As filed with the Securities and Exchange Commission on March 29, 2005
--------------------------------------------------------------------------------



                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

         ---------------------------------------------------------------

                                   FORM 10-KSB

              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2004

                         Commission File No.: 000-07539

                                WINDSORTECH, INC.
        (Exact name of small business issuer as specified in its charter)

                 Delaware                              13-2599131
     (State or other jurisdiction of                (I.R.S. Employer
      incorporation or organization)              Identification No.)

                       70 Lake Drive, Hightstown, NJ 08520
               (Address of Principal Executive Offices) (Zip Code)

                                 (609) 426-4666
                           (Issuer's Telephone Number)

       Securities registered under Section 12(b) of the Exchange Act: None


   Securities registered under Section 12(g) of the Exchange Act: Common Stock


         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  Registrant was required to file such reports),  and (2)
has been subject to such filing  requirements for the past 90 days.
Yes [X] No [ ]


         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B is not contained in this form,  and no  disclosures
will be contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]


         Issuer's revenues for its most recent fiscal year: $22,079,796


         The aggregate market value of the voting stock, $.01 par value, held by
non-affiliates  of the Registrant,  based upon the closing price of Common Stock
on March 18, 2005, as reported on the Over the Counter  Bulletin Board ("OTCBB")
under the symbol "WRST.OB," was approximately $ 76,573,769  (27,845,007 shares x
$2.75 per  share).  There is no officer  who owns more than 10% of the shares of
Common Stock.


         The number of shares  outstanding of each class of our common equity as
of March 18, 2005 is as follows:

Class of Common Equity                             Number of Shares
----------------------                             ----------------
Common Stock, par value $.01                          27,845,007


<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                                           <C>

                                TABLE OF CONTENTS

  ITEM                                             DESCRIPTION                                               PAGE


                                                      PART I

   1.      Description of Business                                                                            1
   2.      Description of Property                                                                            8
   3.      Legal Proceedings                                                                                  9
   4.      Submissions of Matters to a Vote of Security Holders                                               10


                                     PART II

   5.      Market for Common Equity and Related Stockholder Matters                                           10
   6.      Management's Discussion And Analysis of Financial Condition and Results of Operations              15
   7.      Financial Statements                                                                               29
   8.      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure               29
   8A.     Controls and Procedures                                                                            29

                                                     PART III

   9.      Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a)
           of the Exchange Act                                                                                30
   10.     Executive Compensation                                                                             33
   11.     Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
           Matters                                                                                            36
   12.     Certain Relationships and Related Transactions                                                     37
   13.     Exhibits                                                                                           40
   14.     Principal Accountant Fees and Services                                                             40


           Signatures                                                                                         41
           Financial Statements and Exhibits                                                                  43

</TABLE>


                                       2

<PAGE>


                                     PART I

ITEM 1.         DESCRIPTION OF BUSINESS

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK

         The following discussion should be read in conjunction with our audited
Financial Statements and Notes thereto included herein.

         Certain   statements  in  this  Report,   constitute   "forward-looking
statements"  within the  meaning of Section 27A of the  Securities  Act of 1933,
Section 21E of the  Securities  Exchange Act of 1934 and the Private  Securities
Litigation Reform Act of 1995. We intend that such forward-looking statements be
subject to the safe harbors created thereby.

         All such  forward-looking  information involves risks and uncertainties
and may be affected by many factors, some of which are beyond our control. These
factors include:

         o        Our growth strategies.

         o        Anticipated trends in our business and demographics.

         o        Our ability to successfully  integrate the business operations
                  of recently acquired companies; and

         o        Regulatory, competitive or other economic influences.

         Forward-looking   statements   involve   known   and   unknown   risks,
uncertainties and other factors which may cause our actual results,  performance
or achievements to be materially different from any future results,  performance
or achievements  expressed or implied by such forward-looking  statements.  Such
factors include,  among others, the following:  our continued ability to sustain
our growth through continuing vendor relationships;  the successful consummation
and  integration  of future  acquisitions;  the  ability  to hire and retain key
personnel;  the continued  development of our technical,  manufacturing,  sales,
marketing and  management  capabilities;  relationships  with and  dependence on
third-party  suppliers;  anticipated  competition;   uncertainties  relating  to
economic conditions where we operate;  uncertainties  relating to government and
regulatory policies;  uncertainties  relating to customer plans and commitments;
rapid  technological  developments  and obsolescence in the products we sell and
the  industries  in  which  we  operate  and  compete;  existing  and  potential
performance issues with suppliers and customers;  governmental export and import
policies;  global trade  policies;  worldwide  political  stability and economic
growth; the highly competitive environment in which we operate;  potential entry
of new,  well-capitalized  competitors  into our  markets;  and  changes  in our
capital  structure  and  cost  of  capital.   The  words  "believe",   "expect",
"anticipate",   "intend"   and   "plan"   and   similar   expressions   identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements,  which speak only as of the date the statement
was made.



REFERENCES

         References in this form 10-KSB to "we", "us," "our," "the Company," and
"Windsortech," mean Windsortech,  Inc. and our subsidiaries,  unless the context
otherwise requires.


                                       1

<PAGE>


WHAT WE DO

         We are a technology services company.  Our Data Security and Compliance
services  as well as our  Data  Center  Hardware  and  Data  Center  Maintenance
services  are  geared  towards  both the  users of  business-computing  hardware
(desktops,  laptops,  related  peripherals  and servers) as well as the users of
enterprise-class  hardware  (mainframes,  midrange  processors,  large  storage,
controllers,  etc.). In October, 2004, WindsorTech launched its brand extension,
QSGI, to build cohesion among the various technology  services that we offer and
build  brand   recognition   and  preference   through  strong   cross-marketing
opportunities.

SEGMENTS

         Our company  operates in three segments that clearly focus our services
into easy-to-understand categories for our target audiences:

         A.       Data Security & Compliance

                  We provide data security and  regulatory  compliance  services
                  for  end-of-life  business-computing  IT  assets.  We  offer a
                  variety of  solutions to companies  whose  business  computing
                  technologies  (desktops,  laptops,  printers and servers) have
                  come to the end of their life cycle. These services include:

                           - Data erasure to Department Of Defense standards for
                             hard drives
                           - Environmental  compliance (proper recycling or safe
                             disposal) for IT assets
                           - IT asset  remarketing  for IT  assets  with  market
                             value
                           - Asset  Auditing/Life  Cycle Management which allows
                             customers to minimize their overall IT  expenditure
                             and maximize their return on investment.

         B.       Data Center Hardware

                  We are the  leading  reseller  of  refurbished  IBM  mainframe
                  processors,  IBM midrange processors and associated peripheral
                  products  including  tape and disk  products and  connectivity
                  products to companies around the world.

         C.       Data Center Maintenance

                  We provide hardware  maintenance services for enterprise-class
                  hardware and Data Center  consulting  to companies  throughout
                  the United States.

         Across all three  segments,  we purchase  excess,  used,  off-lease and
refurbished hardware from a variety of sources including Fortune 1000 companies,
as well as leasing and finance companies.

Data Security & Compliance Segment:

         We are a "best  practice"  provider  of data  security  and  regulatory
compliance  services for end-of-life  business-computing  IT assets.  We offer a
variety of services to help  companies  with these  assets to ensure  compliance
with  federal and state  mandates  regulating  the  donation or disposal of such
assets.


                                       2

<PAGE>

         Our services include:
          -    Data  security  through  Department  of  Defense  hard drive data
               erasure
          -    IT asset management with IT auditing and reporting
          -    IT  remarketing to  reduce/eliminate  fees  associated  with hard
               drive data erasure and auditing the assets
          -    Environmental  compliance  services  for IT assets with no market
               value

         Our data  security and  destruction  services  help  companies  achieve
regulatory compliance with federal legislation including:

          -    Gramm-Leach-Bliley  Act -  Requires  companies  which  engage  in
               financial   activities  such  as  insurance   companies,   banks,
               brokerage firms, etc. to ensure the security and  confidentiality
               of customer  information and protect against  anticipated threats
               or hazards to information.

          -    Health  Insurers  Portability & Accounting  Act of 1996 (HIPPA) -
               Requires healthcare companies to ensure the confidentially of all
               protected  health  information  and protect  against  anticipated
               threats or hazards to information.

          -    Sarbanes-Oxley  Act - Requires all publicly  traded  companies to
               protect  investors by improving the accuracy and  reliability  of
               corporate  disclosures.  Requires companies to track the complete
               life cycle of all IT assets for seven years.

          -    FTC FACT Act - Requires  companies to protect  consumers  against
               unauthorized  access to credit report  information "in connection
               with the  disposal" of computer  and other  records by erasure of
               hard drives.

          -    Environmental   Compliance  -  requires  that  the  recycling  of
               computers  and  related  products  be managed in a manner that is
               protective of human health and the environment.

         Our services are designed to help our clients to:
          -    reduce  the  burdens  of  liability  associated  with  regulatory
               compliance of IT assets.
          -    reduce the overall expense of achieving regulatory compliance.
          -    reduce the total cost of ownership for IT hardware.
          -    permit IT  professionals to focus on rapid changes in technology,
               service  their  internal   clients  and  make  sure  their  IS/IT
               infrastructure  is proactively  helping their company  maintain a
               competitive edge in the marketplace.

         The market is highly fragmented with critical  legislation  driving the
demand.  There is no other technology services company offering similar IT "life
cycle" services  ranging from PCs to Mainframes.  According to a recent Gartner,
Inc.  estimate,  125 million computers are estimated to be coming out of service
in the US in 2005.

         As a  compliment  to the  services we  provide,  on October 27, 2003 we
filed U.S. Patent  Application titled "System and Method of Erasing a Hard Drive
via a Computer Network." Our product is called,  "EraseYourHardDrive.com."  This
product and the method of erasing a hard drive via a computer network provide an
easy, fast and effective way for erasing hard drives,  which meets US Department
of Defense standards for hard drive sanitation.

         In addition,  the Data Security and Compliance  segment re-sells a wide
range of used and


                                       3

<PAGE>


refurbished computer products,  including servers, laptop and desktop computers,
monitors, PC processors, CD/DVD disk drives, modems, printers and memory.

         Our Data Security & Compliance  group has  technical  facilities in New
Jersey,  a retail sales and marketing  office in Minnesota  and wholesale  sales
offices in New Hampshire and Florida.

Data Center Hardware Segment:

         We  are  a  reseller  of  refurbished   enterprise-class  hardware  and
associated peripheral products to companies around the world. Our strength comes
from a  significant  presence in  worldwide  markets as the leading  provider of
refurbished  mainframes and associated  peripherals.  More importantly,  in this
hardware niche, there are no other significant competitors.

         The enterprise-class products that we market include:
          -    IBM mainframe products
          -    IBM midrange products (AS/400 and RS/6000)
          -    IBM/OEM tape storage
          -    IBM/OEM disk storage
          -    Hitachi Data Systems (HDS) products
          -    EMC products
          -    Connectivity products, controllers and mainframe printers

         Very few resellers of enterprise-class  hardware are able to offer data
center managers  refurbished  mainframe products as well as technical  expertise
across all hardware categories found in the typical data center.

         Because  enterprise-class  hardware is designed and  manufactured to be
reliable  spanning  several  years,  an alternative - such as QSGI - to choosing
"new" hardware offers significant savings to our target audience.

         Businesses that have already made purchasing  decisions and saved money
in the  secondary  market  understand  that  there is often a fine line  between
"latest"  technology  and  "current"  technology.  IBM,  for  example,  recently
introduced  both  the  z990 and z890  mainframe.  This new  hardware  is able to
perform a variety of  functions  that make it unique and  attractive  for "early
adopters"  and those that  believe  that  having the  "latest"  is best.  Others
understand,  however,  that technology that is only one year old can easily meet
their data center requirements - that year-old technology is still "current" for
their  purposes.  Yet,  the key  difference  is that those who choose  "current"
technology (as opposed to "latest") do not absorb the initial  depreciation  and
may pay only a fraction of the price of "new" technology.

         Currently,  IBM is the only  manufacturer  of  mainframes  in the world
marketplace.  This  gives  IBM the  luxury  of  having  no  competition  for new
mainframes.  The  lack  of  competition  for new  mainframes  creates  a  unique
opportunity  for us to sell used  mainframes  to  customers  needing  to control
capital budgets for IT hardware.

         Technology  that is  introduced  by IBM is often  available in the used
marketplace  as early as 9-12  months  after  being  introduced  as a result  of
companies  merging  data  centers,  filing  bankruptcy,  upgrading to the latest
technology,  or when hardware goes off lease. In many instances, the hardware is
shipped to our offices in Eagan, Minnesota,  where it is tested, refurbished and
typically upgraded.

         The key to our success is rooted in the  information  we glean  through
our retail  efforts and our


                                       4

<PAGE>


wholesale efforts.  QSGI is typically involved in greater than 80 percent of all
refurbished  mainframe  bids in the United  States.  To source  enterprise-class
hardware, our wholesale efforts are aware of nearly all mainframes that are - or
about to become -  available  in the world.  Access to this  database of clients
allows us to cross-market our other services that we offer.

         Our  Data  Center  Hardware  group  has  its  technical  facilities  in
Minnesota  along with sales and  marketing.  In addition,  it has  technical and
sales offices in Connecticut, Florida, Illinois and California.

Data Center Maintenance Segment:

         We provide hardware maintenance  services on enterprise-class  hardware
and associated peripheral products to companies around the United States. Either
as a separate  service from the hardware  sale or sold as a service along with a
sale of hardware,  our maintenance  programs are a source of significant savings
and reliability for clients.

         Products we maintain include:
          -    IBM mainframe products
          -    IBM midrange products
          -    IBM/OEM tape storage
          -    IBM/OEM disk storage
          -    Hitachi Data Systems (HDS) products
          -    EMC products
          -    Connectivity products and controllers

         Our  competitive  advantages  that make our  services  valuable for our
corporate  end-users as well as leasing companies needing to manage  "off-lease"
enterprise-class hardware include:
          -    our technical expertise.
          -    our ready  access to a strategic  inventory  of critical  back-up
               parts.
          -    our reduced pricing as compared to our competitors.
          -    our greater expertise on multiple  platforms  including the heart
               of the data center, "the Mainframe."

         All training and back-up parts  management for Data Center  Maintenance
is located in  Minnesota;  however,  we have  technical  coverage and offices in
Pennsylvania, Michigan, Wisconsin, Iowa, Missouri, Texas, Colorado and Wyoming.


DEPENDENCE ON MAJOR CUSTOMERS

         With the exception of our hardware  maintenance  contracts which can be
up to three years in length, we do not have any exclusive long-term arrangements
with our  customers  for the  continued  sales of our  product.  At present,  we
operate solely in the United States and have no assets in foreign countries.

                                       5

<PAGE>


         We sell and deliver our technology services to customers throughout the
United States and on 6 continents  worldwide.  For the years ended  December 31,
2004 and  2003,  sales  to our top ten  customers  comprised  39% and 51% of our
revenue,  respectively.  In each of the periods  referred  to,  Keystone  Memory
Group,  a  "related  party"  for  accounting  purposes,  was  one of our top ten
customers.

         A portion of our revenues is also derived  from export  sales.  For the
years ended December 31, 2004, and 2003,  export sales  comprised 18% and 30% of
revenue, respectively.

Backlog

         Customers typically do not place recurring  "long-term" orders with us,
resulting  in a limited  order  backlog  at any point in time.  Our  failure  to
receive  orders  from  customers  on a  continuous  basis  could have a material
adverse effect on our financial condition,  results of operations and cash flows
given our lack of recurring orders.

