiscal Year 2005Fiscal Quarter
    
    High
    
    Low
    
    High
    
    LowApril  June
    
    $
    4.39
    
    
    $
    3.60
    
    
    $
    4.80
    
    
    $
    4.04July  Sept.
    
    
    4.31
    
    
    
    3.40
    
    
    
    5.16
    
    
    
    3.90Oct.  Dec.
    
    
    3.85
    
    
    
    2.95
    
    
    
    6.05
    
    
    
    4.45Jan.  March
    
    
    3.50
    
    
    
    2.90
    
    
    
    6.01
    
    
    
    4.17
    14




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##### 



Item 6. Selected Financial Data
  Years Ended March 31,(Restated)(Amounts in thousands, except share data)
    
    2006(1)
    
    
    2005(1)
    
    
    2004(2)
    
    
    2003(1)
    
    
    2002Revenues  continuing operations
    
    $
    54,911
    
    
    $
    48,426
    
    
    $
    40,056
    
    
    $
    38,974
    
    
    $
    42,249(Loss) income from
continuing operations
    
    
    (1,276
    )
    
    
    (2,789
    )
    
    
    3,493
    
    
    
    (122
    )
    
    
    36Discontinued operations
    
    
    310
    
    
    
    1,378
    
    
    
    735
    
    
    
    770
    
    
    
    266Gain on sale of discontinued operations
    
    
    2,502
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    1,536
    
    
    $
    (1,411
    )
    
    $
    4,228
    
    
    $
    648
    
    
    $
    302Income(loss) per common share  basicContinuing operations
    
    $
    (.40
    )
    
    $
    (.92
    )
    
    $
    1.32
    
    
    $
    (.05
    )
    
    $
    .02Discontinued operations
    
    
    .09
    
    
    
    .46
    
    
    
    .28
    
    
    
    .35
    
    
    
    .12Gain on sale of discontinued operations
    
    
    .79
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    .48
    
    
    $
    (.46
    )
    
    $
    1.60
    
    
    $
    .30
    
    
    $
    .14Income (loss) per common share  dilutedContinuing operations
    
    $
    (.40
    )
    
    $
    (.92
    )
    
    $
    1.27
    
    
    $
    (.05
    )
    
    $
    .02Discontinued operations
    
    
    .09
    
    
    
    .46
    
    
    
    .27
    
    
    
    .35
    
    
    
    .12Gain on sale of discontinued operations
    
    
    .79
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    .48
    
    
    $
    (.46
    )
    
    $
    1.54
    
    
    $
    .30
    
    
    $
    .14Weighted average number of
shares outstandingBasic
    
    
    3,173,795
    
    
    
    3,043,465
    
    
    
    2,638,345
    
    
    
    2,175,781
    
    
    
    2,100,321Diluted
    
    
    3,188,082
    
    
    
    3,094,922
    
    
    
    2,787,656
    
    
    
    2,212,360
    
    
    
    2,106,478Dividends per common share
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 At March 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Total Assets
    
    $
    27,409
    
    
    $
    33,750
    
    
    $
    26,491
    
    
    $
    17,981
    
    
    $
    20,845Long-term obligations
    
    $
    8,263
    
    
    $
    12,144
    
    
    $
    9,983
    
    
    $
    10,138
    
    
    $
    11,295
 
 (1)
    
    No effect is given to dilutive securities for loss periods.(2)
    
    See Note 11 to the consolidated financial statements for discussion of deferred tax benefit.(3)
    
    We completed the acquisitions during fiscal years ended 2005 and 2004, which affects the
comparability of selected financial data. See Note 4 for information regarding the AlphaNational
acquisition, which occurred on September 30, 2004, and the Microserv, Inc. acquisition, which
occurred on August 29, 2003. 15




---



##### 



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
         16




---



##### 



Restatement of Fiscal 2006 Financial Statements
  17




---



##### 



(Amounts in thousand, except share data)
    
    As reported
    
    
    RestatedGoodwill impairment loss
    
    $
    3,211
    
    
    $
    Operating loss
    
    
    (4,687
    )
    
    
    (1,476
    )Loss from continuing operations
    
    
    (4,487
    )
    
    
    (1,276
    )Income from discontinued operations (net of taxes of $164)
    
    
    310
    
    
    
    310Gain on sale of discontinued operations (net of taxes of
$3,900)
    
    
    5,713
    
    
    
    2,502Net income
    
    $
    1,536
    
    
    $
    1,536Earnings (loss) per share  basic and dilutedContinuing operations
    
    $
    (1.41
    )
    
    $
    (.40
    )Discontinued operations
    
    
    .09
    
    
    
    .09Gain on sale of discontinued operations
    
    
    1.80
    
    
    
    .79$
    .48
    
    
    $
    .48
  March 31,As reported
    
    
    Restated(Amounts in thousands)
    
    2005
    
    
    2005Assets from discontinued operations
    
    
    2,869
    
    
    
    6,080TOTAL CURRENT ASSETS
    
    
    23,660
    
    
    
    26,871GOODWILL
    
    
    6,129
    
    
    
    2,918TOTAL ASSETS
    
    $
    33,750
    
    
    $
    33,750
 Consolidated Results of Operations
  18




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##### 



Years Ended March 31,(Amounts in thousands except share data)(Restated)Results of Operations
    
    2006
    
    
    2005
    
    
    Change
    
    
    %
    
    
    2005
    
    
    2004
    
    
    Change
    
    
    %Revenues
    
    $
    54,911
    
    
    $
    48,426
    
    
    $
    6,485
    
    
    
    13
    %
    
    $
    48,426
    
    
    $
    40,056
    
    
    $
    8,370
    
    
    
    21
    %Costs of services
    
    
    51,211
    
    
    
    46,530
    
    
    
    4,681
    
    
    
    10
    %
    
    
    46,530
    
    
    
    35,323
    
    
    
    11,207
    
    
    
    32
    %Percent of revenues
    
    
    93
    %
    
    
    96
    %
    
    
    
    
    
    
    
    
    
    
    96
    %
    
    
    88
    %Gross Margin
    
    
    3,700
    
    
    
    1,896
    
    
    
    1,804
    
    
    
    95
    %
    
    
    1,896
    
    
    
    4,733
    
    
    
    (2,837
    )
    
    
    -60
    %Percent of revenues
    
    
    7
    %
    
    
    4
    %
    
    
    
    
    
    
    
    
    
    
    4
    %
    
    
    12
    %Selling
    
    
    1,411
    
    
    
    1,771
    
    
    
    (360
    )
    
    
    -20
    %
    
    
    1,771
    
    
    
    1,788
    
    
    
    (17
    )
    
    
    -1
    %Percent of revenues
    
    
    3
    %
    
    
    4
    %
    
    
    
    
    
    
    
    
    
    
    4
    %
    
    
    4
    %General and administrative
    
    
    3,621
    
    
    
    3,725
    
    
    
    (104
    )
    
    
    -3
    %
    
    
    3,725
    
    
    
    3,086
    
    
    
    639
    
    
    
    21
    %Percent of revenues
    
    
    7
    %
    
    
    8
    %
    
    
    
    
    
    
    
    
    
    
    8
    %
    
    
    8
    %Abandonment of lease
    
    
    
    
    
    
    179
    
    
    
    (179
    )
    
    
    N/M
    
    
    
    179
    
    
    
    
    
    
    
    179
    
    
    
    N/MLoss on terminated contracts
    
    
    144
    
    
    
    
    
    
    
    144
    
    
    
    N/M
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    5,176
    
    
    
    5,675
    
    
    
    (499
    )
    
    
    -9
    %
    
    
    5,675
    
    
    
    4,874
    
    
    
    801
    
    
    
    16
    %Percent of Revenues
    
    
    9
    %
    
    
    12
    %
    
    
    
    
    
    
    
    
    
    
    12
    %
    
    
    12
    %Operating (loss) income
    
    
    (1,476
    )
    
    
    (3,779
    )
    
    
    2,303
    
    
    
    60
    %
    
    
    (3,779
    )
    
    
    (141
    )
    
    
    (3,638
    )
    