Employees

         As of March 18, 2005, we employed 56 full-time  and nineteen  part-time
employees.  None of our employees  are  represented  by a collective  bargaining
agreement, nor have we experienced any work stoppages. We consider our relations
with our  employees to be good.  We depend on the  continued  service of our key
technical, sales and senior management personnel, and our ability to attract and
retain  additional  qualified  personnel.  If we are  unable to hire and  retain
qualified personnel, our business will be seriously harmed.


Available Information

         Our Internet website address is http://www.qsgi.com.  We make available
free of charge  through our Internet  website our annual  report on Form 10-KSB,
quarterly reports on Form 10-QSB,  current reports on Form 8-K and amendments to
those reports filed as soon as reasonably  practicable  after we  electronically
file  such  material  with,  or  furnish  it to,  the  Securities  and  Exchange
Commission.


COMPLIANCE WITH ENVIRONMENTAL REGULATIONS

         Federal,  state, and local laws or regulations  which have been enacted
or adopted  regulating the discharge of materials into the environment  have not
had,  and under  present  conditions  we do not foresee  that they will have,  a
material adverse effect on our capital expenditures, earnings, cash flows or our
competitive position. We will continue to monitor our operations with respect to
potential  environmental issues and costs, including changes in legally mandated
standards.

         We recycle used equipment that may contain hazardous  materials through
Waste Management's Recycle America - Asset Recovery Group ("ARG") division. ARG,
for a fee,  manages  commodities  and materials for recycling in accordance with
applicable local, state and federal laws, rules and regulations. Upon receipt of
materials for  recycling,  ARG provides us with a  Certification  of Destruction
that, in part,  certifies  that the  materials  were accepted for the purpose of
recycling  and/or  destruction  in  accordance  with  all  applicable  standards
including federal, state and local requirements.


                                       6

<PAGE>


RECENT DEVELOPMENTS

Change in Authorized Share Capital

         On September 17, 2004, in an Action by Consent in Writing of a Majority
of  Shareholders,  the  Company's  majority  shareholders  voted  to  amend  the
Company's  Amended and Restated  Certificate  of  Incorporation  to increase the
total number of authorized  shares of common stock of the Company.  The majority
shareholders  approved  an  increase  in the number of common  shares  which the
Corporation is authorized to issue from Thirty-five Million  (35,000,000) shares
of Common Stock,  par value $.01 per share, to Fifty-five  Million  (55,000,000)
shares of Common Stock, par value $.01 per share. No change was made to the Five
Million (5,000,000) shares of Preferred Stock, par value $.01 per share that the
Company is  authorized  to issue.  On October 19,  2004,  the  Company  filed an
appropriate  amendment to its Amended and Restated  Certificate of Incorporation
with the Secretary of State of the State of Delaware.

Other Information

         On January 13, 2003,  R. Keith Elliott was appointed as a member of our
board of directors to fill a vacancy.  On May 27, 2003, Andrew Paciocco resigned
as a member of our board of directors for personal reasons. On November 1, 2003,
Seth A. Grossman was appointed to fill the vacancy.

         On June 24, 2003, we offered  2,000,000  shares of our common stock for
sale in a Confidential  Private  Placement to certain  investors.  The offering,
which closed on July 18, 2003,  was not fully  subscribed  and 1,354,586  shares
were sold at $.35 per share.  Officers and directors  (including their children)
purchased 207,200 shares, or 15.3% of the total shares sold.

         On August 28, 2003, we offered 20 Units at a price of $10,000 per Unit.
Each Unit  consists of (i) 10,000  shares of our common  stock,  and warrants to
purchase  10,000 shares of our common stock,  exercisable  for a period of three
years at a price of $1.00 per share (the  "Warrants").  The  offering  closed on
September 2, 2003.

         On February  19, 2004,  by Action of Consent of Majority  Shareholders,
David A. Loppert was removed from the Board of Directors.  Thereafter, the Board
of Directors removed Mr. Loppert as an officer of the Company.

         On April 19,  2004,  David A.  Loppert  filed a  Complaint  against the
Company in the Chancery Court of New Castle County, Delaware, Case No. 394-N, in
which he  asserted  that he  remained a  director  and  officer  of the  Company
notwithstanding  the Company's  position that he no longer held those positions.
Settlement discussions were held and a dispute arose as to whether agreement had
been reached.  On May 14, 2004,  Mr.  Loppert filed a second  lawsuit,  Case No.
441-N in which he asserted that a settlement  had been reached and that he would
acknowledge  that he was no longer an officer or director  provided  the Company
delivered to him options to purchase 1.1 million shares of the Company's  common
stock at $1.10 per share. The Company defended and asserted that final agreement
had never been reached.  However,  on June 25, 2004, the Delaware Chancery Court
ruled that an enforceable settlement had been reached and further ruled that the
Company was  required to pay Mr.  Loppert's  legal fees  related to this matter.
Based upon the Court's  decision in this  matter,  Mr.  Loppert  continued as an
employee of the Company  through  September  30, 2004. On July 27th,  2004,  the
Company determined to appeal the Court's ruling to the Delaware Supreme Court.

            On November  18,  2004,  the Company  filed a Complaint  against Mr.
Loppert  in  the  Circuit  Court  for  Palm  Beach  County,  Florida,  Case  No.
502004CA010870XXXXMB,  in which the Company  asserted  that,  if any  settlement
agreement had been reached between the Company and Mr.  Loppert,  such agreement
had been induced by improper conduct and was thereby voidable.

                                       7

<PAGE>

         On January 7, 2005, Mr. Loppert brought an action in the Superior Court
of New Jersey,  Case No. L000020-05,  against two officers of the Company,  Marc
Sherman and Edward Cummings, and two former officers,  Carl Saracino and Michael
Sheerr,  alleging  that  each  owed Mr.  Loppert  approximately  $110,000.00  in
connection  with  loans  made to each of them  which  were  then  loaned  to the
Company.

         On January 31, 2005,  the Delaware  Supreme Court affirmed the Chancery
Court's June 25, 2004 decision.

         On March 15, 2005,  all claims and  litigation  between Mr. Loppert and
the Company and Messrs.  Sherman,  Cummings,  Saracino and Sheerr were  resolved
pursuant to  agreement.  The Company,  Mr.  Loppert and each party  released all
opposing parties for all claims existing as of the date of settlement.

         On May  26,  2004,  in a  Confidential  Private  Placement  to  certain
investors, we completed the sale of 6,000,000 shares of our Common Stock at $.60
per share and 6,000,000 warrants.  3,000,000 of the warrants are exercisable for
a period  of five  years at a price of $1.50  per  share  and  3,000,000  of the
warrants  are  exercisable  for a period  of five  years at a price of $3.60 per
share.  In October 2004, the Company  issued  warrants with an exercise price of
$2.00 to certain of the $1.50 warrant  holders in exchange for their exercise of
500,000 warrants for which the Company received $750,000.

         On May 28,  2004,  the  Company  completed  the  purchase of all of the
outstanding  shares of QualTech  International  Corporation  and its  affiliate,
QualTech  Services  Group,  Inc.  Under the terms of the  agreement,  QualTech's
shareholders  received a combination of 1,957,831  shares of Windsortech  common
stock and cash totaling  $6.6 million of which $3.25 million was in cash,  $3.25
million was in the Company's common stock and $100,000 was in direct acquisition
costs, primarily legal fees.

         On July 27, 2004, the Company  received  notice from the Securities and
Exchange  Commission  that  its  registration  statement  on Form  SB-2  for the
registration of 28,876,839 shares of stock became effective.

         On October 20, 2004, the Company filed a registration statement on Form
S-8 to register the issuance of up to 9,238,292 shares of common stock including
common stock pursuant to the Windsortech, Inc. 2002 Flexible Stock Plan.

         As of February  14,  2005,  Joel L. Owens  resigned as Chief  Operating
Officer.  He  continues  his  employment  as  Executive  Vice-President  of  the
Company's Data Center Hardware and Data Center Services groups.


ITEM 2.         DESCRIPTION OF PROPERTY


         Our Data Security and Compliance  segment leases  approximately  38,000
square feet of general  warehouse  and office  space in  Hightstown,  New Jersey
pursuant  to a  five-year  lease at a current  annual  rental  of  approximately
$159,000,  escalating each year. In addition to fixed rentals, the real property
lease  requires  the  Company  to pay all  maintenance,  real  estate  taxes and
insurance.  This facility, with approximately 34,000 feet of warehouse space, is
in good condition and ideally  suited to our existing  business and has adequate
and sufficient  capacity for our current and estimated  future  business  needs.
This lease expires in September 2006.


         This  segment  also leases  approximately  1,400  square feet of office
space in Portsmouth,  New Hampshire  pursuant to a three-year lease at a current
annual rental of approximately $30,000, escalating each year. This lease expires
in October 2007.

                                       8

<PAGE>


         Our Data Center  Hardware and Data Center  Maintenance  segments  lease
approximately 30,000 square feet of general warehouse and office space in Eagan,
Minnesota  pursuant to a five-year  lease at a current  rental of  approximately
$13,000,  escalating  in August 2006 to  approximately  $15,000 per month.  This
facility is in good  condition and ideally  suited to our existing  business and
has  adequate  and  sufficient  capacity  for our current and  estimated  future
business needs. This lease expires in October 2009.


         Rent expense and other  charges  totaled  $305,792 and $192,305 for the
years ended December 31, 2004 and 2003, respectively.


         The approximate minimum payments required under the lease for the years
2005 - 2009 are as follows:

Year                                               Amount
------------------------------------ ----------------------

2005                                              398,000
2006                                              380,000
2007                                              217,000
2008                                              187,000
2009                                              148,000
------------------------------------ ----------------------
                                              $ 1,321,000
==================================== ======================

ITEM 3.           LEGAL PROCEEDINGS

         On April 19,  2004,  David A.  Loppert  filed a  Complaint  against the
Company in the Chancery Court of New Castle County, Delaware, Case No. 394-N, in
which  he  asserted   he  remained  a  director   and  officer  of  the  Company
notwithstanding  the Company's  position that he no longer held those positions.
Settlement discussions were held and a dispute arose as to whether agreement had
been reached.

         On May 14, 2004,  Mr.  Loppert  filed a second  lawsuit in the Chancery
Court,  Case No. 441-N,  in which he asserted that a settlement had been reached
and that he would  acknowledge  that he was no longer  an  officer  or  director
provided the Company  delivered to him options to purchase 1.1 million shares of
the Company's common stock at $1.10 per share. The Company defended and asserted
that final  agreement had never been  reached.  However,  on June 25, 2004,  the
Delaware Chancery Court ruled that an enforceable agreement had been reached and
further  ruled that the Company was  required  to pay Mr.  Loppert's  legal fees
related to this  matter.  Based upon the Court's  decision in this  matter,  Mr.
Loppert  continued as an employee of the Company through  September 30, 2004. On
July 27,  2004,  the  Company  determined  to appeal the  Court's  ruling to the
Delaware Supreme Court.

         On November 18, 2004, the Company filed a Complaint against Mr. Loppert
in  the   Circuit   Court   for   Palm   Beach   County,   Florida,   Case   No.
502004CA010870XXXXMB,  in which the Company  asserted  that,  if any  settlement
agreement had been reached between the Company and Mr.  Loppert,  such agreement
had been induced by improper conduct and was thereby voidable.

         On January 7, 2005, Mr. Loppert brought an action in the Superior Court
of New Jersey,  Case No. L000020-05,  against two officers of the Company,  Marc
Sherman and Edward Cummings, and two former officers,  Carl Saracino and Michael
Sheerr,  alleging  that  each  owed Mr.  Loppert  approximately  $110,000.00  in
connection  with  loans  made to each of them  which  were  then  loaned  to the
Company.

                                       9

<PAGE>


         On January 31, 2005,  the Delaware  Supreme Court affirmed the Chancery
Court's June 25, 2004 decision.

         On March 15, 2005,  all claims and  litigation  between Mr. Loppert and
the Company and Messrs.  Sherman,  Cummings,  Saracino and Sheerr were  resolved
pursuant to  agreement.  The Company,  Mr.  Loppert and each party  released all
opposing parties for all claims existing as of the date of settlement.


         The  Company  is party to  various  legal  proceedings  arising  in the
ordinary course of business. In the opinion of management, these proceedings are
not likely to have a material adverse affect on the financial position,  results
of operations or cash flows of the Company.  The estimate of potential impact on
the Company could change in the future.


                                     PART II


ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         On February  19, 2004,  by Action of Consent of Majority  Shareholders.
David A. Loppert was removed from the Board of Directors.  Thereafter, the Board
of Directors removed Mr. Loppert as an officer of the Company.

         On September 17, 2004, in an Action by Consent in Writing of a Majority
of  Shareholders,  the  Company's  majority  shareholders  voted  to  amend  the
Company's  Amended and Restated  Certificate  of  Incorporation  to increase the
total number of authorized  shares of common stock of the Company.  The majority
shareholders  approved  an  increase  in the number of common  shares  which the
Corporation is authorized to issue from Thirty-five Million  (35,000,000) shares
of Common Stock,  par value $.01 per share, to Fifty-five  Million  (55,000,000)
shares of Common Stock, par value $.01 per share. No change was made to the Five
Million (5,000,000) shares of Preferred Stock, par value $.01 per share that the
Company is  authorized  to issue.  On October 19,  2004,  the  Company  filed an
appropriate  amendment to its Amended and Restated  Certificate of Incorporation
with the Secretary of State of the State of Delaware.

ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

         The  Company's  Common Stock is listed on the OTC Bulletin  Board under
the symbol "WSRT.OB." Our Common Stock became listed on October 24, 2003.

         The following table sets forth, for the calendar periods indicated, the
high and low sales prices per share for the  Company's  Common Stock as reported
on the OTC Bulletin Board:


Years Ended December 31, 2004                    High                 Low
     First Quarter                             $ 4.40              $ 2.00
     Second Quarter                              2.30                1.05
     Third Quarter                               2.25                1.19
     Fourth Quarter                              3.57                1.65

                                       10

<PAGE>


Years Ended December 31, 2003
     First Quarter                                 --                  --
     Second Quarter                                --                  --
     Third Quarter                                 --                  --
     Fourth Quarter                              4.05                1.90

Holders

         As of March 18, 2005, there were approximately  3,300 holders of record
of the Company's  Common Stock and the closing price was $2.75.  Because many of
the  outstanding  shares of the  Company's  Common Stock are held by brokers and
other  institutions  on  behalf  of  shareholders,  the  Company  is not able to
estimate the total number of beneficial shareholders represented by these record
holders.

Dividends

         The Company has paid no cash or stock  dividends on its Common Stock to
date and does not  anticipate  paying any  dividends  on its Common Stock in the
foreseeable  future.  The  Company  intends  to use any  earnings,  which may be
generated,  to finance the growth of the businesses.  The Board of Directors has
the  right to  authorize  the  issuance  of  preferred  stock,  without  further
shareholder approval, the holders of which may have preferences over the holders
of the Common Stock as to payment of dividends.