    
    2,580
    %Percent of revenues
    
    
    -3
    %
    
    
    -8
    %
    
    
    
    
    
    
    
    
    
    
    -8
    %Interest expense
    
    
    583
    
    
    
    663
    
    
    
    (80
    )
    
    
    -12
    %
    
    
    663
    
    
    
    591
    
    
    
    72
    
    
    
    12
    %Other income
    
    
    (6
    )
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    15
    
    
    
    Loss before taxes
    
    
    (2,053
    )
    
    
    (4,442
    )
    
    
    (2,389
    )
    
    
    19
    %
    
    
    (4,442
    )
    
    
    (717
    )
    
    
    (3,725
    )
    
    
    -520
    %Income tax (benefit) expense
    
    
    (777
    )
    
    
    (1,653
    )
    
    
    876
    
    
    
    -53
    %
    
    
    (1,653
    )
    
    
    (4,210
    )
    
    
    2,557
    
    
    
    -61
    %(Loss) income from continuing operations
    
    
    (1,276
    )
    
    
    (2,789
    )
    
    
    (1,513
    
    
    
    61
    %
    
    
    (2,789
    )
    
    
    3,493
    
    
    
    (6,282
    )
    
    
    -180
    %Income from
discontinued operations  net
of taxes
    
    
    310
    
    
    
    1,378
    
    
    
    (1,068
    )
    
    
    -78
    %
    
    
    1,378
    
    
    
    735
    
    
    
    643
    
    
    
    87
    %Gain on sale of discontinued operations
 net of taxes
    
    
    2,502
    
    
    
    
    
    
    
    2,502
    
    
    
    N/M
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    1,536
    
    
    $
    (1,411
    )
    
    $
    2,947
    
    
    
    208
    %
    
    $
    (1,411
    )
    
    $
    4,228
    
    
    $
    (5,639
    )
    
    
    N/MEarnings (loss) per share  basicContinuing operations
    
    $
    (.40
    )
    
    $
    (.92
    )
    
    
    
    
    
    
    
    
    
    $
    (.92
    )
    
    $
    1.32Discontinued operations
    
    
    .09
    
    
    
    .46
    
    
    
    
    
    
    
    
    
    
    
    .46
    
    
    
    .28Gain on sale of discontinued
Operations
    
    
    .79
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    .48
    
    
    $
    (.46
    )
    
    
    
    
    
    
    
    
    
    $
    (.46
    )
    
    $
    1.60Earnings (loss) per share  dilutedContinuing operations
    
    $
    (.40
    )
    
    $
    (.92
    )
    
    
    
    
    
    
    
    
    
    $
    (.92
    )
    
    $
    1.27Discontinued operations
    
    
    .09
    
    
    
    .46
    
    
    
    
    
    
    
    
    
    
    
    .46
    
    
    
    .27Gain on sale of discontinued
Operations
    
    
    .79
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    .48
    
    
    $
    (.46
    )
    
    
    
    
    
    
    
    
    
    $
    (.46
    )
    
    $
    1.54
 
 N/M = not meaningful 19




---



##### 



Revenues
   March 31,(Amounts in thousands)
    
    2006
    
    
    2005
    
    
    Change
    
    
    %
    
    
    2005
    
    
    2004
    
    
    Change
    
    
    %Revenues:Services
    
    $
    51,533
    
    
    $
    45,718
    
    
    $
    5,815
    
    
    
    11
    %
    
    $
    45,718
    
    
    $
    34,509
    
    
    $
    11,209
    
    
    
    32
    %Product held for resale
    
    
    3,378
    
    
    
    2,708
    
    
    
    670
    
    
    
    25
    %
    
    
    2,708
    
    
    
    5,547
    
    
    
    (2,839
    )
    
    
    -51
    %Total revenues
    
    $
    54,911
    
    
    $
    48,426
    
    
    $
    6,485
    
    
    
    13
    %
    
    $
    48,426
    
    
    $
    40,056
    
    
    $
    8,370
    
    
    
    21
    %
    Cost of Services
     20




---



##### 



March 31,(Amounts in thousands)
    
    2006
    
    
    2005
    
    
    Change
    
    
    %
    
    
    2005
    
    
    2004
    
    
    Change
    
    
    %Services delivery and
support
    
    $
    42,913
    
    
    $
    38,767
    
    
    $
    4,146
    
    
    
    11
    %
    
    $
    38,767
    
    
    $
    26,393
    
    
    $
    12,374
    
    
    
    47
    %Product held for resale
    
    
    3,126
    
    
    
    2,494
    
    
    
    632
    
    
    
    25
    %
    
    
    2,494
    
    
    
    5,151
    
    
    
    (2,657
    )
    
    
    -52
    %Total direct costs
    
    
    46,039
    
    
    
    41,261
    
    
    
    4,778
    
    
    
    12
    %
    
    
    41,261
    
    
    
    31,544
    
    
    
    9,717
    
    
    
    31
    %Indirect costs
    
    
    5,172
    
    
    
    5,269
    
    
    
    (97
    )
    
    
    -2
    %
    
    
    5,269
    
    
    
    3,779
    
    
    
    1,490
    
    
    
    39
    %Cost of services
    
    $
    51,211
    
    
    $
    46,530
    
    
    $
    4,681
    
    
    
    10
    %
    
    $
    46,530
    
    
    $
    35,323
    
    
    $
    11,207
    
    
    
    32
    %
       21




---



##### 



Gross Margin
    Selling Expenses
   General and Administrative Expenses
    22




---



##### 



Severance Costs and Abandonment of Facilities
   Operating Loss
   Interest Expense
   Income Taxes
    Discontinued Operations
  23




---



##### 



Gain on Sale of Discontinued Operations
  Net Income (loss)
   Depreciation and Amortization
  Sale of Secure Network Services Business
    24




---



##### 



Liquidity and Capital Resources
   
    
    $400,000 principal amount of our 7% convertible subordinated debentures;
    
    $500,000 principal amount of our 8% promissory notes dated October 8, 1998;
    
    $500,000 principal amount of our 8% promissory notes dated October 13, 1998;
    
    $100,000 accrued interest on our 7% convertible subordinated debentures, and 8%
promissory notes dated October 8, 1998, October 13, 1998, November 2, 1998 and November
5, 1998;
    
    $494,000 principal amount on our notes issued to former Microserv shareholders; and
    
    $250,000 earn out to the former Microserv sShareholders.
        25




---



##### 



Liquidity and Capital Resources (Amounts in thousands)
    
    2006
    
    
    2005
    
    
    2004Cash balance at March 31
    
    $
    400
    
    
    $
    1,264
    
    
    $
    430Working capital at March 31
    
    $
    9,674
    
    
    $
    11,685
    
    
    $
    9,769Net cash (used in) provided by operating activities
    
    $
    (8,138
    )
    
    $
    687
    
    
    $
    (120
    )Net cash provided by (used in) investment activities
    
    $
    11,751
    
    
    $
    (1,671
    )
    
    $
    (1,078
    )Net cash (used in) provided by financing activities
    
    $
    (4,477
    )
    
    $
    1,818
    
    
    $
    1,060
       26




---



##### 



27




---



##### 



(Amounts in thousands)
 Year ended
    
    Bank Line of
    
    
    Other
    
    
    Consulting
    
    
    OperatingMarch 31,
    
    Credit
    
    
    Debt (1) (2) (3) (4)
    
    
    Commitment (5)
    
    
    Leases
    
    
    TotalLess than 1 year
    
    $
    
    
    
    $
    202
    
    
    $
    50
    
    
    $
    1,514
    
    
    $
    1,7661 to 3 years
    
    
    6,891
    
    
    
    1,071
    
    
    
    100
    
    
    
    1,908
    
    
    
    9,9703 to 5 years
    
    
    
    
    
    
    83
    
    
    
    
    
    
    
    387
    
    
    
    470More than 5 years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    6,891
    
    
    $
    1,356
    
    
    $
    150
    
    
    $
    3,809
    
    
    $
    12,206
 
 (1)
    