Securities authorized for issuance under equity compensation plans

         Set forth in the table below is  information,  as of December 31, 2004,
regarding securities authorized for issuance under equity compensation plans:


<TABLE>
<CAPTION>
<S>                                          <C>                            <C>                        <C>

                                                                                             Number of securities
                                                                                            remaining available for
                                  Number of Securities to     Weighted-average exercise      future issuance under
                                be issued upon exercise of      price of outstanding       equity compensation plans
                                   outstanding options,         options, warrants and        (excluding securities
                                    warrants and rights                rights              reflected in column (a))
Plan Category                                   (a)                      (b)                          (c)
------------------------------- ---------------------------- ---------------------------- ----------------------------

Equity compensation plans
approved by security holders                 6,275,000                      $1.428                     1,333,292

Equity compensation plans not
approved by security holders                 1,350,000                      $0.026                         -

------------------------------- ---------------------------- ---------------------------- ----------------------------
         Total                               7,625,000                      $1.18                      1,333,292
=============================== ============================ ============================ ============================
</TABLE>

Equity Compensation Plan not Approved by Security Holders


The material features of the plan are:


Option Grant.  In October 2001,  in  connection  with their initial  employment,
WindsorTech, Inc. (New Jersey corporation) granted to Messrs. Cummings, Loppert,
Saracino,  Sherman  and Sheerr and two other  employees  options to  purchase an
aggregate  of  1,350,000  shares  of its  common  stock  at  $0.026  per  share,
exercisable  at any time  after  October 1, 2001 and on or before  December  31,
2010. The options granted were Non-Qualified Options and immediately vested.


                                       11

<PAGE>


Death.  If  the  option  recipient  dies,  his  personal  representative  and/or
beneficiary  will have the right  (which  must be  exercised  not later than the
option  expiration  date) to  exercise  the  options to the extent they were not
exercised at the time of the recipient's death.


Non-Transferability of Rights; Designation of Beneficiaries.  Except as provided
below, the options cannot not be transferred by the recipient other than by will
or the laws of  descent  and  distribution,  and,  during  the  lifetime  of the
recipient,  the options can be  exercised  only by the  recipient,  except that,
during his lifetime, the recipient may transfer the options for no consideration
to members of his immediate  family or a trust for the benefit of himself and/or
members of his immediate  family subject to all of the provisions  applicable to
the options prior to the transfer.


Withholding.  The Company or any  affiliate  that employs the  recipient has the
right to deduct any sums that  federal,  state or local tax law  requires  to be
withheld  with  respect to the  exercise of the options or as  otherwise  may be
required  by such laws.  The Company or any such  affiliate  may  require,  as a
condition to issuing stock upon the exercise of the options,  that the recipient
or other person exercising the options pay a sum to cover any such taxes. In the
alternative,  the recipient or other person  exercising the options may elect to
pay such sums to the Company or the  affiliate by delivering  written  notice of
that election to the Company's  corporate  headquarters prior to or concurrently
with  exercise.  There is no  obligation  that the  recipient  be advised of the
existence of the tax or the amount that may be withheld.


Changes in Capital Structure. If there is any change in the capital structure of
the  Company,  or if there is be any  dividend  upon  the  stock of the  Company
payable in stock or any other dividend  payable in stock, or of there is a stock
split, spin-off, split-up, spin-out,  recapitalization,  merger,  consolidation,
reorganization,  combination or exchange of shares, the maximum aggregate number
of shares with respect to which the options may be exercised  and the number and
the option  price of the shares of stock with  respect to which the options were
granted, will be proportionately  adjusted by the Company if, and to the extent,
necessary to prevent dilution or enlargement of the rights of the recipient.

Recent Sales of Unregistered Securities

         The following table lists all unregistered securities sold/issued by us
in the last three years pursuant to Item 701 of Regulation S-B.

         These shares were issued to the persons listed below in connection with
(1) the  formation of  WindsorTech,  (2) the Merger,  (3) a  transaction  fee in
connection with the merger, (4) services rendered to Delta, (5) stock in lieu of
compensation and, unless otherwise  indicated,  were issued without registration
in reliance upon the exemption provided by Section 4(2) of the Securities Act of
1933, as amended, (6)(7)(8) Private Placement Shares, (9) the acquisition,  (10)
the  exercise of stock  options,  (11) the exercise of stock  warrants,  or (12)
services rendered.

<TABLE>
<CAPTION>
<S>                                       <C>         <C>        <C>                                          <C>
                                                             Number of                                 Number of Common
Name/Entity/Nature                  Date Issued     Note      Persons             Issued For                 Shares
------------------                  -----------     ----      -------             ----------                 ------
Edward L. Cummings                  Oct - 2001        1          1          Capital Contribution              5,000,000
David A. Loppert                    Oct - 2001        1          1          Capital Contribution              5,000,000
Carl C. Saracino                    Oct - 2001        1          1          Capital Contribution              5,000,000
Michael P. Sheerr                   Oct - 2001        1          1          Capital Contribution              5,000,000
Marc Sherman                        Oct - 2001        1          1          Capital Contribution              5,000,000

Edward L. Cummings                  Jan - 2002        2          1          Merger Consideration              1,800,000
David A. Loppert                    Jan - 2002        2          1          Merger Consideration              1,800,000
Carl C. Saracino                    Jan - 2002        2          1          Merger Consideration              1,800,000

                                       12

<PAGE>

                                                             Number of                                 Number of Common
Name/Entity/Nature                  Date Issued     Note      Persons             Issued For                 Shares
------------------                  -----------     ----      -------             ----------                 ------
Michael P. Sheerr                   Jan - 2002        2          1          Merger Consideration              1,800,000
Marc Sherman                        Jan - 2002        2          1          Merger Consideration              1,800,000

Leonard P. Stone                    Jan - 2002        3          1               Finders Fee                    450,000
William J. Barbera                  Jan - 2002        3          1               Finders Fee                    180,000

Frederic E. Smithline               Jan - 2002        4          1            Services Rendered                 600,000

Brian Cockerham                     Dec - 2002        5          1              Compensation                      5,000
Edward L. Cummings                  Dec - 2002        5          1              Compensation                    500,000
Erik Cummings                       Dec - 2002        5          1              Compensation                     50,000
David Harris                        Dec - 2002        5          1              Compensation                    150,000
Robert Jackson                      Dec - 2002        5          1              Compensation                    150,000
David A. Loppert                    Dec - 2002        5          1              Compensation                    500,000
Eleanor McDonald                    Dec - 2002        5          1              Compensation                      5,000
Wayne Neuls                         Dec - 2002        5          1              Compensation                      5,000
Lou Nuccio                          Dec - 2002        5          1              Compensation                     50,000
Carl C. Saracino                    Dec - 2002        5          1              Compensation                    500,000
Michael P. Sheerr                   Dec - 2002        5          1              Compensation                    500,000
Marc Sherman                        Dec - 2002        5          1              Compensation                    500,000

Stanley Adelman                      July - 03        6          1        Private Placement Shares                5,000
Harvey Albert                        July - 03        6          1        Private Placement Shares               15,000
Mike Belise & Linda A Gary           July - 03        6          2        Private Placement Shares               71,429
Bismark Intervest, Inc.              July - 03        6          1        Private Placement Shares              300,000
Edward L. Cummings                   July - 03        6          1        Private Placement Shares               61,200
John R. Doss                         July - 03        6          1        Private Placement Shares              300,000
Steven Gadon & Barbara Gadon         July - 03        6          2        Private Placement Shares               85,000
Andrew L. Granat                     July - 03        6          1        Private Placement Shares               15,000
Alan J Haber                         July - 03        6          1        Private Placement Shares                3,000
Barry S. Hanburger                   July - 03        6          1        Private Placement Shares                2,500
Bernard & Carol Harris, JT TEN       July - 03        6          2        Private Placement Shares                2,000
WROS
John D. Wright, cust for             July - 03        6          1        Private Placement Shares                1,000
Jonathan Martin Harris, Minor
Rodney D. and Linda L. Johnson,      July - 03        6          1        Private Placement Shares                2,000
JT TEN WROS
Craig G. Langweiler                  July - 03        6          2        Private Placement Shares               10,000
Monte Lang & Lillian M Lang, JT      July - 03        6          2        Private Placement Shares               30,000
TEN WROS
Max & Delayne Loppert, JT TEN        July - 03        6          1        Private Placement Shares               70,000
WROS
Anne E.B. Loppert, Minor, David      July - 03        6          1        Private Placement Shares               43,500
A. Loppert, Custodian
Jeffrey E.B. Loppert, Minor,         July - 03        6          1        Private Placement Shares               43,500
David A. Loppert, Custodian
Martin Miller                        July - 03        6          1        Private Placement Shares                2,857
Robert & Penni Parker, JT TEN        July - 03        6          2        Private Placement Shares               14,300
WROS
RBC Dain Rauscher Custodian,         July - 03        6          1        Private Placement Shares               20,000
FBO Harvey Albert IRA
Lois G. Rosenberg                    July - 03        6          1        Private Placement Shares                  500
Paul Rosen & Wendy Rosen             July - 03        6          2        Private Placement Shares               85,000
Carl Saracino                        July - 03        6          1        Private Placement Shares               15,000
Philip & Lilyan Sherman, JT TEN      July - 03        6          2        Private Placement Shares               20,000
WROS
Michael P. Sheerr                    July - 03        6          1        Private Placement Shares               44,000
Alexandra J. Sherman, Minor,         July - 03        6          1        Private Placement Shares               28,433
Marc Sherman Custodian
Maximilian B. Sherman, Minor,        July - 03        6          1        Private Placement Shares               28,433
Marc Sherman Custodian
Zachary T. Sherman, Minor, Marc      July - 03        6          1        Private Placement Shares               28,434
Sherman Custodian
Jonathan E. Stoll                    July - 03        6          1        Private Placement Shares                2,500
Gail M. Thompson                     July - 03        6          1        Private Placement Shares                1,000
Jack B. Tull Sr.                     July - 03        6          1        Private Placement Shares                3,000
John D. & Dorothy J. Wright, JT      July - 03        6          2        Private Placement Shares                1,000
TEN WROS


                                       13

<PAGE>


                                                             Number of                                 Number of Common
Name/Entity/Nature                  Date Issued     Note      Persons             Issued For                 Shares
------------------                  -----------     ----      -------             ----------                 ------
Bismark Intervest, Inc.              July - 03        7          1        Private Placement Shares              100,000
Edith Newman Revocable Trust         July - 03        7          1        Private Placement Shares               20,000
Paul Lee Newman Roth IRA             July - 03        7          1        Private Placement Shares               50,000
Paul Lee Newman                      July - 03        7          1        Private Placement Shares               30,000
Michael Weiss                        May - 04         8          1        Private Placement Shares               83,400
Odin Partners, LP                    May - 04         8          1        Private Placement Shares              116,600
Barron Partners, LP                  May - 04         8          1        Private Placement Shares            4,833,333
Guerilla Partners, LP                May - 04         8          1        Private Placement Shares              716,600
Guerilla IRA Partners, LP            May - 04         8          1        Private Placement Shares               83,400
Bismark Investment                   May - 04         8          1        Private Placement Shares              166,667
Joel Owens                           May - 04         9          1               Acquisition                  1,715,911
Jolene Owens                         May - 04         9          1               Acquisition                    241,920
Robert Jackson                       Nov - 04        10          1        Exercise of Stock Options             200,000
Carl Saracino                        Nov - 04        10          1        Exercise of Stock Options             150,000
Michael Sheerr                       Nov - 04        10          1        Exercise of Stock Options             150,000
Guerilla IRA Partners, LP            Oct - 04        11          1       Exercise of Stock Warrants              41,700
Guerilla Partners, LP                Oct - 04        11          1       Exercise of Stock Warrants             358,300
Odin Partners, LP                    Oct - 04        11          1       Exercise of Stock Warrants              58,300
Michael Weiss                        Oct - 04        11          1       Exercise of Stock Warrants              41,700
Burger, Trailor, Farmer              Jul - 04        12          1       Shares Issued for Services             105,422
Burger, Trailor, Farmer              Dec - 04        12          1       Shares Issued for Services              18,000
---------------------------------
</TABLE>

1.          Represents shares issued to the founders and initial shareholders of
            WindsorTech in exchange for a capital  contribution  of $50,000 paid
            by each in cash.  At the  time of  issuance,  WindsorTech  was not a
            public   reporting   entity,   and  the  shares   were  exempt  from
            registration  pursuant to Section  4(2) of the  Securities  Act. The
            certificates  representing the shares were legended to indicate that
            they were  restricted.  These shares were  exchanged  for the Merger

                                       14

<PAGE>



            Consideration  shares  issued in January 2002 as discussed in note 2
            below and were subsequently cancelled.

2.          Represents  shares  issued  in  connection  with  the  Merger  in  a
            transaction  negotiated by the WTI  shareholders  in connection with
            the Merger,  which Merger  transaction was exempt from  registration
            pursuant to Section 4(2) of the Securities Act. The Merger Agreement
            included an  acknowledgment  that the sale was not registered,  that
            the WTI  shareholders  were  acquiring the shares for investment and
            not for resale, and that such shareholder  acknowledged that he must
            hold the  shares  until and  unless  registered  or  transferred  in
            another   transaction   exempt  from   registration.   In  addition,
            certificates  representing the shares were legended to indicate that
            they  were  restricted.

            The shares were issued in exchange for 5,000,000 shares from each of
            the  stockholders of WindsorTech,  Inc. (New Jersey  corporation) as
            merger consideration. Each share was valued at $0.0278.

3.          Represents  shares,  valued  at  $0.0278  per  share,  issued  as  a
            transaction fee in connection with the Merger, which transaction was
            exempt from  registration  pursuant to Section  4(2) of the Act. The
            certificates  representing the shares were legended to indicate that
            they were  restricted.

            Mr. Stone and Mr. Barbera introduced the WindsorTech shareholders to
            Alfred Morgan,  the principal  stockholder of Delta and received the
            shares as a finders fee for making such introduction.

4.          Represents  shares  issued to for past legal  services  rendered  to
            Delta in lieu of  cash.  The  shares  issued  by Delta  prior to the
            Merger  were  valued by Delta at $0.01 per  share.  The  certificate
            representing  the shares was  legended  to  indicate  that they were
            restricted.

5.          Represents  shares issued in lieu of cash  compensation.  Each share
            was valued at $0.026. The certificates  representing the shares were
            legended to indicate that they were restricted. The shares issued to
            each of Mr.  Cummings,  Loppert,  Saracino,  Sheerr and  Sherman are
            reflected in the Summary Compensation Table in Part I, Item 6, under
            the "Bonus" column in 2002.

6.          Represents shares issued in a Confidential  Private  Placement.  The
            offering closed on July 18, 2003. 1,354,586 shares were sold at $.35
            per  share.   Officers  and  directors  (including  their  children)
            purchased 207,200 shares, or 15.3% of the total shares sold.

7.          Represents shares issued in a Confidential  Private  Placement.  The
            offering  closed on September 2, 2003. The offering was for 20 units
            at a price of $10,000 per Unit.  Each Unit  consisted  of (i) 10,000
            shares of common  stock and  warrants to purchase  10,000  shares of
            common stock,  exercisable for a period of three years at a price of
            $1.00 per share.

8.          Represents an aggregate of 6,000,000  shares of our own common stock
            sold to 6 investors  for a total of  $3,600,000,  or $.60 per share,
            which transaction was exempt from registration  pursuant to Rule 506
            of Regulation D promulgated  under the Securities Act. The Investors
            were either accredited investors or sophisticated investors, and the
            total offering was less than 10 non-accredited investors.  There was
            no general solicitation or advertising for the sale of these shares,
            and the  investors  had  access to or were  provided  with  relevant
            financial and other information relating to us.

9.          Represents  shares  used  in  connection  with  the  acquisition  of
            Qualtech  International  Corporation and Affiliate,  valued at $1.66
            per share,  which transaction was exempt from registration  pursuant
            to Section 4(2) of the Act.

10.         Represents  shares issued in connection  with the exercise of common
            stock options.

11.         Represents  shares issued in connection  with the exercise of common
            stock warrants.

12.         Represents shares issued to Burger, Trailor & Farmer, P.A. for legal
            services rendered.

ITEM 6.            MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                   AND RESULTS OF OPERATIONS

         The following discussion should be read in conjunction with our audited
Financial Statements and Notes thereto included herein.

         Certain   statements  in  this  Report,   constitute   "forward-looking
statements"  within the  meaning of Section 27A of the  Securities  Act of 1933,
Section 21E of the  Securities  Exchange Act of 1934 and the Private  Securities
Litigation Reform Act of 1995. We intend that such forward-looking statements be
subject to the safe harbors created thereby.


                                       15

<PAGE>

         All such  forward-looking  information involves risks and uncertainties
and may be affected by many factors, some of which are beyond our control. These
factors include:
     o Our growth strategies.
     o Anticipated trends in our business and demographics.
     o Our ability to successfully integrate the business operations of recently
       acquired  companies;  and
     o Regulatory, competitive or other economic influences.

         Forward-looking   statements   involve   known   and   unknown   risks,
uncertainties and other factors which may cause our actual results,  performance
or achievements to be materially different from any future results,  performance
or achievements  expressed or implied by such forward-looking  statements.  Such
factors include,  among others, the following:  our continued ability to sustain
our growth through continuing vendor relationships;  the successful consummation
and  integration  of future  acquisitions;  the  ability  to hire and retain key
personnel;  the continued  development of our technical,  manufacturing,  sales,
marketing and  management  capabilities;  relationships  with and  dependence on
third-party  suppliers;  anticipated  competition;   uncertainties  relating  to
economic conditions where we operate;  uncertainties  relating to government and
regulatory policies;  uncertainties  relating to customer plans and commitments;
rapid  technological  developments  and obsolescence in the products we sell and
the  industries  in  which  we  operate  and  compete;  existing  and  potential
performance issues with suppliers and customers;  governmental export and import
policies;  global trade  policies;  worldwide  political  stability and economic
growth; the highly competitive environment in which we operate;  potential entry
of new,  well-capitalized  competitors  into our  markets;  and  changes  in our
capital  structure  and  cost  of  capital.   The  words  "believe",   "expect",
"anticipate",   "intend"   and   "plan"   and   similar   expressions   identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements,  which speak only as of the date the statement
was made.

OVERVIEW

         We are a technology services company.  Our Data Security and Compliance
services  as well as our  Data  Center  Hardware  and  Data  Center  Maintenance
services  are  geared  towards  both the  users of  business-computing  hardware
(desktops,  laptops,  related  peripherals  and servers) as well as the users of
enterprise-class  hardware  (mainframes,  midrange  processors,  large  storage,
controllers,  etc.). In October, 2004, WindsorTech launched its brand extension,
QSGI, to build cohesion among the various technology  services that we offer and
build  brand   recognition   and  preference   through  strong   cross-marketing
opportunities.

RESULTS OF OPERATIONS

         The following table sets forth,  for the periods  indicated  below, the
relationships to total revenue of line items in our statements of operations for
the years ended December 31, 2004 and 2003.

                                       16

<PAGE>

<TABLE>
<CAPTION>
<S>                                                       <C>                      <C>

                                                  Year Ended               Year Ended
                                             December 31, 2004       December 31, 2003
                                            -------------------------------------------------
                                                              %                        %
                                                              -                        -
  Revenue                                                 100.0                    100.0
  Cost of sales                                            75.4                     73.4
                                            -------------------------------------------------
  Gross profit                                             24.6                     26.6
  Selling, general and administrative
      expenses                                             21.9                     26.6
  Depreciation and amortization                             1.8                      1.0
  Interest expense                                          0.4                      1.0
                                            -------------------------------------------------
  Income (loss) before provision (benefit)                  0.5                     (2.0)
      for income taxes
  Provision (benefit) for income taxes                     (0.1)                      --
                                            -------------------------------------------------
  Net income (loss)                                         0.6                     (2.0)
                                            =================================================
</TABLE>

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

     Revenue for the year ended  December 31, 2004 was  $22,079,796  compared to
revenue of  $7,484,472  for the year ended  December  31,  2003,  a  $14,595,324
increase,  or 195.0%.  $12,375,105  of the  increase  was a result of our recent
acquisitions  and the  balance was due to organic  growth of our core  business.
Revenues  increased  because we were able to find new sources of product,  which
made more  products  available for sale and we increased our sales staff to help
increase our market penetration.



     Our revenues categorized by products and services are as follows:

                           Year Ended               Year Ended
                      December 31, 2004       December 31, 2003

  Revenue
     Products               $ 20,605,647              $ 7,454,235
     Services                  1,474,149                   30,237
                     -------------------------------------------------
  Total Revenue             $ 22,079,796              $ 7,484,472
                     =================================================

<TABLE>
<CAPTION>
<S>                                             <C>               <C>    <C>            <C>     <C>           <C>

     Our revenue by geographic segment is as follows:
--------------------------------------------------------------------------------

Years Ended December 31,                               2004         %          2003       %         Change  % Change

United States                                   $18,094,977       82%    $5,198,400     70%     12,896,577    248%
Asia                                                983,921        4%       817,707     11%        166,214     20%
Europe                                              382,866        2%       349,715      5%         33,151     10%
Africa                                              604,686        3%       703,073      9%       (98,387)    (14)%
United Kingdom                                    1,333,544        6%       155,834      2%      1,177,710    756%
Canada                                              506,262        2%       223,458      3%        282,804    127%
Australia                                            63,150                  24,500       -         38,650    158%
South America                                       110,390        1%        11,785       -         98,605    837%
---------------------- ----------------- ------------------- --------- ------------- ------- -------------- ----------
   Total                                        $22,079,796      100%    $7,484,472    100%    $14,595,324    195%
====================== ================= =================== ========= ============= ======= ============== ==========
</TABLE>


     We  operate  solely in the  United  States  and have no  assets in  foreign
countries.  However,  we sell to


                                       17

<PAGE>



customers in foreign countries.  For the years ended December 31, 2004 and 2003,
export sales comprised approximately 18% and 30% of revenue,  respectively.  All
of our purchases  and sales are  denominated  in US dollars,  and we recorded no
foreign currency transaction gains or losses during any period.

     Gross profit for the year ended December 31, 2004 was  $5,428,413  compared
to a gross  profit  of  $1,992,411  for the year  ended  December  31,  2003,  a
$3,436,002  increase,  or  172.5%.  Gross  margin  was 24.6% for the year  ended
December 31, 2004 compared to 26.6% for the year ended December 31, 2003.  Gross
profit  increased  due to organic  growth  and the  acquisitions.  However,  our
margins  contracted while we strengthened our  infrastructure  and built a solid
foundation for our long term growth.

     The overall management of the computer equipment through out its life cycle
represents a growing  burden on  companies.  The  continual  growth of liability
concerns  associated  with IT assets  and the  compliance  with  relatively  new
government  legislation  is what is  going  to have the  biggest  impact  on the
Company's  future  revenues.  Our business  has been built to keep  companies in
compliance with government legislation whether it is HIPPA, Sarbanes-Oxley,  the
FACT  Act,  Gramm-Leach-Bliley,  the  Patriot  Act  or  federal  and  state  EPA
regulations.

     Gartner Dataquest reports that in the US alone some 133,000 PCs per day are
retired and replaced by their original owners.  According to the National Safety
Council,  63 million  computers  will become  obsolete in 2005,  resulting  in a
potentially  greater source of computer  equipment becoming available for resale
and a potentially greater source of customers needing our services.

     Selling,  general and  administrative  expenses for the year ended December
31,  2004,  were  $4,835,565  compared  to selling,  general and  administrative
expenses of  $1,988,091  for the year ended  December  31,  2003,  a  $2,847,474
increase, or 143.2%. Selling,  general and administrative expense increased as a
result of  recording  a one time  settlement  expense  of  $380,000,  $1,300,000
attributable  to the  companies  acquired,  which  consisted  mainly of payroll,
payroll  taxes,  and  employee  benefits,   rent  and  facilities  expenses  and
insurance,  and $240,000 from increased professional fees mainly attributable to
the defense and appeal of a lawsuit and  additional  accounting  fees.  Expenses
also  increased  as the Company  promoted and launched its new brand name "QSGI"
and added sales personnel to market its services and build brand recognition, In
order to accomplish  this,  the Company  hired  additional  sales  personnel and
support  staff,  opened an  additional  sales office and  increased  salaries to
retain  qualified  personnel.  In  addition,  the company  provided  educational
opportunities and training to the national sales team.

     Depreciation  and  amortization  for the year ended  December 31, 2004, was
$391,672 compared to depreciation and amortization of $71,973 for the year ended
December 31, 2003, a $319,699 increase,  or 444.2%. This increase was the result
of depreciation and the amortization of intangibles from the acquired  companies
as well as one full  year of  depreciation  for  fixed  asset  acquisitions  and
leasehold improvements that occurred throughout 2003 and new additions purchased
in 2004.

     Interest expense for the year ended December 31, 2004, was $83,307 compared
to interest  expense of $79,656 for the year ended  December  31, 2003, a $3,651
increase, or 4.6%, commensurate with the increase in the Company's borrowings.

     The Company recognized a tax benefit during 2004 by decreasing its deferred
tax asset valuation allowance as it anticipates that such benefit is more likely
than not to be realized.  During 2003,  the Company did not recognize a deferred
tax benefit as it increased its deferred tax asset valuation allowance.


SEGMENTS

     Our company operates in three segments that clearly focus our services into
easy-to-understand categories for our target audiences:

                                       18

<PAGE>


     Data Security & Compliance

         We  provide  data  security  and  regulatory  compliance  services  for
         end-of-life  business-computing  IT  assets.  We  offer  a  variety  of
         solutions to companies whose business computing technologies (desktops,
         laptops,  printers  and  servers)  have  come to the end of their  life
         cycle. These services include:
                  - Data erasure to Department Of Defense standards for hard
                    drives
                  - Environmental compliance (proper recycling or safe disposal)
                    for IT assets
                  - IT asset  remarketing  for IT assets with market value
                  - Asset Auditing/Life Cycle Management which allows customers
                    to minimize their overall IT expenditure and maximize their
                    return on investment.

     Data Center Hardware

         We are the leading  reseller of refurbished  IBM mainframe  processors,
         IBM midrange  processors and associated  peripheral  products including
         tape and disk products and  connectivity  products to companies  around
         the world.

     Data Center Maintenance

         We provide hardware maintenance services for enterprise-class  hardware
         and Data Center consulting to companies throughout the United States.

     Across  all  three  segments,  we  purchase  excess,  used,  off-lease  and
refurbished hardware from a variety of sources including Fortune 1000 companies,
as well as leasing and finance companies.


Data Security & Compliance Segment


                                         Year Ended               Year Ended
                                      December 31, 2004        December 31, 2003

Revenue                                   $ 10,388,674             $ 7,484,472
Gross Profit                                 2,412,138               1,992,411
Selling, General and Administration          3,003,403               1,988,091
Depreciation and Amortization                  113,519                  71,973
Interest Expense, Net                           67,172                  79,656
Income (Loss) Before Provision
(Benefit) for Income Taxes                   (983,059)               (147,309)

Segment Assets                               4,556,736                  88,142
Goodwill                                             -                       -
Expenditures for Property and
Equipment                                       93,129               1,390,998

                                       19

<PAGE>


     Revenue for the year ended December 31, 2004 was $10,388,674 as compared to
revenue  for the year ended  December  31,  2003 of  $7,484,472,  an increase of
38.8%.  Revenues  increased because we were able to find new sources of product,
which made more products  available for sale and we increased our sales staff to
help increase our market penetration.

     Gross  Profit  for the year  ended  December  31,  2004 was  $2,412,138  as
compared to gross profit for the year ended December 31, 2003 of $1,992,411,  an
increase of 21%. Gross profit increased primarily because of increased revenues.

     Selling, General and Administrative Expense for the year ended December 31,
2004 was $3,003,403 as compared to Selling,  General and Administrative  expense
for the year ended December 31, 2003 of $1,988,091, an increase of 51%. Selling,
general and administrative expense increased as a result of recording a one time
settlement  expense of $380,000,  and $240,000 from increased  professional fees
mainly  attributable  to the  defense  and  appeal of a lawsuit  and  additional
accounting  fees.  Expenses also increased as the Company  promoted and launched
its new brand name "QSGI" and added sales  personnel  to market its services and
build  brand  recognition.  In order  to  accomplish  this,  the  Company  hired
additional  sales  personnel and support staff and increased  salaries to retain
qualified personnel.

     Depreciation  for the year ended December 31, 2004 was $113,519 as compared
to depreciation for the year ended December 31, 2003 of $71,973,  an increase of
58%.  This was the  result of one full  year of  depreciation  for  fixed  asset
acquisitions and leasehold improvements that occurred throughout 2004.

     Interest  expense  for the year  ended  December  31,  2004 was  $67,172 as
compared to interest expense for the year ended December 31, 2003 of $79,656,  a
decrease of 16%.

Data Center Hardware Segment

                                          Year Ended            Year Ended
                                       December 31, 2004     December 31, 2003

Revenue                                     $ 11,155,459                     -
Gross Profit                                   2,562,942                     -
Selling, General and Administration            1,418,447                     -
Depreciation and Amortization                    240,351                     -
Interest Expense, Net                             16,135                     -
Income (Loss) Before Provision
(Benefit) for Income Taxes                     1,067,296                     -

Segment Assets                                 8,036,107                     -

Goodwill                                       1,823,157                     -
Expenditures for Property and
Equipment                                          9,938                     -

Data Center Maintenance Segment

                                          Year Ended            Year Ended
                                       December 31, 2004     December 31, 2003


                                       20

<PAGE>

Revenue                                      $ 1,219,646                     -
Gross Profit                                     453,333                     -
Selling, General and Administration              413,715                     -
Depreciation and Amortization                     37,802                     -
Interest Expense, Net                                  -                     -
Income (Loss) Before Provision
(Benefit) for Income Taxes                        33,632                     -

Segment Assets                                   877,970                     -

Goodwill                                         157,286                     -
Expenditures for Property and                                                -
Equipment                                        103,044                     -

The Data Center Hardware and Data Center Maintenance segments became part of the
Company on May 1, 2004.

Liquidity and Capital Resources

     Our current  ratios at December 31, 2004 and December 31, 2003 were 1.8 and
1.3, respectively.  Working capital at December 31, 2004 was $3,359,841 compared
to $236,892 at December 31, 2003.  Working capital increased  primarily from the
proceeds  received from the issuance of common stock and warrants,  the exercise
of stock options and warrants,  net amounts  borrowed under  revolving  lines of
credit and net  amounts  borrowed  from  certain  shareholders.  This amount was
reduced by financing the operations of the company and by the acquisitions.

     Net cash used in operating  activities for the year ended December 31, 2004
was $2,145,496 compared to $185,700 of cash provided by operating activities for
the year ended December 31, 2003. Cash used in operating activities for the year
ended  December  31,  2004 was  primarily  a result of an  increase  in accounts
receivable and inventories offset by an increase in accounts payable and accrued
expenses,  depreciation,  stock option  compensation  expense and stock warrants
issued for services.  Cash provided by operating  activities  for the year ended
December 31, 2003 was primarily a result of an increase in accounts  payable and
accrued expenses,  depreciation,  and stock warrants issued for services, offset
by an increase in accounts receivable and the net loss.