    At March 31, 2006, affiliates (See Note 13 to the consolidated financial statements), held in
the aggregate $500,000, and $500,000 face amount of our 8% subordinated notes dated November 2,
1998 and November 5, 1998, respectively, in the aggregate principal amount of $1.0 million. These
notes are subordinate to our revolving credit agreement and we cannot make principal or interest
payments on such notes without the consent of Provident Bank. The balance of our subordinated
notes at March 31, 2006 was $1.0 million.(2)
    
    In conjunction with the acquisition of AlphaNational, we issued notes totaling $168,000 to the
former AlphaNational shareholders. These notes carried interest at the rate of 6% and matured on
March 31, 2006 and were paid in full on April 17, 2006.(3)
    
    We are obligated under a capitalized lease for phone equipment with a term of sixty months. The
note carries interest of 8%. The balance of the note on March 31, 2006 was $185,000.(4)
    
    We have a note with an automobile manufacturer. The note has a term of 48 months with an
interest rate of 0.0%. The balance on the note at March 31, 2006, was $3,000.(5)
    
    We have a consulting advisory service commitment with a former Chief Executive Officer of the
Company. From April 1, 1999 through March 31, 2009, we are to pay the former Chief Executive
Officer $50,000 per year for consulting services. Off Balance Sheet Arrangements
  28




---



##### 



Application of Critical Accounting Policies
  Revenue Recognition
    Inventory Valuation Reserves
  29




---



##### 



Allowance for Doubtful Accounts
  Goodwill and Other Intangible Assets
    Property and Equipment
  Income Taxes and Valuation Allowance
  30




---



##### 



Results of Operations and Forward Looking Statements
  Recent Accounting Pronouncements
    Item 7A. Quantitative and Qualitative Disclosures about Market Risk
   31




---



##### 



Long-term debt (including current maturities)
    
    Total Debt
    
    
    Fair Value(Amounts in thousands)Revolving credit agreement at the PRIME rate plus .75%, due
June 30, 2007. Average interest rate of 5.0%
    
    $
    6,891
    
    
    $
    6,8918% subordinated notes from affiliate due July 1, 2007
    
    
    1,000
    
    
    
    1,0006% notes issued to former AlphaNational shareholders due
March 31, 2006
    
    
    168
    
    
    
    168Equipment under a capitalized lease, 8% interest, 60 month term
    
    
    188
    
    
    
    188Total fixed rate debt
    
    
    1,356
    
    
    
    1,356Total debt
    
    $
    8,247
    
    
    $
    8,247
      32




---



##### 



Item 8. Financial Statements and Supplementary Data
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
 33




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
 34




---



##### 



HALIFAX CORPORATION   FOR THE YEARS ENDED MARCH 31, 2006, 2005 AND 2004
 (Restated)(Amounts in thousands except share and per share data)
    
    2006
    
    
    2005
    
    
    2004Revenues
    
    $
    54,911
    
    
    $
    48,426
    
    
    $
    40,056Operating costs and expenses
    
    
    51,211
    
    
    
    46,530
    
    
    
    35,323Gross margin
    
    
    3,700
    
    
    
    1,896
    
    
    
    4,733Selling and Marketing
    
    
    1,411
    
    
    
    1,771
    
    
    
    1,788General and administrative
    
    
    3,621
    
    
    
    3,725
    
    
    
    3,086Abandonment of lease
    
    
    
    
    
    
    179
    
    
    
    Severance costs
    
    
    144
    
    
    
    
    
    
    
    Operating loss
    
    
    (1,476
    )
    
    
    (3,779
    )
    
    
    (141
    )Interest expense
    
    
    583
    
    
    
    663
    
    
    
    591Other income
    
    
    (6
    )
    
    
    
    
    
    
    (15
    )Loss before income taxes
    
    
    (2,053
    )
    
    
    (4,442
    )
    
    
    (717
    )Income tax benefit
    
    
    (777
    )
    
    
    (1,653
    )
    
    
    (4,210
    )(Loss) income from continuing operations
    
    
    (1,276
    )
    
    
    (2,789
    )
    
    
    3,493Income from discontinued operations (net of taxes of $163,
$863, and $460, respectively)
    
    
    310
    
    
    
    1,378
    
    
    
    735Gain on sale of discontinued operations (net of tax of $3,609)
    
    
    2,502
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    1,536
    
    
    $
    (1,411
    )
    
    $
    4,228Earnings (loss) per share  basicContinuing operations
    
    $
    (.40
    )
    
    $
    (.92
    )
    
    $
    1.32Discontinued operations
    
    
    .09
    
    
    
    .46
    
    
    
    .28Gain on sale of discontinued operations
    
    
    .79
    
    
    
    
    
    
    
    $
    .48
    
    
    $
    (.46
    )
    
    $
    1.60Earnings (loss) per share  dilutedContinuing operations
    
    $
    (.40
    )
    
    $
    (.92
    )
    
    $
    1.27Discontinued operations
    
    
    .09
    
    
    
    .46
    
    
    
    .27Gain on sale of discontinued operations
    
    
    .79
    
    
    
    
    
    
    
    $
    .48
    
    
    $
    (.46
    )
    
    $
    1.54Weighted average number of common shares outstanding  Basic
    
    
    3,173,795
    
    
    
    3,043,465
    
    
    
    2,638,345Weighted average number of common shares outstanding  diluted
    
    
    3,188,082
    
    
    
    3,094,922
    
    
    
    2,787,656
 
 *
    
    No effect is given to dilutive securities for loss periods.  35




---



##### 



HALIFAX CORPORATION  CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2006 AND 2005
 March 31,2006
    
    
    2005(Amounts in thousands except share and per share data)
    
    
    
    
    
    (Restated)ASSETSCURRENT ASSETSCash
    
    $
    400
    
    
    $
    1,264Restricted cash
    
    
    625
    
    
    
    Trade accounts receivable, net
    
    
    11,415
    
    
    
    9,626Inventory, net
    
    
    6,363
    
    
    
    5,600Prepaid expenses and other current assets
    
    
    722
    
    
    
    487Deferred tax asset
    
    
    1,332
    
    
    
    3,814Assets from discontinued operations
    
    
    
    
    
    
    6,080TOTAL CURRENT ASSETS
    
    
    20,857
    
    
    
    26,871PROPERTY AND EQUIPMENT, net
    
    
    1,381
    
    
    
    1,581GOODWILL
    
    
    2,918
    
    
    
    2,918OTHER INTANGIBLE ASSETS, net
    
    
    1,295
    
    
    
    1,309OTHER ASSETS
    
    
    130
    
    
    
    141DEFERRED TAX ASSET
    
    
    828
    
    
    
    930TOTAL ASSETS
    
    $
    27,409
    
    
    $
    33,750LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    3,975
    
    
    $
    4,528Accrued expenses
    
    
    3,160
    
    
    
    4,584Deferred maintenance revenues
    
    
    3,515
    
    
    
    3,776Current portion of long-term debt
    
    
    34
    
    
    
    17Notes payable
    
    
    168
    
    
    
    662Income taxes payable
    
    
    331
    
    
    
    Liabilities from discontinued operations
    
    
    
    
    
    
    1,619TOTAL CURRENT LIABILITIES
    
    
    11,183
    
    
    
    15,186LONG-TERM BANK DEBT
    
    
    6,891
    
    
    
    9,463OTHER LONG-TERM DEBT
    
    
    154
    
    
    
    3SUBORDINATED DEBT  AFFILIATE
    
    
    1,000
    
    
    
    2,400DEFERRED INCOME
    
    
    218
    
    
    
    278TOTAL LIABILITIES
    
    
    19,446
    
    
    
    27,330COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    STOCKHOLDERS EQUITYPreferred stock, no par value authorized 1,500,000, issued 0 shares
    
    
    
    
    
    
    Common stock, $.24 par value:Authorized - 6,000,000 sharesIssued  3,431,890 in 2006 and 3,427,640 in 2005Outstanding - 3,175,206 in 2006 and 3,170,956 in 2005
    
    
    828
    
    
    
    827Additional paid-in capital
    
    
    9,017
    
    
    
    9,011Accumulated deficit
    
    
    (1,670
    )
    
    
    (3,206
    )Less treasury stock at cost  256,684 shares in 2006 and 2005
    
    
    (212
    )
    