     Net cash used in investing activities for the years ended December 31, 2004
and 2003 was $3,214,496 and $112,358,  respectively. For the year ended December
31,  2004,  cash was used for the  acquisitions  and to  purchase  property  and
equipment.  For the year ended  December  31,  2003,  cash was used to  purchase
equipment, computer software and to apply for the EraseYourHardDrive.com patent

     Net cash provided by financing  activities  for the year ended December 31,
2004 was  $5,934,776  and was  provided  for by the  sale of  common  stock  and
warrants, the exercise of stock options and warrants, net amounts borrowed under
revolving lines of credit,  and net amounts borrowed from certain  shareholders.
Net cash provided by financing  activities  for the year ended December 31, 2003
was  $142,430  and was provided for by the sale of common stock and warrants and
reduced by payments on notes payable and  principal  reductions on capital lease
obligations.

     Since the acquisition, we have invested in strengthening our infrastructure
and have used cash to increase  inventory  to a level  necessary  to support our
growth.  Our  accounts  receivable  increased  as a result  of  strong  sales in
December  2004. We believe that cash generated  from  operations,  together with
available cash resources and anticipated  exercise of stock options and warrants
in 2005, will be sufficient to meet our cash  requirements for at least the next
12  months.   However,  we  may  need  to  raise  additional


                                       21

<PAGE>


funds to  finance  unanticipated  working  capital  requirements  or to  acquire
complementary   businesses   although  we  have  not   identified  any  specific
acquisition candidates.


     We do not have any material  commitments for capital expenditures nor do we
expect to incur any material commitments for capital expenses during 2005.

     We did not have any significant elements of income or loss not arising from
continuing  operations in 2004 or 2003 and do not expect any in 2005.  While our
business is marginally  seasonal,  we do not expect this  seasonality  to have a
material adverse affect on our results of operations or cash flows.

Off-Balance Sheet Arrangements

     The company does not have any off-balance sheet arrangements.

FACTORS AFFECTING FUTURE OPERATING RESULTS


         You should carefully consider the following risk factors, together with
all other  information  contained or  incorporated  by reference in this filing,
before you decide to purchase shares of our stock. These factors could cause our
future  results  to differ  materially  from  those  expressed  in or implied by
forward-looking  statements made by us.  Additional risks and  uncertainties not
presently  known to us or that we currently  deem  immaterial  may also harm our
business.  The trading  price of our common  stock  could  decline due to any of
these risks, and you may lose all or part of your investment.


Uncertainty Of Future Financial Results


         Our future financial  results are uncertain.  There can be no assurance
that we will continue to achieve  profitability,  and we may incur losses in the
foreseeable  future.  Achieving and sustaining  profitability  depends upon many
factors,  including our ability to raise capital when needed, the success of our
various marketing programs, and the maintenance or reduction of expense levels.


Fluctuations In Future Quarterly Results


         We have been in  business  since  October  2001 and have only  thirteen
quarters of historic quarterly  operating  results,  only six of which have been
profitable.  Our quarterly  operating results may fluctuate based on how well we
manage our business.  Some of the factors that may affect how well we manage our
business include the timing of our delivery of significant  orders;  our ability
to engineer customer  solutions in a timely,  cost effective manner; our ability
to structure our organization to enable achievement of our operating objectives;
our  ability to meet the needs of our  customers  and  markets;  the  ability to
deliver,  in a timely fashion,  products for which we have received orders;  the
length of the sales cycle;  the demand for  products and services we offer;  the
introduction  or  announcements  by  computer   manufacturers  relating  to  the
remarketing  of new and used  equipment;  the hiring and training of  additional
personnel;  as well as general  business  conditions.  If we fail to effectively
manage our business, this could adversely affect our results of operations.


         We expect that the size and timing of our sales  transactions  may vary
substantially from quarter to quarter, and we expect such variations to continue
in future  periods,  including the  possibility  of losses in one or more fiscal
quarters.  These  fluctuations  may be  caused by  delays  in  shipping  certain
computer  systems for which we receive  orders that we expect to deliver  during
that quarter. In addition,  our collection periods may fluctuate due to periodic
shortages  of goods  available  for  shipment,  which may result in the delay of
payment  from  customers  who will not pay until their  entire order is shipped.
Accordingly,  it is  likely  that in one or more  future  fiscal  quarters,  our
operating results could be below investors'  expectations and, as a result,  any
future  public  offering  of  shares of our  Common  Stock  could


                                       22

<PAGE>


be materially adversely affected.


Industry cycles may strain our management and resources


         Cycles of  growth  and  contraction  in our  industry  may  strain  our
management and resources. To manage these industry cycles effectively,  we must:
improve  operational and financial systems;  train and manage our employee base;
successfully integrate operations and employees of businesses we acquire or have
acquired;  attract,  develop,  motivate  and  retain  qualified  personnel  with
relevant  experience;  and adjust spending levels according to prevailing market
conditions. If we cannot manage industry cycles effectively,  our business could
be seriously harmed.

We Have Limited Principal Markets And Customers;  We Have Significant Dependence
   On Major Customers; There Is A Risk Of Industry Concentration


         We operate  solely in the  United  States and have no assets in foreign
countries. We sell and deliver computer systems, peripheral devices and parts to
more  than 300  customers  throughout  the  United  States  and on 6  continents
worldwide. For the years ended December 31, 2004 and 2003, our top ten customers
accounted for approximately 39% and 51% of our total revenues,  respectively. In
each of the periods  referred to, one of those  customers  was  Keystone  Memory
Group,  a "related  party" for  accounting  purposes.  We cannot be certain that
customers  that have  accounted  for  significant  revenue in past  periods will
continue  to  generate  revenue.  As a  result  of  this  concentration  of  our
customers,  our results of operations could be negatively affected if any of the
following occurs:  one or more of our customers becomes insolvent or goes out of
business;  one or more of our key  customers  significantly  reduces,  delays or
cancels orders; or one or more of our significant  customers selects products or
services from one of our competitors.


         Due to our acquisition,  our customer base has broadened  significantly
and we therefore anticipate being less dependent on a relatively small number of
customers to generate revenue.  However,  as revenue mix fluctuates from quarter
to quarter,  we may become more  dependent on a small number of customers  for a
significant  portion of our revenue in a particular  quarter,  the loss of which
could adversely affect our operation results


         With the exception of several of our maintenance  contracts,  we do not
have any exclusive  long-term  arrangements with our customers for the continued
sales of our product. Our failure to acquire additional significant or principal
customers or to maintain our relationships with our existing principal customers
could have a material  adverse  effect on our  results  of  operations  and cash
flows.


            For the years ended December 31, 2004 and 2003, primarily all of our
sales of computer  systems,  peripherals and parts were to remarketers  based in
the United States or brokers based both in and out of the United States for whom
we directly  exported  product.  For the years ended December 31, 2004 and 2003,
export  sales  comprised  18%  and  30%  of  revenue,  respectively.  All of our
purchases  and sales are  denominated  in US dollars  and we recorded no foreign
currency transaction gains or losses during any period.


         Although we are striving to broaden our market  focus to include  sales
to other markets,  such as financial services, in the immediate future we expect
that we will continue to derive a substantial percentage of our sales of product
to such brokers and remarketers. Accordingly, unfavorable economic conditions or
factors that relate to these  industries,  particularly any such conditions that
might result in reductions in capital expenditures or changes in such companies'
information processing system

                                       23

<PAGE>


requirements, could have a material adverse effect on our results of operations.


We Rely On Merchandise Vendors As Sources For Our Products


         The availability of off-lease and excess inventory  computer  equipment
is unpredictable. We have no long-term arrangements with our vendors that assure
the availability of equipment. We purchase equipment from more than 25 different
vendors,  and we have no formal  commitments with or from any of them. We cannot
assure you that our current  vendors  will  continue to sell  equipment to us as
they  have in the  past,  or that we  will  be  able  to  establish  new  vendor
relationships  that  ensure  equipment  will be  available  to us in  sufficient
quantities  and at  favorable  prices.  If we are  unable to  obtain  sufficient
quantities  of  equipment at favorable  prices,  our business  will be adversely
affected.  In addition,  we may become  obligated to deliver  specified types of
computer  equipment  in a short time period and,  in some  cases,  at  specified
prices. Because we have no formal relationships with vendors, we may not be able
to obtain the required  equipment in sufficient  quantities in a timely  manner,
which could adversely affect our ability to fulfill these obligations.


We Are Subject To Risks That Our Inventory May Decline  In Value  Before We Sell
     It Or  That  We May  Not Be Able To  Sell The Inventory  At The  Prices  We
     Anticipate


         We purchase and warehouse inventory, most of which is "as-is" or excess
inventory of computer  equipment.  As a result,  we assume  inventory  risks and
price erosion risks for these products.  These risks are especially  significant
because computer  equipment  generally is  characterized by rapid  technological
change and  obsolescence.  These changes  affect the market for  refurbished  or
excess inventory  equipment.  Our success will depend on our ability to purchase
inventory at attractive  prices  relative to its resale value and our ability to
turn our inventory  rapidly  through sales. If we pay too much or hold inventory
too long,  we may be forced to sell our  inventory at a discount or at a loss or
write down its value, and our business could be materially adversely affected.


Declining Prices For New Computer Equipment Could Reduce Demand For Our Products


         The cost of new computer equipment has declined  dramatically in recent
years.  As the price of new computer  products  declines,  consumers may be less
likely to purchase  refurbished computer equipment unless there is a substantial
discount  to the  price of the new  equipment.  Accordingly,  if we were to sell
"as-is" or refurbished  equipment  directly to end users, we would have to offer
the products at a substantial  discount to the price of new products.  As prices
of new products continue to decrease,  our revenue,  profit margins and earnings
could be adversely  affected.  There can be no assurance that we will be able to
maintain a sufficient pricing  differential between new products and our "as-is"
or  refurbished  products to avoid  adversely  affecting  our  revenues,  profit
margins and earnings.


If We Need Additional Financing For  Unanticipated  Working  Capital Needs Or To
     Finance  Acquisitions,  We May Not Be  Able To  Obtain Such Capital,  Which
     Could Adversely Affect Our Ability To Achieve Our Business Objectives


         We believe that cash  generated  from  operations,  together with other
available cash resources,  will be sufficient to meet our cash  requirements for
at least the next 12 months.  However,  we may need to raise additional funds to
finance  unanticipated  working capital  requirements  or acquire  complementary
businesses, although we have not identified any specific acquisition candidates.
If funds are not

                                       24

<PAGE>


available  when required for our  unanticipated  working  capital needs or other
transactions,  our  ability to carry out our  business  plan could be  adversely
affected,  and we may be  required  to scale back our growth and  operations  to
reflect the extent of available funding.


We have made acquisitions in the past and may make  acquisitions  in the future,
     if advisable, and these acquisitions involve numerous risks.

Our growth  depends  upon market  growth and our ability to enhance our existing
products and  services,  and to introduce  new products and services on a timely
basis. One of the ways to accomplish this is through  acquisitions.  In 2004, we
completed  the  acquisitions  of  Qualtech  International  Corporation  and  its
affiliate  Qualtech  Services  Group.   Acquisitions   involve  numerous  risks,
including, but not limited to, the following:

          o    difficulty  and  increased  costs  in   assimilating   employees,
               including our possible inability to keep and retain key employees
               of the acquired business;

          o    disruption of our ongoing business;

          o    discovery of undisclosed  liabilities  of the acquired  companies
               and legal  disputes  with  founders or  shareholders  of acquired
               companies;

          o    inability to  successfully  incorporate  acquired  technology and
               operations  into our  business and  maintain  uniform  standards,
               controls, policies, and procedures;

          o    inability to commercialize acquired technology; and

          o    the need to take impairment  charges or write-downs  with respect
               to acquired assets.

         No  assurance  can be given that our prior  acquisitions  or our future
acquisitions, if any, will be successful or provide the anticipated benefits, or
that they will not adversely affect our business, operating results or financial
condition.  Failure to manage growth  effectively and to successfully  integrate
acquisitions  made by us  could  materially  harm  our  business  and  operating
results.


If We  Experience  Problems  In  Our  Distribution  Operations,  We  Could  Lose
       Customers


       In addition to product vendors,  we depend on several other third parties
over whom we have limited control,  including,  in particular,  Federal Express,
United Parcel  Service and common  carriers for delivery of products to and from
our  distribution   facility  and  to  our  customers.   We  have  no  long-term
relationships  with any of those  parties.  We are  therefore  subject to risks,
including risks of employee strikes and inclement weather, which could result in
failures by such  carriers  to deliver  products  to our  customers  in a timely
manner, which could damage our reputation and name.


The Industry In Which We Compete In Is Highly Competitive


         We face competition in each area of our business,  although in the Data
Center  Hardware  Segment,  there are no  significant  competitors.  Some of our
competitors have greater  resources and a more established  market position than
we have. Our primary competitors include:

          o    major  manufacturers of computer equipment such as, Dell Computer
               Corporation,  Hewlett  Packard  and  IBM,  each  of  which  offer
               "as-is", refurbished and new equipment through their websites and
               direct e-mail broadcast campaigns;

          o    privately  and  publicly  owned  businesses  such  as  Redemtech,
               Solectron  and  Spacefitters  that  offer  asset  management  and
               end-of-life product refurbishment and remarketing services;


                                       25

<PAGE>



          o    traditional store-based computer retailers, such as Best Buy Co.,
               Inc., Circuit City Stores, Inc., CompUSA and Gateway Country; and

          o    online competitors and auction sites, such as e-Bay

         Some competitors have longer  operating  histories,  larger customer or
user bases, greater brand name recognition and significantly  greater financial,
marketing and other resources than we do. Some of these competitors already have
an  established  brand  name and can  devote  substantially  more  resources  to
increasing  brand name  recognition  and  product  acquisition  than we can.  In
addition,  larger,  well-established  and  well-financed  entities may join with
online  competitors  or computer  manufacturers  or  suppliers as the use of the
Internet and other online  services  increases.  Our  competitors may be able to
secure products from vendors on more favorable  terms,  fulfill  customer orders
more  efficiently  or adopt  more  aggressive  price or  inventory  availability
policies than we can. Traditional store-based retailers also enable customers to
see and  test  products  in a  manner  that  is not  possible  in the  wholesale
business.  Our product offerings must compete with other new computer  equipment
and related products offered by our competitors.  That competition may intensify
if prices for new computers continue to decrease.


No Dividends On Common Stock; Issuance Of Preferred Stock


         We do not have a history of paying  dividends on our Common Stock,  and
there can be no assurance that dividends will be paid in the foreseeable future.
We intend to use any  earnings,  which may be generated to finance the growth of
our  businesses.  Our Board of Directors has the right to authorize the issuance
of preferred stock, without further shareholder  approval,  the holders of which
may have  preferences  over the  holders  of the  Common  Stock as to payment of
dividends.


Dependence On Key Individuals


         Our  success  depends  to  a  significant  extent  upon  the  continued
contributions of our key management,  technical and sales personnel, many of who
would be difficult to replace.  The loss of one or more of these employees could
harm our business.  Although we have entered into a limited number of employment
contracts with certain executive  officers,  we generally do not have employment
contracts  with our key  employees.  Our success  also depends on our ability to
identify, attract and retain qualified technical, sales, marketing,  finance and
managerial  personnel.  Competition  for  qualified  personnel  is  particularly
intense in our industry and in our  location.  This makes it difficult to retain
our  key  personnel  and  to  recruit  highly  qualified   personnel.   We  have
experienced, and may continue to experience,  difficulty in hiring and retaining
candidates with appropriate  qualifications.  To be successful,  we need to hire
candidates  with  appropriate  qualifications  and retain our key executives and
employees.