    
    (212
    )TOTAL STOCKHOLDERS EQUITY
    
    
    7,963
    
    
    
    6,420TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    27,409
    
    
    $
    33,750
 See notes to consolidated financial statements
 36




---



##### 



HALIFAX CORPORATION   FOR THE YEARS ENDED MARCH 31, 2006, 2005 AND 2004
 2006
    
    
    2005
    
    
    2004(Amounts in thousands)
    
    (Restated)Cash flows from operating activities:Net income (loss)
    
    $
    1,536
    
    
    $
    (1,411
    )
    
    $
    4,228Adjustments to reconcile net income to net cash provided by
(used in) operating activities:Gain on sale of discontinued operations
    
    
    (2,502
    )
    
    
    
    
    
    
    Income from discontinued operations
    
    
    (310
    )
    
    
    (1,378
    )
    
    
    (735
    )Depreciation and amortization
    
    
    1,081
    
    
    
    1,159
    
    
    
    762Deferred income taxes
    
    
    (1,305
    )
    
    
    (1,704
    )
    
    
    (4,360
    )Changes in assets and liabilities:Increase in accounts receivable
    
    
    (1,789
    )
    
    
    (1,628
    )
    
    
    (340
    )(Increase) decrease in inventory
    
    
    (763
    )
    
    
    439
    
    
    
    (353
    )(Increase) decrease in prepaid expenses and other
current assets
    
    
    (235
    )
    
    
    128
    
    
    
    (320
    )Decrease in other assets
    
    
    11
    
    
    
    14
    
    
    
    30Increase (decrease) in accounts payable,
accrued expenses and other current liabilities
    
    
    (1,977
    )
    
    
    2,194
    
    
    
    (662
    )(Decrease) increase in deferred maintenance revenues
    
    
    (261
    )
    
    
    227
    
    
    
    (66
    )(Decrease) increase in deferred income
    
    
    (60
    )
    
    
    (59
    )
    
    
    199Income taxes payable
    
    
    331
    
    
    
    
    
    
    
    Net cash (used in) provided by continuing operations
    
    
    (6,243
    )
    
    
    (2,019
    )
    
    
    (1,617
    )Net cash (used in) provided by discontinued operations
    
    
    (1,895
    )
    
    
    2,706
    
    
    
    1,497Net cash flow (used) provided by operating activities
    
    
    (8,138
    )
    
    
    687
    
    
    
    (120
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (402
    )
    
    
    (833
    )
    
    
    (652
    )Proceeds from sale of discontinued operations
    
    
    13,057
    
    
    
    
    
    
    
    Restricted cash
    
    
    (625
    )
    
    
    
    
    
    
    Payment for acquisitions (net of cash acquired)
    
    
    (330
    )
    
    
    (824
    )
    
    
    (416
    )Net cash provided by (used in) investing activities by
continuing operations
    
    
    11,700
    
    
    
    (1,657
    )
    
    
    (1,068
    )Net cash flow provided by (used in) discontinued
operations
    
    
    51
    
    
    
    (14
    )
    
    
    (10
    )Net cash flow provided by (used in ) investing activities
    
    
    11,751
    
    
    
    (1,671
    )
    
    
    (1,078
    )Cash flows from financing activities:Proceeds from debt borrowings
    
    
    38,975
    
    
    
    33,195
    
    
    
    25,204Repayments of debt
    
    
    (41,547
    )
    
    
    (31,461
    )
    
    
    (23,699
    )Retirement of subordinated debt- affiliate
    
    
    (1,400
    )
    
    
    
    
    
    
    (1,600
    )Repayments of other debt
    
    
    (18
    )
    
    
    
    
    
    
    Retirement of acquisition debt
    
    
    (494
    )
    
    
    
    
    
    
    Proceeds from private placement
    
    
    
    
    
    
    
    
    
    
    1,200Costs associated with private placement
    
    
    
    
    
    
    
    
    
    
    (45
    )Proceeds from sale of stock upon exercise of stock
options
    
    
    7
    
    
    
    84
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (4,477
    )
    
    
    1,818
    
    
    
    1,060Net (decrease) increase in cash
    
    
    (864
    )
    
    
    834
    
    
    
    (138
    )Cash at beginning of year
    
    
    1,264
    
    
    
    430
    
    
    
    568Cash at end of year
    
    $
    400
    
    
    $
    1,264
    
    
    $
    430
  See notes to consolidated financial statements
 37




---



##### 



HALIFAX CORPORATION   FOR THE YEARS ENDED MARCH 31, 2006, 2005, AND 2004
  AdditionalCommon Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    Treasury StockShares
    
    
    Par Value
    
    
    Capital
    
    
    Deficit
    
    
    Shares
    
    
    Cost
    
    
    TotalMarch 31, 2003
    
    
    2,433,047
    
    
    $
    588
    
    
    $
    5,016
    
    
    $
    (6,023
    )
    
    
    256,684
    
    
    $
    (212
    )
    
    $
    (631
    )Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,228
    
    
    
    
    
    
    
    
    
    
    
    4,228Issuance of Common Stock
    
    
    734,049
    
    
    
    176
    
    
    
    2,946
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,122March 31, 2004
    
    
    3,167,096
    
    
    
    764
    
    
    
    7,962
    
    
    
    (1,795
    )
    
    
    256,684
    
    
    
    (212
    )
    
    
    6,719Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,411
    )
    
    
    
    
    
    
    
    
    
    
    (1,411
    )Issuance of Common Stock
    
    
    260,544
    
    
    
    63
    
    
    
    1,049
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,112March 31, 2005
    
    
    3,427,640
    
    
    
    827
    
    
    
    9,011
    
    
    
    (3,206
    )
    
    
    256,684
    
    
    
    (212
    )
    
    
    6,420Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,536
    
    
    
    
    
    
    
    
    
    
    
    1,536Issuance of Common Stock
    
    
    4,250
    
    
    
    1
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7March 31, 2006
    
    
    3,431,890
    
    
    $
    828
    
    
    $
    9,017
    
    
    $
    (1,670
    )
    
    
    256,684
    
    
    $
    (212
    )
    
    $
    7,963
 See notes to consolidated financial statements
 38




---



##### 



HALIFAX CORPORATION   FOR THE YEARS ENDED MARCH 31, 2006, 2005 AND 2004
 1.
    
    SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS ACTIVITY
 Business Activity
 Principles of Consolidation
 Use of Estimates
 Accounts Receivable
  Inventory
 Property and Equipment
 Machinery and equipment
    
    3-10 yearsFurniture and fixtures
    
       5 yearsBuilding improvements
    
       5-10 yearsVehicles
    
        4 years
  39




---



##### 



Goodwill and Intangible Assets
 Deferred Maintenance Revenues
 Revenue Recognition
 Income Taxes
 Stock-Based Compensation
  40




---



##### 



Year Ended March 31,(Amounts in thousands except share data)
    
    2006
    
    
    2005
    
    
    2004Net income (loss) (as reported)
    
    $
    1,536
    
    
    $
    (1,411
    )
    
    $
    4,228Deduct: stock-based compensation expense
determined under the fair value method,
net of tax
    
    
    (45
    )
    
    
    (106
    )
    
    
    (175
    )Proforma net income (loss)
    
    $
    1,491
    
    
    $
    (1,517
    )
    
    $
    4,053Earnings (loss) per common share (as
reported):Basic
    
    $
    .48
    
    
    $
    (.46
    )
    
    $
    1.60Diluted
    
    $
    .48
    
    
    $
    (.46
    )
    
    $
    1.54Proforma earnings (loss) per common share:Basic
    
    $
    .47
    
    
    $
    (.50
    )
    
    $
    1.54Diluted
    
    $
    .47
    
    
    $
    (.50
    )
    
    $
    1.45
 Earnings Per Common Share
 Concentration of Risk
  Recent Pronouncements
    41




---



##### 



2.
    