         We are  organized  with a small senior  management  team. If we were to
lose the services of the following  members of our management  team, our overall
operations could be adversely affected. We consider our key individuals to be:

<TABLE>
<CAPTION>
<S>                                      <C>
Name                                                                      Position
---------------------------------------- ----------------------------------------------------------------------------
Marc Sherman  ......................     Chairman, President and Chief Executive Officer, Director
Joel L. Owens ......................     Executive Vice President Data Center Hardware and Data Center Services
                                           Group
Edward L. Cummings..................     Vice President, CFO, Treasurer, Director
David M. Harris.....................     Vice President, Information Technology and Systems
</TABLE>

Anti-Takeover Provisions


         Certain   provisions  of  our  Amended  and  Restated   Certificate  of


                                       26

<PAGE>



Incorporation,  Amended and  Restated  By-laws and Delaware law may be deemed to
have an anti-takeover effect. Our certificate of incorporation provides that our
Board of Directors may issue additional  shares of Common Stock or establish one
or more classes or series of Preferred  Stock with such  designations,  relative
voting rights,  dividend rates,  liquidation  and other rights,  preferences and
limitations that the Board of Directors fixes without stockholder  approval.  In
addition,  we are subject to the anti-takeover  provisions of Section 203 of the
Delaware General  Corporation Law. In general,  the statute prohibits a publicly
held  Delaware  corporation  from engaging in a "business  combination"  with an
"interested  stockholder"  for a period  of three  years  after  the date of the
transaction  in which the person  became an interested  stockholder,  unless the
business  combination is approved in a prescribed manner.  Each of the foregoing
provisions  may  have  the  effect  of  rendering  more   difficult,   delaying,
discouraging,  preventing or rendering more costly an acquisition of the Company
or a change in control of the Company.


CRITICAL ACCOUNTING POLICIES


         Management   is   responsible   for  the  integrity  of  the  financial
information  presented  herein.  The Company's  financial  statements  have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United  States of America.  Where  necessary,  they reflect  estimates  based on
management's  judgment.  When selecting or evaluating  accounting  alternatives,
management  focuses on those that produce from among the available  alternatives
information most useful for  decision-making.  Significant  accounting  policies
that are  important to the portrayal of the  Company's  financial  condition and
results,  which in some cases require management's  judgment,  are summarized in
the Notes to Financial Statements which are included herein in Item 7.


         The Company believes that the critical  accounting  policies  discussed
below  involve  additional  management  judgment due to the  sensitivity  of the
methods,  assumptions and estimates  necessary in determining the related asset,
liability, revenue and expense amounts.


         The Company  recognizes  revenue when it is realized or realizable  and
earned. The Company provides a limited "DOA Warranty" in connection with some of
our product  sales.  DOA means "Dead On Arrival" and is a commonly  used term in
the computer  industry.  If provided to our customer,  this warranty  applies to
used computers,  disk drives,  CD drives or DVD drives that do not power-up when
they are received or, in some cases,  for a period of up to 60 days from receipt
and  provides  that the covered  equipment  can be returned for a full refund or
replacement  product, if available.  The decision whether to provide a refund or
replacement product is generally at our option, but in limited circumstances, it
may be at the customer's  option.  Based on an internal study by management,  we
determined  that less that 5% of the  Company's  sales are  covered  under  this
warranty and, of those sales, less than 10% are returned to the Company.  If the
equipment sold does not power-up,  the Company has  alternative  methods to sell
this equipment,  by tearing it down and selling the working  components as parts
and the non-working components to metal recyclers. The alternative sales methods
are rarely below the original cost of the equipment. The Company has not had any
significant  differences  for the  years  ended  December  31,  2004  and  2003.
Therefore, no warranty reserve has been recorded.  Should a reserve be recorded,
it would increase both cost of sales and accrued expenses.


         The  Company  provides  estimated  inventory   allowances  for  excess,
slow-moving and obsolete inventory as well as for inventory whose carrying value
is in  excess of net  realizable  value.  These  reserves  are based on  current
assessments  about future  demands,  market  conditions  and related  management
initiatives.  Management continually monitors its inventory valuation, and makes
an  assessment  of  its  inventory  allowance  on a  monthly  basis.  If  market
conditions  and  actual  demands  are less  favorable  than those  projected  by
management,  additional inventory write-downs may be required,  which would be a
decrease to our inventory balance and an increase to cost of sales.

                                       27

<PAGE>


         The Company  evaluates the  realizability of its deferred tax assets on
an ongoing  basis by assessing  its  valuation  allowance  and by adjusting  the
amount of such allowance,  if necessary.  In the  determination of the valuation
allowance,  the Company has considered future taxable income and the feasibility
of tax planning initiatives. If the Company determined that it would not be able
to realize a deferred tax asset created by net operating losses and other timing
differences  between the book and tax methods of  accounting,  an  adjustment to
increase the valuation  allowance  would be charged to income tax expense in the
period such conclusion was made.  Currently,  the Company has not provided for a
valuation  allowance.  In addition,  the Company operates within multiple taxing
jurisdictions  and is  subject  to audit in these  jurisdictions.  Although  the
Company is not  currently  being audited by any taxing  authority,  there is the
possibility of future audits,  whose  resolution could have an adverse impact of
the results of operations and cash flows of the Company.


         The Company accounts for stock-based employee compensation arrangements
in accordance  with the  provisions of APB Opinion No. 25,  Accounting for Stock
Issued to  Employees,  and complies with the  disclosure  provisions of SFAS No.
123, Accounting for Stock-Based Compensation. Had the Company elected to account
for stock-based employee  compensation  arrangements in accordance with SFAS No.
123 as an alternative to APB Opinion No. 25, additional  expense would have been
recognized in the statement of operations.  For options issued to non-employees,
the Company applies SFAS No. 123. Expense is recognized using the Black -Scholes
option  pricing model,  which contains  estimates on the volatility of the stock
price,  the risk  free  interest  rate,  and the  expected  life of the  options
granted.  The Company  bases its  estimates on the best  available  information.
Increases in estimated  volatility,  expected  life,  and the risk free interest
rate would all increase  the amount of expense  recognized  in the  Statement of
Operations.

Impact Of Recently Issued Accounting Standards

In May  2003,  the FASB  issued  SFAS  150,  Accounting  for  Certain  Financial
Instruments with  Characteristics  of Both Liabilities and Equity.  SFAS No. 150
establishes  standards  for  how  an  issuer  classifies  and  measures  certain
financial  instruments with  characteristics  of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some  circumstances).  Many of those  instruments
were  previously  classified  as equity.  SFAS No.150 is effective for financial
instruments  entered  into or modified  after May 31,  2003,  and  otherwise  is
effective at the beginning of the first interim period  beginning after June 15,
2003. It is to be implemented by reporting the cumulative  effect of a change in
accounting principle for financial  instruments created before the issuance date
of the  statement and still  existing at the beginning of the interim  period of
adoption.  Restatement is not permitted.  The Company  adopted the provisions of
SFAS No.  150  effective  July 1,  2003,  which had no  impact on the  Company's
financial position or results of operations.

In November  2002,  the FASB  issued  Interpretation  (FIN) No. 45,  Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees of  Indebtedness  of Others.  This  interpretation  elaborates on the
disclosures  to be made by a guarantor  in its  financial  statements  about its
obligations under certain  guarantees that it has issued. It also clarifies that
a  guarantor  is required to  recognize,  at the  inception  of a  guarantee,  a
liability  for the fair  value  of the  obligation  undertaken  in  issuing  the
guarantee.  The Company adopted this interpretation in 2003, which had no impact
on the Company's financial position or results of operations.

In December  2003,  the FASB issued No. 46  (revised  December  2003) (FIN 46R),
Consolidation  of Variable  Interest  Entities,  which  addresses how a business
enterprise should evaluate whether it has a controlling financial interest in an
entity through means other than voting rights and accordingly should consolidate
the entity.  FIN 46R replaces  FIN No. 46,  Consolidation  of Variable  Interest
Entities,  which

                                       28

<PAGE>


was issued in January  2003.  The  Company  will be required to apply FIN 46R to
variable  interests in variable  interest entities (VIEs) created after December
31, 2003. For any VIEs that must be consolidated under FIN 46R that were created
before January 1, 2004, the assets,  liabilities and noncontrolling interests of
the VIE  initially  would  be  measured  at  their  carrying  amounts  with  any
difference  between the net amount added to the balance sheet and any previously
recognized  interest being recognized as the cumulative  effect of an accounting
change.  If determining the carrying amounts is not  practicable,  fair value at
the date FIN 46R first  applies may be used to measure  the assets,  liabilities
and noncontrolling  interest of the VIE. The adoption of this standard will have
no impact on the Company's financial position or results of operations.

In December 2004, the FASB issued SFAS No. 123R,  Share-Based Payment.  SFAS No.
123R requires measurement of all employee stock-based  compensation awards using
a fair  value  method and the  recording  of such  expense  in the  consolidated
financial  statements.  In addition,  the adoption of SFAS No. 123R will require
additional   accounting  related  to  the  income  tax  effects  and  additional
disclosure  regarding the cash flow effects  resulting from share-based  payment
arrangements.  SFAS No. 123R is effective for the Company  beginning  January 1,
2006.  The Company  currently  plans to adopt SFAS No.  123R using the  modified
prospective  method.  The  Company  is  currently  assessing  the  impact of the
adoption of SFAS No. 123R to its results of operations,  financial condition and
compensation strategies.


ITEM 7.           FINANCIAL STATEMENTS


         Our financial  statements included in this Annual Report on Form 10-KSB
are listed in Item 13 and begin  immediately  after Item 14 on pages F-1 through
F-29.


ITEM 8.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                  AND FINANCIAL DISCLOSURE


         None




ITEM 8A.          CONTROLS AND PROCEDURES


         EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES


         Our management, including our chief executive officer and president and
our chief financial  officer,  have conducted an evaluation of the effectiveness
of our disclosure  controls and  procedures (as defined in Rule 13a-15(e)  under
the  Securities  and  Exchange  Act of  1934)  as of  December  31,  2004.  This
evaluation was carried out under the supervision and with the  participation  of
our  management,  including  our chief  executive  officer  and chief  financial
officer.  Based upon that evaluation,  our chief executive officer and our chief
financial officer have concluded that our disclosure controls and procedures are
effective for timely gathering,  analyzing and disclosing the information we are
required to disclose in our reports filed under the Exchange Act.

         There were no changes in our internal control over financial  reporting
during the quarter ended December 31, 2004 that have materially affected, or are
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.

         We are  continuing to evaluate the  employees  involved and the control
procedures  in place as well as the costs and benefits of making  changes in the
number and duties of  employees.  We are also

                                       29

<PAGE>


working to document  controls  this year and to identify  other items that might
require  remediation in connection  with our compliance  with Section 404 of the
Sarbanes-Oxley Act of 2002.

Part III


ITEM 9.           DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
                  COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT


As of March 18, 2005, Our Directors and Executive Officers are:
<TABLE>
<CAPTION>
<S>                                       <C>     <C>
Name                                      Age                                  Position
----------------------------------------- ------- -------------------------------------------------------------------
Marc Sherman                              41      Chairman, President and Chief Executive Officer, Director
R. Keith Elliott................          62      Director
Seth A. Grossman................          39      Chief Operating Officer, Director
Edward L. Cummings..............          56      Vice President, Chief Financial Officer, Treasurer, Director
Robert W. VanHellemont..........          58      Director
David Harris  ..................          42      Vice President, Information Technology and Systems
</TABLE>

         In January  2003,  R. Keith  Elliott was  appointed  as a member of our
board of directors to fill a vacancy. In May 2003, Andrew Paciocco resigned as a
member of our board of directors for personal reasons. In November 2003, Seth A.
Grossman was appointed to fill the vacancy.


         In February 2005, Joel L. Owens resigned as Chief Operating Officer for
personal reasons.


         Marc Sherman founded WindsorTech, Inc. in August 2001 and has served as
Chairman,  President and Chief Executive  Officer since then. His term of office
expires at the 2005 annual  meeting and he has  indicated  he is  available  for
reelection.  Mr. Sherman served as a director of and Chief Executive  Officer of
Intellesale,  Inc. (and its  predecessor,  Universal  Commodities  Corp.),  from
December  1994 to July 2001, a company that  purchased and sold large volumes of
off-lease/off  finance excess, used,  refurbished and "as-is" computer equipment
and related products and which provided technology asset management to companies
wishing to maximize the value of their computer  equipment  coming to the end of
its useful or book lives.  Prior to 1994, Mr. Sherman served in key positions in
various family  businesses.  Mr. Sherman has over fifteen years of experience in
marketing,   operations   and   executive   management.   Mr.   Sherman  is  the
brother-in-law of Mr. Sheerr.

         R. Keith  Elliott was  appointed  to the board of  directors in January
2003 to fill a vacancy.  His term of office  expires at the 2005 annual  meeting
and he has indicated he is available for reelection.  Mr. Elliott is the retired
chairman  and chief  executive  officer of  Hercules,  Inc. He had been  elected
chairman and chief  executive  officer of Hercules,  Inc. in 1997.  From 1991 to
April  2000,  he served  Hercules,  Inc.  as  Senior  Vice  President  and Chief
Financial  Officer;  Executive  Vice  President  and  Chief  Financial  Officer;
President and Chief Operating  Officer;  President and Chief Executive  Officer;
and  Chairman of the Board of  Directors.  Hercules,  Inc.  is a  multi-national
specialty  chemical   manufacturer  serving  the  paper,  water,   construction,
pharmaceutical,  food, consumer non-durable and adhesive markets and industries.
Mr. Elliott is a member of the Board of Directors of Checkpoint Systems, Inc., a
multi-national  manufacturer of electronic  labeling  systems used in the retail
industry to identify products and reduce theft,  Sithe Energies  Company,  which
develops peaking power plants based on gas, oil and coal fuels, Wilmington Trust
Company,  which provides customized  financial  alternatives for wealth advisory
clients,  corporate clients, and regional banking clients,  Computer Task Group,
an information  technology staffing and solutions company, and the Institute for
Defense Analyses,  a federally funded research and development  company. He also
serves as a member of the National  Advisory  Board for the  University of South
Carolina.  Mr. Elliott serves as Chairman of the Audit Committee and is a member
of the


                                       30

<PAGE>


Compensation  Committee of the Board of  Directors.  The Board of Directors  has
determined that Mr. Elliott is an Audit Committee Financial Expert, as that term
is defined in the rules issued pursuant to the  Sarbanes-Oxley Act of 2002. This
designation  does not impose any duties,  obligations  or  liabilities  that are
greater than the duties,  obligations and liabilities  imposed by being a member
of the audit  committee or board of  directors.  The Board of Directors has also
determined  that Mr. Elliott is  independent,  as that term is defined under the
enhanced  independence  standards for audit committee  members in the Securities
Exchange Act of 1934 and rules there under.


         Seth A.  Grossman  was  hired on March 14,  2005 to be Chief  Operating
Officer.  He had joined the Board of  Directors  in November  2003.  His term of
office  expires  at the 2005  annual  meeting  and he has  indicated  that he is
available for  reelection.  Mr.  Grossman was the Executive  Vice  President and
Chief Strategic  Officer of Paxson  Communications  Corporation  (AMEX:PAX).  He
joined Paxson Communications in 1995 as its Director of Finance, before assuming
additional   responsibilities   as  SVP  of  Investor  Relations  and  Corporate
Development and then Chief Financial Officer. Prior to his tenure at Paxson, Mr.
Grossman  was a Senior  Associate  with  Houlihan,  Lokey,  Howard  &  Zukin,  a
specialty  investment  bank in New  York  where  he  concentrated  on  corporate
finance,  valuation advisory and restructuring.  Mr. Grossman was also a partner
with  McFerren  Holding  Co.,  a  Central  and  Eastern  European  privatization
consulting  firm. Mr. Grossman holds a BBA with  distinction from the University
of  Michigan  and  an  MBA  from  the  Harvard   Graduate   School  of  Business
Administration.  He currently  sits on the Board of the  Enterprise  Development
Corporation of South Florida, a not-for-profit technology enterprise development
concern. Mr. Grossman sits on the Audit and Compensation Committees of the Board
of Directors of the Company.


         Edward L. Cummings  co-founded  WindsorTech  and has served as its Vice
President,  Chief Financial  Officer and Treasurer since inception.  His term of
office  expires  at the 2005  annual  meeting  and he has  indicated  that he is
available  for  reelection.  Mr.  Cummings  joined the Board of Directors of the
Company  in  February  2004 to fill a  vacancy.  He  served  as  Executive  Vice
President, Chief Financial Officer and Secretary of Intellesale,  Inc. from July
1999 to February 2001. He joined its predecessor  company Universal  Commodities
Corp. in October 1995 as controller and was elected to the board of directors in
January  1997.  From  September  1994 to  October  1995 he owned TCC,  Inc.,  an
operator of several  retail gift shops.  From December 1981 to September 1994 he
was Chief Financial  Officer and Treasurer of Albert E. Price,  Inc., a giftware
import and export company.


         Robert W.  VanHellemont  was  appointed  to the board of  directors  in
August 2004 to fill a vacancy.  He is the founder and chief executive officer of
the  Varilease  companies.  The Varilease  companies are leading North  American
business  equipment  and financing  providers,  which have financed more than $1
billion in assets worldwide.  Mr.  VanHellemont  founded Varilease Corp. in 1987
and founded Varilease Technology Finance Group, Inc. in 2000. Additionally,  Mr.
VanHellemont served as senior vice president of Thomson-McKinnon  Securities and
spent over 10 years in senior positions at CMI Corp.


         David M.  Harris  joined  WindsorTech  in May  2002 as Vice  President,
Information   Technology  and  Systems.   Mr.  Harris  is  responsible  for  the
development,   implementation  and  maintenance  of  the  Company's  information
technology systems and processes.  Prior to joining the Company, Mr. Harris was,
from  October  2001 to May 2002 a private  consultant  and,  from  April 1998 to
October 2001,  Network and Systems  Administrator  for  Intellesale,  Inc. Prior
thereto,  from 1984 to 1998 he has held various positions as Network and Systems
Administrator and Programmer for various companies.


         None of the Directors or Executive Officers of the Company:

                                       31

<PAGE>

          o    have filed a bankruptcy  petition or served as a general  partner
               or an executive officer of any entity that has filed or had filed
               against it a bankruptcy petition;

          o    have been convicted in a criminal proceeding or is the subject of
               a pending criminal proceeding;

          o    are subject to any order,  judgment or decree,  not  subsequently
               reversed,  suspended  or  vacated,  of  any  court  of  competent
               jurisdiction,  permanently  or  temporarily  enjoined,  barred or
               suspended or otherwise  limited in their  involvement in any type
               of business, securities or banking activities; or

          o    have been found by a court of competent  jurisdiction  in a civil
               action,   the  Commission  or  the  Commodity   Futures   Trading
               Commission  to have  violated  federal  or  state  securities  or
               commodities law and the judgment has not been reversed, suspended
               or vacated.


Code of Ethics for Staff Members and Directors

The Company has adopted a Code of Ethics for Staff Members and Directors,  which
applies to all  employees,  including our Chief  Executive  and Chief  Financial
Officers.  The Code is available on the "Investor  Relations" portion of our web
site at www.windsortechinc.com.


Compliance with Section 16(a) of the Exchange Act


         We are in compliance with Section 16(a) of the Exchange Act.

                                       32

<PAGE>


ITEM 10. EXECUTIVE COMPENSATION


         The following table sets forth certain summary  information  concerning
the total  remuneration  paid in 2004 and 2003 to the Company's  Chief Executive
Officer and its four other most highly compensated executive officers.

<TABLE>
<CAPTION>
<S>                           <C>     <C>                          <C>                   <C>         <C>        <C>

                                             Summary Compensation Table
                                             --------------------------
                                                                               Long-Term Compensation
                                                                           --------------------------------
                                            Annual Compensation                   Awards          Payouts
                                  -------------------------------------------------------------------------
                                                                                       Securities
                                                                            Restricted Underlying                All
                                                               Other Annual   Stock     Options /    LTIP       Other
    Name and Principal        Year    Salary     Bonus         Compensation   Awards     SAR's      Payouts  Compensation
       Position (1)                    ($)         ($)           ($)           ($)        (#)         (#)        ($)
---------------------------------------------------------------------------------------------------------------------

Marc Sherman                  2004    $ 265,385            -       $ 5,500          -  1,000,000     $   -      $  -
   Chairman, CEO and          2003    $ 163,384            -       $ 6,000          -  1,000,000     $   -      $  -
   President


Edward L. Cummings            2004    $ 141,346            -       $ 5,500          -    500,000     $   -      $  -
   Vice President,
Treasurer                     2003    $ 120,115            -       $ 6,000          -    250,000     $   -      $  -
   and CFO

David A. Harris               2004    $  89,415            -             -          -          -     $   -      $  -
    Vice President IT         2003    $  82,540            -             -          -    225,000     $   -      $  -

Joel L. Owens(3)              2004    $ 141,667            -             -          -     60,000     $   -      $  -
    Chief Operating Officer   2003            -            -             -          -          -     $   -      $  -

David A. Loppert(2)           2004    $  61,558            -       $ 2,000          -  1,100,000     $   -      $  -
   Director, Vice
President,                    2003    $ 143,192            -       $ 6,000          -    500,000     $   -      $  -
   Secretary


Carl C. Saracino              2004    $ 125,000            -       $ 4,000          -          -     $   -      $  -
   Operations Manager         2003    $ 120,115            -       $ 6,000          -    150,000     $   -      $  -


Michael P. Sheerr             2004    $ 125,000            -       $ 4,000          -          -     $   -      $  -
   Sales Manager              2003    $ 120,115            -       $ 6,000          -    150,000     $   -      $  -
</TABLE>

----------------------------
(1). See "Employment Contracts" below for agreements entered into with executive
     officers.
(2). On February 19, 2004, by Action of Consent of Majority Shareholders,  David
     A. Loppert was removed from the Board of Directors.  Thereafter,  the Board
     of Directors removed Mr. Loppert as an officer of the Company. As part of a
     court  enforced  settlement  agreement  with Mr.  Loppert,  the company was
     required to issue him 1,100,000  stock options.  These were not part of the
     2002 Flexible Stock Plan.
(3)  Named as COO on September 23, 2004. His employment  started on May 1, 2004.
     Mr. Owens resigned as COO as of February 14, 2005.

Option Grants in Last Fiscal Year

         The following table contains information  concerning the grant of Stock
Options to the named executive officers during 2004:

<TABLE>
<CAPTION>
<S>                         <C>                 <C>              <C>                  <C>          <C>       <C>

                                                  Individual Grants
                       ------------------------------------------------------------------------
                           Number of           % of
                           Securities       Total Options
                           Underlying        Granted to                                            Grant Date
                        Options Granted     Employees in      Exercise Price                      Present Value
        Name                  (#)               2004             ($/Sh)       Expiration Date          ($)
---------------------- ------------------------------------------------------------------------ -------------------
Marc Sherman                500,000             38.5%            $ 1.44          May -14           $ 535,000 (1)
Marc Sherman                500,000                 -            $ 1.90          Nov -14           $ 735,000 (2)

                                       33

<PAGE>


Edward L. Cummings          250,000             19.2%            $ 1.44          May -14           $ 267,500 (1)
Edward L. Cummings          250,000                 -            $ 1.90          Nov -14           $ 367,500 (2)
</TABLE>

(1)      Based on the grant date  present  value of $1.07 per option share which
         was derived  using the  Black-Scholes  option  pricing model and is not
         intended to forecast future  appreciation of the Company's common share
         price. The Black-Scholes model was used with the following assumptions:
         dividend yield of 0%; expected volatility of 216.5%; risk-free interest
         rate of 3.63%; and expected lives of 5 years.
(2)      Based on the grant date  present  value of $1.47 per option share which
         was derived  using the  Black-Scholes  option  pricing model and is not
         intended to forecast future  appreciation of the Company's common share
         price. The Black-Scholes model was used with the following assumptions:
         dividend yield of 0%; expected volatility of 231.7%; risk-free interest
         rate of 3.53%; and expected lives of 5 years.


Option Exercises and Fiscal Year-End Values


         The following  table sets forth  information  with respect to the named
executive   officers   concerning  the  exercise  of  options  during  2004  and
unexercised options held on December 31, 2004:

<TABLE>
<CAPTION>
<S>                    <C>             <C>                   <C>                        <C>

                  Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
                                                           Number of Securities
                                                          Underlying Unexercised         Value of Unexercised
                                                         Options at Year End 2004    In-The-Money Options at Year
                              Exercised in 2004                     (#)                      End 2004 ($)
                       -------------------------------- ------------------------------------------------------------
                           Shares
                        Acquired Upon       Value
         Name           Exercise (#)    Realized ($)     Exercisable  Unexercisable  Exercisable    Unexercisable
------------------------------------------------------- ------------------------------------------------------------
Marc Sherman                 -         $     --            2,375,000        --        $ 8,122,500          --
Edward L. Cummings           -         $     --            1,100,000        --          3,762,000          --
David A. Harris              -         $     --              225,000        --            770,000          --
Joel L. Owens                -         $     --               60,000        --            205,000          --
Carl C. Saracino       150,000         $  4,500              350,000        --          1,197,000          --
Michael P. Sheerr      150,000         $  4,500              350,000        --          1,197,000          --

</TABLE>


Compensation Pursuant to Plans


         Other than as  disclosed  above,  the Company has no plans  pursuant to
which cash or  non-cash  compensation  was paid or  distributed  during the last
fiscal  year,  or is proposed to be paid or  distributed  in the future,  to the
individuals described above.

Compensation of Directors


         Beginning  in the first  quarter  of 2002,  the  non-employee  director
compensation  was changed from receiving no compensation to fixed quarterly fees
in the amount of $1,500 per non-employee director. Such fee may be paid in cash,
options or in shares of the Company's Common Stock, at the election of the board
of  directors.   Reasonable   travel  expenses  are  reimbursed  when  incurred.
Individuals who become directors of the Company are  automatically  granted,  on
the date  they  become  directors,  an  initial  non-qualified  stock  option to
purchase 125,000 shares of Common Stock, $.01 par value, at the closing price of
the Company's  Common Stock,  expiring ten years from the grant date.  Directors
who are not also executive officers are not eligible to participate in any other
benefit plan of the Company.


Compensation Committee Interlocks and Insider Participation


         None.

                                       34

<PAGE>


Employment  Contracts  and  Termination  of  Employment,  and  Change-in-Control
Arrangements

         The Company entered into employment and non-compete agreements with the
following named executive officers on October 1, 2001.

Name                      Length              Commencing       Base Compensation
--------------------------------------------------------------------------------
Marc Sherman               1 Year(1)      October 1, 2001        $  100,000  (2)
Edward L. Cummings         1 Year(1)      October 1, 2001        $  100,000  (3)
David A. Loppert(6)        1 Year(1)      October 1, 2001        $  100,000  (5)
Carl C. Saracino(6)        1 Year(1)      October 1, 2001        $  100,000  (4)
Michael P. Sheerr(6)       1 Year(1)      October 1, 2001        $  100,000  (4)

------------------------------------------
(1)  Automatically  renewed for  successive  additional  one-year  terms on each
     anniversary unless either the employee or the Company gives the other party
     30 days notice of non-renewal  prior to an anniversary date. The employment
     agreements include certain early termination provisions in the event of the
     employee's death,  retirement,  or upon the occurrence of certain events of
     defaults  in  performance  by  either  the  Company  or  the  employee,  as
     applicable.
(2)  $50,000 per annum for the period from  October 1, 2001 to December 31, 2001
     then increasing to $100,000 per annum effective  January 1, 2002,  $200,000
     per annum,  effective June 1, 2003 and $300,000 per annum  effective May 1,
     2004.
(3)  $50,000 per annum for the period from  October 1, 2001 to December 31, 2001
     then increasing to $100,000 per annum effective  January 1, 2002,  $125,000
     per annum,  effective June 1, 2003 and $150,000 per annum, effective May 1,
     2004.
(4)  $50,000 per annum for the period from  October 1, 2001 to December 31, 2001
     then increasing to $100,000 per annum effective  January 1, 2002,  $125,000
     per annum, effective June 1, 2003.
(5)  $50,000 per annum for the period from  October 1, 2001 to December 31, 2001
     then increasing to $100,000 per annum effective  January 1, 2002,  $165,000
     per annum,  effective  June 1,  2003.  Mr.  Loppert  is no longer  with the
     Company.
(6)  The Company  has  notified  Mr.  Saracino  and Mr.  Sheerr that it does not
     intend to renew their  employment  contracts.  Mr.  Loppert's  contract has
     expired.

Key provisions of Employment and Non-Compete Agreements

Compensation.  In  addition  to the base  compensation  of each named  executive
listed  above,  each  named  executive  is  entitled  to receive  such  bonuses,
incentive compensation,  and other compensation,  if any, as the Company's board
of  directors  or  the  compensation  committee  thereof,  or  other  designated
committee shall award such executive from time to time whether in cash,  Company
stock,   stock  options,   other  stock  based   compensation,   other  form  of
remuneration, or any combination of the foregoing.


Option Grant.  Each executive was granted an option to acquire 250,000 shares of
the Company's  common stock at $0.026 per share,  exercisable  at any time after
October 1, 2001 and on or before December 31, 2010.


Change of  Control.  In the event of a change in  control  of the  Company,  all
options  granted to the  executives  will  immediately  vest,  to the extent not
already vested, and will become exercisable in accordance with the plan or terms
and conditions  under which they were granted.  If, after the  announcement of a
change in control,  an executive  is  terminated  by the Company  other than for
cause,  then the executive's base  compensation will be increased to three times
the current base  compensation and such amount shall be payable in a lump sum to
the  executive  in US  dollars  within  30 days of the  date of  termination  of
employment.


Excise  Gross  Up.  In the event  that any  payment  or  benefit  payable  to an
executive  under his employment  contract,  and/or under any other  agreement or
arrangement  with the Company or any person whose actions  result in a change of
control of the Company, is covered by Section 280G(b)(2) of the Internal Revenue
Code of 1986 and is subject to the excise tax under Section 4999 of the Internal
Revenue  Code of  1986,  as  amended,  the  Company  will pay the  executive  an
additional amount that covers all excise taxes incurred or to be incurred by the
executive  because of any such payment or benefit,  plus an

                                       35

<PAGE>


additional  amount to cover all federal and state  income taxes and excise taxes
on the initial excise gross up payment.