    ACCOUNTS RECEIVABLE
  March 31,(Amounts
in thousands)
    
    2006
    
    
    2005Amounts billed
    
    $
    11,079
    
    
    $
    9,531Amounts unbilled
    
    
    501
    
    
    
    393Total
    
    
    11,580
    
    
    
    9,924Allowance for doubtful accounts
    
    
    (165
    )
    
    
    (298
    )Total
    
    $
    11,415
    
    
    $
    9,626
 3.
    
    PROPERTY AND EQUIPMENT
  March 31,
    
    
    Estimated(Amounts in thousands)
    
    2006
    
    
    2005
    
    
    Useful LivesMachinery and equipment
    
    $
    2,746
    
    
    $
    3,573
    
    
    3-10 yearsFurniture and fixtures
    
    
    210
    
    
    
    255
    
    
    5 yearsBuilding improvements
    
    
    315
    
    
    
    599
    
    
    5-10 yearsVehicles
    
    
    160
    
    
    
    150
    
    
    4 yearsTotal
    
    
    3,431
    
    
    
    4,577Accumulated depreciation
    
    
    (2,050
    )
    
    
    (2,996
    )Total
    
    $
    1,381
    
    
    $
    1,581
  4.
    
    ACQUISITIONS
       42




---



##### 



5.
    
    GOODWILL AND OTHER INTANGIBLE ASSETS
  EstimatedAmortization
    
    
    2006
    
    
    2005period
    
    
    Gross
    
    
    Accumulated
    
    
    Net
    
    
    Gross
    
    
    Accumulated
    
    
    Net(Amounts in thousands):
    
    (in months)
    
    
    Assets
    
    
    Amortization
    
    
    Assets
    
    
    Assets
    
    
    Amortization
    
    
    AssetsClient master contracts
    
    
    60-90
    
    
    
    1,675
    
    
    
    (440
    )
    
    
    1,235
    
    
    
    1,345
    
    
    
    (196
    )
    
    
    1,149Backlog
    
    
    48
    
    
    
    96
    
    
    
    (62
    )
    
    
    34
    
    
    
    96
    
    
    
    (38
    )
    
    
    58Subcontractor provider
network
    
    
    36
    
    
    
    64
    
    
    
    (64
    )
    
    
    
    
    
    
    64
    
    
    
    (41
    )
    
    
    23Non compete
    
    
    24-36
    
    
    
    109
    
    
    
    (83
    )
    
    
    26
    
    
    
    109
    
    
    
    (30
    )
    
    
    79$
    1,944
    
    
    $
    (649
    )
    
    $
    1,295
    
    
    $
    1,614
    
    
    $
    (305
    )
    
    $
    1,309
   Fiscal Year ended March 31,2007
    
    $
    3432008
    
    
    2972009
    
    
    2872010
    
    
    2162011
    
    
    123Thereafter
    
    
    29Total
    
    $
    1,295
   43




---



##### 



6.
    
    LONG-TERM DEBT
  March 31,(Amounts in thousands)Long-term debt consists of:
    
    2006
    
    
    2005Revolving credit agreement dated June 29, 2005 maturing June 30, 2007 with
a maximum borrowing limit of $12.0 million. Amounts available under this
agreement are determined by applying stated percentages to the Companys
eligible receivables and inventory. At March 31, 2006 and 2005, $5.1
million and $2.6 million, respectively, was available to the Company under
the terms of the agreement. The facility bears interest at the banks prime
rate plus 3/4%. The interest rate at March 31, 2006 and 2005 was 7.75% and
5.75%, respectively.Total bank debt
    
    $
    6,891
    
    
    $
    9,4637% Convertible subordinated debenture with an affiliate (see Note 13) dated
January 27, 1998. Principal due in full on July 1, 2007. Interest payable
semiannually in arrears beginning
August 1, 1998. Convertible to common stock by note holder at any time at
a conversion price of $3.19 per common share. During the year ended March
31, 2006 the notes were paid in full.
    
    
    
    
    
    
    400Subordinated note with an affiliate (see Note 13) dated October 8, 1998.
Principal due on July 1, 2007. Interest accrues annually at 8%. During the
year ended March 31, 2006 the notes were paid in full.
    
    
    
    
    
    
    690Subordinated note with an affiliate (see Note 13) dated October 13, 1998.
Principal due on July 1, 2007. Interest accrues annually at 8%. During the
year ended March 31, 2006 the notes were paid in full.
    
    
    
    
    
    
    310Subordinated note with an affiliate (see Note 13) dated November 2, 1998.
Principal due on July 1, 2007. Interest accrues annually at 8%.
    
    
    500
    
    
    
    500Subordinated note with an affiliate (see Note 13) dated November 5, 1998.
Principal due on July 1, 2007. Interest accrues annually at 8%.
    
    
    500
    
    
    
    500Subtotal  debt affiliated parties
    
    
    1,000
    
    
    
    2,4005% Notes issued to former Microserv shareholders (see Note 4)
    
    
    
    
    
    
    4946% notes issued to former AlphaNational shareholders due March 31, 2006
(see Note 4) The notes were paid in full on April 17, 2006.
    
    
    168
    
    
    
    168Equipment under a capitalized lease, 8% interest, 60 month term
    
    
    185
    
    
    
    Other debt, interest rates 0.0% to 1.9%, terms ranging from 36 to 48 months.
    
    
    3
    
    
    
    20Total debt
    
    
    8,247
    
    
    
    12,545Less current maturities
    
    
    202
    
    
    
    679Total long-term debt
    
    $
    8,045
    
    
    $
    11,866
 44




---



##### 



(Amounts in thousands)
 Year endedMarch 31,
    
    Total2007
    
    $
    2022008
    
    
    7,9252009
    
    
    372010
    
    
    402011
    
    
    43Total
    
    $
    8,247
  7.
    
    ACCRUED EXPENSES
  March 31,(Amounts in thousands)
    
    2006
    
    
    2005Accrued lease payments
    
    $
    825
    
    
    $
    1,369Accrued vacation
    
    
    735
    
    
    
    906Accrued payroll
    
    
    465
    
    
    
    1,431Payroll taxes accrued and withheld
    
    
    466
    
    
    
    231Terminated lease costs
    
    
    115
    
    
    
    154Other accrued expenses
    
    
    554
    
    
    
    493$
    3,160
    
    
    $
    4,584
 8.
    
    STOCKBASED COMPENSATION
   45




---



##### 



WeightedAverageNumber of
    
    
    Exercise Price2005 Plan
    
    Shares
    
    
    Per ShareGranted
    
    
    27,800
    
    
    $
    3.40Outstanding at March 31, 2006
    
    
    27,800
    
    
    $
    3.40
 WeightedAverageNumber of
    
    
    Exercise Price1994 Plan and 1997 Plan
    
    Shares
    
    
    Per ShareOutstanding at March 31, 2003
    
    
    412,417
    
    
    $
    5.09Granted
    
    
    38,000
    
    
    
    5.16Exercised
    
    
    
    
    
    
    Forfeited/Expired
    
    
    (32,500
    )
    
    
    5.49Outstanding at March 31, 2004
    
    
    417,917
    
    
    
    5.07Granted
    
    
    96,800
    
    
    
    4.56Exercised
    
    
    (21,500
    )
    
    
    3.48Forfeited/Expired
    
    
    (32,500
    )
    
    
    3.77Outstanding at March 31, 2005
    
    
    460,217
    
    
    
    5.13Exercised
    
    
    (4,250
    )
    
    
    2.60Forfeited/Expired
    
    
    (50,050
    )
    
    
    5.02Outstanding at March 31, 2006
    
    
    405,917
    
    
    $
    5.16
 46




---



##### 



Options OutstandingWeighted Average
    
    Options Outstanding
    
    
    
    
    
    Options ExercisableRange of
    
    Options
    
    Remaining
    
    Weighted Average
    
    Options
    
    Weighted AverageExercise Prices
    
    Outstanding
    
    Contractual Life
    
    Exercise Price
    
    Exercisable
    
    Exercise price$
    3.40
    
    
    
    27,800
    
    
    10 years
    
    $
    3.40
    
    
    
    27,800
    
    
    $
    3.40
  Options OutstandingWeighted Average
    
    
    Options Outstanding
    
    
    
    
    
    
    Options ExercisableRange of
    
    
    Options
    
    
    Remaining
    
    
    Weighted Average
    
    
    Options
    
    
    Weighted AverageExercise Prices
    
    
    Outstanding
    
    
    Contractual Life
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Exercise price$
    10.25
    
    
    
    24,250
    
    
    2 years
    
    $
    10.25
    
    
    
    24,250
    
    
    $
    10.257.03
    
    
    
    10,500
    
    
    3 years
    
    
    7.03
    
    
    
    10,500
    
    
    
    7.035.57-7.56
    
    
    
    77,000
    
    
    4 years
    
    
    6.23
    
    
    
    77,000
    
    
    
    6.235.38-7.06
    
    
    
    69,000
    
    
    5 years
    
    
    5.78
    
    
    
    69,000
    
    
    
    5.781.80-4.05
    
    
    
    76,000
    
    
    6 years
    
    
    3.49
    
    
    
    75,836
    
    
    
    3.493.10-5.00
    
    
    
    49,167
    
    
    7 years
    
    
    3.48
    
    
    
    26,667
    
    
    
    3.604.11-5.70
    
    
    
    18,000
    
    
    8 years
    
    
    4.55
    
    
    
    12,253
    
    
    
    4.274.45-5.02
    
    
    
    82,000
    
    
    9 years
    
    
    4.59
    
    
    
    78,959
    
    
    
    4.59$
    2.60-$7.56
    
    
    
    405,917
    
    
    
    
    
    
    $
    5.16
    
    
    
    374,465
    
    
    $
    5.28
       (Amounts in thousands)
    
    2006
    
    
    2005
    
    
    2004Current expense:Federal
    
    $
    133
    
    
    $
    
    
    
    $
    14State
    
    
    395
    
    
    
    51
    
    
    
    136Total current:
    
    
    528
    
    
    
    51
    
    
    
    150Deferred expense:Federal
    
    
    (1,065
    )
    
    
    (1,394
    )
    
    
    (4,172
    )State
    
    
    (240
    )
    
    
    (310
    )
    
    
    (188
    )Total deferred:
    
    
    (1,305
    )
    
    
    (1,704
    )
    
    
    (4,360
    )Income tax (benefit) expense
    
    $
    (777
    )
    
    $
    (1,653
    )
    
    $
    (4,210
    )
 47




---



##### 



(Amounts in thousands)
    
    2006
    
    
    2005Deferred tax assets:Accounts receivable reserves
    
    $
    63
    
    
    $
    115Inventory reserve
    
    
    318
    
    
    
    661Inventory capitalization
    
    
    100
    
    
    
    103Depreciation/amortization
    
    
    76
    
    
    
    209Accrued compensation/vacation
    
    
    283
    
    
    
    348Other accrued costs
    
    
    102
    
    
    
    Abandonment of space
    
    
    44
    
    
    
    69AMT credit carryforwards
    
    
    227
    
    
    
    93Net operating loss carryforward
    
    
    863
    
    
    
    3,039Deferred gain on building sale
    
    
    84
    
    
    
    1072,160
    
    
    
    4,744Deferred tax liabilities:
    
    
    
    
    
    
    2,160
    
    
    
    4,744Valuation allowance
    
    
    
    
    
    
    Net deferred tax asset
    
    $
    2,160
    
    
    $
    4,744
     2006
    
    
    2005
    
    
    2004(Benefit) provision for income taxes
    
    
    (34.0
    )%
    
    
    (34.0
    )%
    
    
    (34.0
    )%(Reduction) increase in taxes resulting from:State taxes, net of federal benefit
    
    
    (4.1
    )
    
    
    (7.1
    )
    
    
    (6.2
    )Permanent items
    
    
    26.3
    
    
    
    3.9
    
    
    
    9.1Other
    
    
    (3.0
    )
    
    
    
    
    
    
    (1.1
    )Change in valuation allowance for deferred tax assets
    
    
    
    
    
    
    
    
    
    
    (554.9
    )Total
    
    
    (14.8
    )%
    
    
    (37.2
    )%
    
    
    (587.1
    )%
 48




---



##### 



(Amounts in thousands)
    
    2006
    
    
    2005
    
    
    2004Revenue
    
    $
    3,045
    
    
    $
    13,580
    
    
    $
    9,481Income before taxes
    
    $
    473
    
    
    $
    2,240
    
    
    $
    1,195Net income
    
    $
    310
    
    
    $
    1,378
    
    
    $
    735
  2005Accounts receivable
    
    $
    2,781Unbilled accounts receivable
    
    
    61Fixed assets (net)
    
    
    27Goodwill
    
    
    3,211Total assets
    
    $
    6,080Accounts payable
    
    $
    1,427Accrued expenses
    
    
    192Total liabilities
    
    $
    1,619
   49




---



##### 



(Amounts in thousand, except share data)
    
    As reported
    
    
    RestatedGoodwill impairment loss
    
    $
    3,211
    
    
    $
    Operating loss
    
    
    (4,687
    )
    
    
    (1,476
    )Loss from continuing operations
    
    
    (4,487
    )
    
    
    (1,276
    )Income from discontinued operations (net of taxes of $164)
    
    
    310
    
    
    
    310Gain on sale of discontinued operations (net of taxes of $3,900)
    
    
    5,713
    
    
    
    2,502Net income
    
    $
    1,536
    
    
    $
    1,536Earnings (loss) per share  basic and dilutedContinuing operations
    
    $
    (1.41
    )
    
    $
    (.40
    )Discontinued operations
    
    
    .09
    
    
    
    .09Gain on sale of discontinued operations
    
    
    1.80
    
    
    
    .79$
    .48
    
    
    $
    .48
  March 31,As reported
    
    
    Restated(Amounts in thousands)
    
    2005
    
    
    2005Assets from discontinued operations
    
    
    2,869
    
    
    
    6,080TOTAL CURRENT ASSETS
    
    
    23,660
    
    
    
    26,871GOODWILL
    
    
    6,129
    
    
    
    2,918TOTAL ASSETS
    
    $
    33,750
    
    
    $
    33,750
  (Amounts in thousands)
 Year ending March 31,2007
    
    $
    1,5142008
    
    
    1,0552009
    
    
    8532010
    
    
    3872011 and thereafter
    
    
    Total minimum lease payments
    
    $
    3,809
   50




---



##### 



51




---



##### 



(Amounts in thousands)
    
    2006
    
    
    2005
    
    
    2004Interest
    
    $
    586
    
    
    $
    644
    
    
    $
    611Income taxes
    
    $
    395
    
    
    $
    
    
    
    $
    81Disclosure of non-cash financing activities:Purchase of equipment pursuant to a capital lease
    
    $
    186
    
    
    $
    
    
    
    $
    5% notes payable to former Microserv shareholders
    
    $
    
    
    
    $
    
    
    
    $
    494Common stock issued for the purchase of AlphaNational
    
    $
    
    
    
    $
    1,028
    
    
    $
    Common stock issued for the purchase of Microserv
    
    $
    
    
    
    $
    
    
    
    $
    1,871Fees to investment bankers
    
    $
    
    
    
    $
    
    
    
    $
    117Fair value of assets acquired
    
    $
    
    
    
    $
    
    
    
    $
    1,619Warrants issued in connection with private placement
    
    $
    
    
    
    $
    
    
    
    $
    69
  
 Years Ended March 31,(Amounts in thousands except share data)
    
    2006
    
    
    2005
    
    
    2004Numerator for earnings per share:Net income as reported  Basic
    
    $
    1,536
    
    
    $
    (1,411
    )
    
    $
    4,228Interest on convertible subordinated
debt (net of tax)
    
    
    
    
    
    
    
    
    
    
    77Net Earnings  Dilutive
    
    $
    1,536
    
    
    $
    (1,411
    )
    
    $
    4,305Denominator:Denominator for basic earnings per share-
    
    
    3,173,795
    
    
    
    3,043,465
    
    
    
    2,638,345Weighted-average shares outstandingEffect of dilutive securities:7% convertible debenture
    
    
    
    
    
    
    
    
    
    
    97,324Employee stock options
    
    
    14,287
    
    
    
    42,243
    
    
    
    43,226Non qualified stock options
    
    
    
    
    
    
    564
    
    
    
    2,124Warrants
    
    
    
    
    
    
    8,650
    
    
    
    6,637Dilutive potential common sharesDenominator for diluted earnings per
share  adjusted weighted-average
shares and assumed conversions
    
    
    3,188,082
    
    
    
    3,094,922
    
    
    
    2,787,656Earnings per share  Basic:
    
    $
    .48
    
    
    $
    (.46
    )
    
    $
    1.60Earnings per share  Diluted
    
    $
    .48
    
    
    $
    (.46
    )
    
    $
    1.54
 52




---



##### 



53




---



##### 



(Amounts in thousands except share data)
 June 30,
    
    
    September 30,
    
    
    December 31,
    
    
    March 31,2005
    
    
    2005
    
    
    2005
    
    
    2006Revenues
    
    $
    14,679
    
    
    $
    13,958
    
    
    $
    13,390
    
    
    $
    12,884Gross Margin
    
    
    1,182
    
    
    
    1,094
    
    
    
    314
    
    
    
    1,110Loss from continuing operations
    
    
    (234
    )
    
    
    (172
    )
    
    
    (783
    )
    
    
    (87
    )Income from discontinued operations
    
    
    310
    
    
    
    
    
    
    
    
    
    
    
    Gain on sale of discontinued operations
    
    
    
    
    
    
    
    
    
    
    2182
    
    
    
    320Net income
    
    $
    76
    
    
    $
    (172
    )
    
    $
    1,399
    
    
    $
    233Basic earnings per shareContinuing operations
    
    $
    (.07
    )
    
    $
    (.05
    )
    
    $
    (.25
    )
    
    $
    (.03
    )Discontinued operations
    
    
    .09
    
    
    
    
    
    
    
    
    
    
    
    Gain on sale of discontinued operations
    
    
    
    
    
    
    
    
    
    
    .69
    
    
    
    .10$
    .02
    
    
    $
    (.05
    )
    
    $
    .44
    
    
    $
    .07Diluted earning per shareContinuing operations
    
    $
    (.07
    )
    
    $
    (.05
    )
    
    $
    (.25
    )
    
    $
    (.03
    )Discontinued operations
    
    
    .09
    
    
    
    
    
    
    
    
    
    
    
    Gain on sale of discontinued operations
    
    
    
    
    
    
    
    
    
    
    .69
    
    
    
    .10$
    .02
    
    
    $
    (.05
    )
    
    $
    .44
    
    
    $
    .07
 June 30,
    
    
    September 30,
    
    
    December 31,
    
    
    March 31,2004
    
    
    2004
    
    
    2004
    
    
    2005Revenues
    
    $
    10,668
    
    
    $
    11,198
    
    
    $
    12,645
    
    
    $
    13,915Gross Margin
    
    
    1,094
    
    
    
    835
    
    
    
    (372
    )
    
    
    339Loss from continuing operations
    
    
    (276
    )
    
    
    (496
    )
    
    
    (1,245
    )
    
    
    (772
    )Income from discontinued operations
    
    
    367
    
    
    
    540
    
    
    
    210
    
    
    
    261Net income
    
    $
    91
    
    
    $
    44
    
    
    $
    (1,035
    )
    
    $
    (511
    )Basic earnings per shareContinuing operations
    
    $
    (.09
    )
    
    $
    (.17
    )
    
    $
    (.42
    )
    
    $
    (.24
    )Discontinued operations
    
    
    .12
    
    
    
    .19
    
    
    
    .07
    
    
    
    .08$
    .03
    
    
    $
    .02
    
    
    $
    (.35
    )
    
    $
    (.16
    )Diluted earning per shareContinuing operations
    
    $
    (.09
    )
    
    $
    (.17
    )
    
    $
    (.42
    )
    
    $
    (.24
    )Discontinued operations
    
    
    .12
    
    
    
    .19
    
    
    
    .07
    
    
    
    .08$
    .03
    
    
    $
    .02
    
    
    $
    (.35
    )
    
    $
    (.16
    )
 54




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##### 



Schedule II, Valuation and Qualifying Accounts
  Balance at
    
    
    
    
    
    
    
    
    
    Balance atBeginning
    
    
    
    
    
    
    
    
    
    end ofof year
    
    Additions
    
    Deductions
    
    YearYear Ended March 31, 2004Allowance for doubtful
Accounts
    
    $
    270,000
    
    
    $
    84,000
    
    
    $
    206,000
    
    
    $
    148,000Allowance for inventory
Obsolescence
    
    $
    630,000
    
    
    $
    379,000
    
    
    $
    57,000
    
    
    $
    952,000Year Ended March 31, 2005Allowance for doubtful
Accounts
    
    $
    148,000
    
    
    $
    179,000
    
    
    $
    29,000
    
    
    $
    298,000Allowance for inventory
Obsolescence
    
    $
    952,000
    
    
    $
    1,044,000
    
    
    $
    280,000
    
    
    $
    1,716,000Year Ended March 31, 2006Allowance for doubtful
Accounts
    
    $
    298,000
    
    
    $
    86,000
    
    
    $
    219,000
    
    
    $
    165,000Allowance for inventory
Obsolescence
    
    $
    1,716,000
    
    
    $
    318,000
    
    
    $
    1,207,000
    
    
    $
    827,000
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
    55




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##### 



Item 9A. Controls and Procedures
 Evaluation of the Companys Disclosure Controls and Internal Controls
  Limitations on the Effectiveness of Controls
  Conclusions
  Item 9B. Other Information
  56




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##### 



PART III
 Item 10. Directors and Executive Officers of the Registrant
   Code of Conduct and Ethics
  Item 11. Executive Compensation
  Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
  Equity Compensation Plans
  (c)Number of securities(a)
    
    
    (b)
    
    
    remaining available forNumber of securities to
    
    
    Weighted-average
    
    
    future issuance underbe issued upon exercise of
    
    
    exercise price of
    
    
    equity compensation planoutstanding options,
    
    
    outstanding options,
    
    
    (excluding securitiesPlan Category
    
    warrants and rights
    
    
    warrants and rights
    
    
    reflected in column (a))Equity compensation plans
approved by security
holders (1)
    
    
    433,717
    
    
    $
    5.04
    
    
    
    232,200Equity compensation plans
not approved by security
holders (2)
    
    
    50,000
    
    
    
    3.19
    
    
    
    Total
    
    
    483,717
    
    
    $
    4.84
    
    
    
    232,200
 
 (1)
    
    The Company has three equity compensation plans, the 1994 Key Employee Stock Option Plan, the
Non-Employee Directors Stock Option Plan and 2005 Stock Option and Stock Incentive Plan.The 1994 Key Employee Stock Option Plan has a maximum of 400,000 shares of Common Stock
available for issuance. As of March 31, 2006, there were options to purchase 306,000 shares
of Common Stock outstanding. No additional options may be granted under the 1994 Key
Employee Stock Option Plan. The 57




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##### 



Non-Employee Directors Stock Option Plan has a maximum of 100,000 options available for
issuance. As of March 31, 2006, there were options to purchase 99,917 shares of Common
Stock outstanding. No additional options may be granted under the Non-Employee Directors
Stock Option Plan.The 2005 Stock Option and Stock Incentive Plan has a maximum of 260,000 shares of Common
Stock that are available for issuance. As of March 31, 2006, there were options to purchase
27,800 shares of common stock outstanding and 0 shares of Common Stock issued pursuant to
restricted stock awards.(2)
    
    On August 29, 2003, the Company issued warrants to purchase 50,000 shares of Common Stock at
an exercise price of $3.19 per share to its investment advisors. Item 13. Certain Relationships and Related Transactions
  Item 14. Principal Accounting Fees and Services
  58




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##### 



PART IV
 Item 15. Exhibits, Financial Statement Schedules
  1.
    
    Consolidated Financial Statements
 o
    
    Independent Auditors Reportso
    
    Consolidated Statements of Operations for the years ended March 31, 2006, 2005, and 2004o
    
    Consolidated Balance Sheets as of March 31, 2006 and 2005o
    
    Consolidated Statements of Cash Flows for the years ended March 31, 2006, 2005, and 2004o
    
    Consolidated Statements of Changes in Stockholders Equity for the years ended March 31, 2006, 2005 and 2004o
    
    Notes to Consolidated Financial Statements
 2.
    
    Financial Statement Schedule
 o
    
    Schedule II, Valuation and Qualifying Accounts
  3.
    
    Exhibits2.1
    
    Agreement and Plan of Merger, dated August 29, 2003 for the Acquisition of Microserv, Inc. by
Halifax Corporation. (Incorporated by reference to Exhibit 99.1 to Form 8-K dated September
12, 2003.)2.2
    
    Agreement and Plan of Merger dated September 30, 2004 by and among AlphaNational
Technology Services, Inc., Halifax Corporation, Halifax-AlphaNational Acquisition, Inc., et
al. (Schedules and exhibits are omitted pursuant to Regulation S-K, Item 601(b)(2); The
Company agrees to furnish supplementally a copy of such schedules and/or exhibits to the
Securities and Exchange Commission upon request.) (Incorporated by reference from Exhibit 2.1
to Form 8-K dated September 30, 2004.)2.3
    
    Asset Purchase Agreement by and among Halifax Corporation, Indus Acquisition, LLC and Indus
Corporation dated as of June 30, 2005. (Schedules and exhibits are omitted pursuant to
Regulation S-K, Item 601(b)(2); Halifax agrees to furnish supplementally a copy of such
schedules and/or exhibits to the Securities and Exchange Commission upon request).
(Incorporated by reference to Exhibit 2.4 to form 10-K for the year ended March 31, 2005.)3.1
    
    Articles of Incorporation, as amended. (Incorporated by reference to Exhibit 3.1 to Form
10-K for the year ended March 31, 1995.)3.2
    
    By-laws, as amended (Incorporated by reference to Exhibit 3.2 to Form 10-K for the year ended
March 31, 2004.)3.3
    
    Articles of Amendment to Articles of Incorporation. (Incorporated by reference to Exhibit
3.3 to Form 10-K for the year ended March 31, 2000.)
 59




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##### 



4.1
    
    Research Industries Incorporated Promissory Note dated November 2, 1998. (Incorporated by
reference to Exhibit 4.13 to Form 10-K for the year ended March 31, 2002.)4.2
    
    Research Industries Incorporated Promissory Note dated November 5, 1998. (Incorporated by
reference to Exhibit 4.13 to Form 10-K for the year ended March 31, 2002.)4.3
    
    Form of 5% note issued to Microserv Shareholders (Incorporated by Reference to Exhibit 99.6
to Form 8-K dated August 29, 2003.)4.4
    
    Second Amended and Restated Loan and Security Agreement dated as of the 29th day of June,
2005, by and between Halifax Corporation, Halifax Engineering, Inc., Microserv LLC and Halifax
AlphaNational Acquisition, Inc. and Provident Bank and related documents. (Incorporated by
reference to Exhibit 4.9 to Form 10-K for the year ended March 31, 2005.)4.5
    
    Amendment to 8% Promissory Notes dated October 8, 1998, October 13, 1998, November 2, 1998
and November 5, 2005 held by Nancy M. Scurlock. (Incorporated by reference to Exhibit 4.10 to
Form 10-K for the year ended March 31, 2005.)4.6
    
    Amendment to 8% Promissory Notes dated October 8, 1998, October 13, 1998, November 2, 1998
and November 5, 2005 held by The Arch C. Scurlock Childrens Trust, dated December 9, 2003.
(Incorporated by reference to Exhibit 4.11 to Form 10-K for the year ended March 31, 2005.)10.1
    
    1994 Key Employee Stock Option Plan. (Incorporated by reference to Exhibit 10.3 to Form 10-K for the
year ended March 31, 1995).10.2
    
    Charles L. McNew Executive Severance Agreement dated May 8, 2000. (Incorporated by reference
to Exhibit 10.7 to Form 10-K for the year ended March 31, 2000.)10.3
    
    Charles L. McNew Executive Severance Agreement, dated March 31, 2001. (Incorporated by
reference to Exhibit 10.8 to Form 10-K for the year ended March 31, 2001.)10.4
    
    Severance Agreement of Joseph Sciacca, dated May 10, 2000. (Incorporated by reference to
Exhibit 10.9 to Form 10-Q for the quarter ended September 30, 2001.)10.5
    
    Director Stock Option Plan dated September 19, 1997. (Incorporated by reference to Exhibit
10.13 to Form 10-K for the year ended March 31, 2002.)10.6
    
    Severance Agreement of Hugh Foley, dated January 17, 2003. (Incorporated by reference to
Exhibit 10.14 to Form 10-K for the year ended March 31, 2003.)10.7
    
    Registration Rights and First Offer Agreement dated August 29, 2003. (Incorporated by reference to
Exhibit 99.2 to Form 8-K dated August 29, 2003.)
10.8 Employee Severance and Restricted Covenant Agreement with Jonathan Scott, dated August 29, 2003.
(Incorporated by reference to Exhibit 99.4 to Form 8-K dated August 29, 2003.)
10.9 Voting Agreement, dated August 29, 2003 between Microserv, Inc. and certain shareholders of Halifax
Corporation. (Incorporated by reference to Exhibit 99.5 to Form 8-K dated August 29, 2003.)10.10
    
    Amended and Restated Banking Agreement by and between the Company, Halifax Engineering,
Inc., Microserv LLC, and Halifax AlphaNational Acquisition, Inc and Provident Bank dated
November 8, 2004. (Incorporated by reference to Exhibit 10.1 to Form 10-Q for quarter ended
September 30, 2004.)
 60




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##### 



10.11
    
    Registration Rights Agreement among the Company and L. L. Whiteside, Charles A. Harper,
Morris Horn and Dan Lane dated September 30, 2004. (Incorporated by reference to Exhibit 10.2
to Form 10-Q for quarter ended September 30, 2004.)10.12
    
    Employee Severance and Restrictive Covenant Agreement between the Company and L.L. Whiteside
dated September 30, 2004. (Incorporated by reference to Exhibit 10.3 to Form 10-Q for quarter
ended September 30, 2004.)10.13
    
    Summary Term Sheet of Director Fees and Officer Compensation*10.14
    
    2005 Stock Option and Stock Incentive Plan. (Incorporated by reference to Appendix A to the
definitive proxy statement on Schedule 14A filed with the Securities and Exchange Commission
on July 29, 2005.)10.15
    
    Modification to Contract VA-844 between the Commonwealth of Virginia and Halifax
Corporation. (Incorporated by reference to Exhibit 10.18 to Form 10-Q for the Quarter ended
September 30, 2005.)10.16
    
    Solutions Engagement Agreement between International Business Machines Corporation and
Halifax Corporation dated as of March 18, 2002. (Incorporated by reference to Exhibit 10 to
the form 10-Q for the quarter ended December 31, 2005.21.1
    
    Subsidiaries of the registrant.23
    
    Independent Registered Public Accounting Firm Consent23.1
    
    Independent Registered Public Accounting Firm Consent31.1
    
    Certification of Charles L. McNew, Principal Executive Officer, of Halifax Corporation dated
June 18, 2007.31.2
    
    Certification of Joseph Sciacca, Principal Financial Officer, of Halifax Corporation dated June 18, 2007.32.1
    
    Certificate of Charles L. McNew, Principal Executive Officer, of Halifax Corporation dated
June 18, 2007 pursuant to 18US.C. Section 1350.32.2
    
    Certificate of Joseph Sciacca, Principal Financial Officer, of Halifax Corporation dated
June 18, 2007
pursuant to 18 U.S.C. Section 1350.
 
 *
    
    Previously filed with the intial Form 10-K filing made on June 23, 2006. 61




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##### 



SIGNATURES
  HALIFAX CORPORATION/s/ Charles L. McNew

  Charles L. McNew
    
    
    
    Date: June 18, 2007President and Chief Executive Officer/s/ Joseph Sciacca

  Joseph Sciacca
    
    
    
    Date: June 18, 2007Vice President, Finance andChief Financial Officer
 62