Vesting of Options.  In the event of termination of the  executive's  employment
for any  reason  other  than  termination  by the  Company  due to his  material
default, as described in the employment  contract,  all stock options granted to
him by the Company (or any  subsidiary or affiliate)  whether  granted under and
pursuant to a plan or  otherwise,  will become  immediately  exercisable  to the
extent  not  already   exercisable  and  will  remain  exercisable  until  their
expiration date.


Non-Compete Provisions.  During the employment term and for a period of one year
after  termination of employment,  if such termination is either  voluntarily by
the  executive,  or for cause by the Company,  the  executive  shall not engage,
directly  or  indirectly,  either  on his own  behalf  or on behalf of any other
person, firm,  corporation or other entity, in any business competitive with the
business  of the  Company,  in any  geographic  area in  which  the  Company  is
conducting  business during such  executive's  employment term or at the time of
termination  of  executive's  employment,  or own more than 5% of any such firm,
corporation or other entity. In addition, the executive must furnish the Company
with such  information,  as the Company shall from time to time request in order
to determine that executive is in compliance with his non-compete agreement.


ITEM 11.          SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SHAREHOLDERS


Ownership of Equity Securities in the Company


         The  following  table  sets  forth  information   regarding  beneficial
ownership of the Company's  Common Stock by each director and by each  executive
officer  named in the Summary  Compensation  Table and by all the  directors and
executive officers as a group as of December 31, 2003:

<TABLE>
<CAPTION>
<S>                                                                          <C>                            <C>

-------------------- ------------------------------------------- -------------------------- --------------------------
  Title of Class        Name and Address of Beneficial Owner       Amount and Nature of
                                                                    Beneficial Owner(1)         Percent of Class
-------------------- ------------------------------------------- -------------------------- --------------------------

Common               Edward L. Cummings                                      3,216,200                      9.7%
                     c/o 70 Lake Drive
                     Hightstown, NJ 08520
-------------------- ------------------------------------------- -------------------------- --------------------------
Common               R. Keith Elliott                                          425,000                      1.3%
                     c/o 70 Lake Drive
                     Hightstown, NJ 08520
-------------------- ------------------------------------------- -------------------------- --------------------------
Common               Seth A. Grossman                                          425,000                      1.3%
                     c/o 70 Lake Drive
                     Hightstown, NJ 08520
-------------------- ------------------------------------------- -------------------------- --------------------------
Common               David A. Harris                                           425,000                      1.3%
                     c/o 70 Lake Drive
                     Hightstown, NJ  08520
-------------------- ------------------------------------------- -------------------------- --------------------------
Common               Joel L. Owens                                           1,993,331                      6.0%
                     c/o 70 Lake Drive
                     Hightstown, NJ 08520
-------------------- ------------------------------------------- -------------------------- --------------------------
Common               Carl C. Saracino                                        1,815,000                      5.5%
                     c/o 70 Lake Drive
                     Hightstown, NJ 08520
-------------------- ------------------------------------------- -------------------------- --------------------------
Common               Michael P. Sheerr                                       1,844,000                      5.6%
                     c/o 70 Lake Drive
                     Hightstown, NJ
-------------------- ------------------------------------------- -------------------------- --------------------------
Common               Marc Sherman (2)                                        5,016,300                     15.1%

                                       36

<PAGE>

-------------------- ------------------------------------------- -------------------------- --------------------------
                     c/o 70 Lake Drive
                     Hightstown, NJ 08520
-------------------- ------------------------------------------- -------------------------- --------------------------
Common               Robert W. VanHellemont                                    198,500                      *
                     c/o 70 Lake Drive
                     Hightstown, NJ  08520
-------------------- ------------------------------------------- -------------------------- --------------------------
Common               All Directors and Executive  Officers as a             15,358,331                     46.4%
                     Group (9 Persons)
-------------------- ------------------------------------------- -------------------------- --------------------------
</TABLE>

----------------------------------
*    The amount shown is less than 1% of the outstanding shares of common stock.
1.   This table includes  presently  exercisable  stock  options.  The following
     directors and executive  officers hold the number of presently  exercisable
     options  (all of which may be  exercised  at any time) set forth  following
     their respective names: Edward L. Cummings - 1,100,000;  R. Keith Elliott -
     425,000;  Seth A.  Grossman  -425,000;  David A. Harris - 275,000;  Joel A.
     Owens - 60,000;  Carl C.  Saracino - 350,000;  Michael P. Sheerr - 350,000;
     Marc  Sherman  -  2,375,000;  Robert W.  VanHellemont  -  175,000;  and all
     directors and executive officers as a group (9 persons) - 5,535,000.
2.   Includes 85,300 shares  beneficially  owned by Mr.  Sherman's  children for
     whom Mr. Sherman has sole voting and dispositive power.

         Set forth in the table below is information, as of March 15, 2005, with
respect to persons known to the Company  (other than the directors and executive
officers shown in the preceding table) to be the beneficial  owners of more than
five percent of the Company's issued and outstanding Common Stock:

Name and Address                Number of Shares             Percent Of Class
                               Beneficially Owned
-----------------------    ---------------------------     ---------------------


Barron Partners                   4,833,333                       17.4%
730 Fifth Avenue
New York, NY  10019

Securities authorized for issuance under equity compensation plans

         This  information  is presented in Part II, Item 5 - "Market for Common
Equity and Related Stockholder Matters" above.


ITEM 12  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


Loans from Principal Stockholders/Executive Officers


         A.  On  October  12,  2001  the  Company  executed  a  Variable  Amount
Promissory  Note in the  amount of  $250,000  in favor of David A.  Loppert,  an
executive  officer and director of the Company in consideration  for Mr. Loppert
extending  to the  Company a  revolving  line of credit of up to  $250,000.  The
amounts  outstanding were due on demand and bore interest at the rate of 12% per
annum.  Interest  payments were paid monthly in arrears.  The highest  principal
amount outstanding on the loan was $158,170.  The Company repaid the outstanding
balance on April 24, 2002.


         B. On April 24, 2002, the Company entered into a secured loan agreement
with its  principal  stockholders  in order to provide the Company  with working
capital.  The  agreement  was amended on September  30, 2002 and on February 28,
2003 to extend the maturity date. The loans are secured by substantially  all of
the  assets of the  Company.  Each  principal  stockholder  loaned  the  Company
$110,000 (for an aggregate of $550,000).  At December 31, 2003,  the Company had
repaid $10,000 on each loan. At December 31, 2004,  the balance  remaining is as
follows:

                                       37

<PAGE>


<TABLE>
<CAPTION>
<S>                                           <C>                        <C> <C>               <C>

                                                Amount of
         Name                                        Loan            Maturity             Interest Rate
         ---------------------------------  --------------   -------------------------  ------------------
         Marc Sherman                         $  15,000          January 31, 2006              12%
         Edward L. Cummings                   $  80,000          January 31, 2006              12%
         David A. Loppert                     $ 100,000          January 31, 2005              12%
         Carl C. Saracino                     $  70,000          January 31, 2006              12%
         Michael P. Sheerr                    $  90,000          January 31, 2006              12%
</TABLE>


         The loans bear interest at the rate of 12% per annum with interest only
payments  payable  monthly in  arrears.  $100,000 of the  principal  and accrued
interest is due and  payable on January 31, 2005 and $ 255,000 of the  principal
and accrued interest is due and payable on January 31, 2006. The loan agreement,
as amended,  provides,  among other standard and customary terms,  that when the
Company  arranges  permanent  long  or  short-  term  financing,  the  principal
stockholder loans will be subordinate to such permanent financing, if required.


         At maturity, at the election of the principal stockholders, the Company
shall  repay  such loans in cash or in a  combination  of cash and shares of the
Company's  Common Stock,  with such stock valued at the current  "market  value"
determined by a professional valuation service. For example, if each stockholder
elects to  receive  all of his loan  repayment  in  common  stock,  and if,  for
illustrative  purposes  only, the value of each share of common stock is $.01 at
maturity,  the Company will be required to issue 55,000,000 shares of its common
stock.  In this  scenario,  the Company  will be required to obtain  shareholder
approval  to  increase  its  authorized  share  capital  so that  there  will be
sufficient  shares  available  for issuance.  If the  Company's  common stock is
publicly  traded at the time of  maturity,  the current  "market  value" will be
based on the average of the closing  price for the ten business  days  preceding
the maturity  date. If the Company's  common stock is not publicly  traded,  the
method of valuation will be selected by the professional valuation service.


         The  Company  and  the  principal  stockholders  also  entered  into an
Intercreditor  Agreement dated as of April 24, 2002, that provides,  among other
standard  and  customary  terms,  that  until  all  liabilities  under  the loan
agreement have been paid in full, any payments made by the Company in respect of
the loans  shall be made in equal  amounts  to and among the  lenders,  who will
apportion  all  amounts  so  paid  to  any  of  them  in  accordance   with  the
Intercreditor Agreement so that no lender receives any payments from the Company
before or in  preference to any other lender.  Additionally,  the  Intercreditor
Agreement  would provide for equal  treatment of the lenders in connection  with
any bankruptcy, insolvency, receivership,  liquidation or dissolution proceeding
of the Company.


         C. In October  2002,  the  Company  executed  Company  Variable  Amount
Promissory  Notes,  each in the  amount of  $125,000  in favor of each of Edward
Cummings, David Loppert, Carl C. Saracino, Michael Sheerr and Marc Sherman, each
an executive officer and principal  stockholder of the Company, in consideration
for each executive  extending to the Company a revolving line of credit of up to
$125,000.  The amounts  outstanding  are due on demand and bear  interest at the
rate of 12% per annum.  Interest  payments  are paid  monthly in arrears.  As of
December  31, 2004,  $6,594 was due under these notes.  As of December 31, 2003,
$7,192 was due under these notes.


Sales to Related Party


         The Company had sales to Keystone  Memory Group, a customer  related to
Marc Sherman,  Chairman and CEO, who is a principal  stockholder  of the Company
and Michael Sheerr,  an employee of the Company and former officer and principal
stockholder.  Keystone  Memory Group is owned by Michael P. Sheerr and his wife.
Mrs. Sheerr is Marc Sherman's sister. Neither Mr. Sherman nor Mr.


                                       38

<PAGE>


Sheerr has any business experience with Keystone.


         The Company also had sales to Micro Memory Bank, a customer  related to
Michael  Sheerr,  an employee of the  Company and former  officer and  principal
stockholder.  Micro Memory Bank is owned by Michael Sheerr's brother. Mr. Sheerr
does not have any business experience with Micro Memory Bank.


         Sales to Keystone amounted to approximately $1,102,000 and $938,000 for
the years ended December 31, 2004 and 2003,  respectively.  Accounts  receivable
from  Keystone  amounted to $119,046  and $37,173 at December 31, 2004 and 2003,
respectively.


         Sales to Micro Memory Bank amounted to approximately $5,400 and $20,000
for the years  ended  December  31,  2004 and 2003,  respectively.  There was no
amount due from Micro Memory Bank at December 31, 2004 or December 31, 2003.


         Keystone primarily sells memory upgrades for Sun, HP, Cisco, Compaq and
IBM  workstations,  servers and  personal  computers  as well as other  computer
parts.  We sell  personal  computer  memory  modules  to  Keystone  in bona fide
arms-length  negotiated  transactions  at competitive  fair market  prices.  The
products primarily consist of 32Mb, 64Mb, 128Mb and 256Mb RAM, or "Random Access
Memory," modules.


         Micro  Memory  Bank   manufactures   and  sells   memory   modules  for
workstations,  servers and personal computers.  We sell personal computer memory
modules to Micro Memory Bank in bona fide arms-length negotiated transactions at
competitive fair market prices.  The products  primarily  consist of 32Mb, 64Mb,
128Mb and 256Mb RAM or "Random Access Memory" modules.


Shares issued to Principal Stockholders/Executive Officers
<TABLE>
<CAPTION>
<S>                                      <C>                                                               <C>


Principal Stockholder /                                                                                   Number of
-----------------------                                                                                      Common
Executive Officer                 Date Issued         Note                  Issued For                       Shares
-----------------                 -----------         ----                  ----------                       ------
Edward L. Cummings                 Oct - 2001           A              Capital Contribution                5,000,000
                                   Jan - 2002           B              Merger Consideration                1,800,000
                                   Dec - 2002           C                  Compensation                      500,000

David A. Loppert                   Oct - 2001           A              Capital Contribution                5,000,000
                                   Jan - 2002           B              Merger Consideration                1,800,000
                                   Dec - 2002           C                  Compensation                      500,000

Carl C. Saracino                   Oct - 2001           A              Capital Contribution                5,000,000
                                   Jan - 2002           B              Merger Consideration                1,800,000
                                   Dec - 2002           C                  Compensation                      500,000


Michael P. Sheerr                  Oct - 2001           A              Capital Contribution                5,000,000
                                   Jan - 2002           B              Merger Consideration                1,800,000
                                   Dec - 2002           C                  Compensation                      500,000


Marc Sherman                       Oct - 2001           A              Capital Contribution                5,000,000

                                       39

<PAGE>


                                   Jan - 2002           B              Merger Consideration                1,800,000
                                   Dec - 2002           C                  Compensation                      500,000
</TABLE>

         A. In October  2001,  WindsorTech,  Inc.  (New Jersey  Company) sold an
aggregate of 50,000 shares of its common to Edward Cummings, David Loppert, Carl
C. Saracino,  Michael Sheerr and Marc Sherman in consideration  for $50,000 from
each of them.  In January  2002,  WindsorTech,  Inc.  (New  Jersey  Corporation)
affected a 100:1 stock split. These shares were restricted within the meaning of
the Securities Act of 1933.

         B. On January 30, 2002, in connection with the Merger,  Delta issued an
aggregate of  9,000,000  shares of its common  stock to Edward  Cummings,  David
Loppert, Carl C. Saracino, Michael Sheerr and Marc Sherman in exchange for their
25,000,000 shares of common stock in WindsorTech, Inc. (New Jersey Corporation).
The  9,000,000  shares of common  stock were valued at  $250,000,  or $.0278 per
share.  These shares are restricted  within the meaning of the Securities Act of
1933.

         C. In  December  2002,  the  Compensation  Committee  of the  Board  of
Directors awarded each executive  officer a $13,000 bonus,  payable in shares of
the Company's  restricted  common stock. Each executive officer received 500,000
restricted shares of common stock valued at $0.026 per share.


ITEM 13. EXHIBITS AND FINANCIAL STATEMENTS


Exhibits
           See List of Exhibits filed as part of this Report on Form 10-KSB.

The financial statements listed below appear immediately after page 42.

Report of Independent Registered Public Accounting Firm              F-1
Financial Statements
         Balance Sheet                                               F-2
         Statement Of Operations                                     F-3
         Statement Of Stockholders' Equity                           F-4
         Statement Of Cash Flows                                     F-5
         Notes To Financial Statements                        F-6 - F-22



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES



During  2004 and  2003,  we paid the  following  fees,  including  out of pocket
expense reimbursements, to Rubin, Brown, Gornstein & Co. LLP:

                                       40

<PAGE>




                                                  2004                 2003
                                                  ----                 ----
       Audit Fees                            $ 108,358              $55,265

       Audit-Related Fees (1)                   24,450                7,000

       Tax Fees (2)                              9,250                6,200

       All Other Fees (3)                           --               20,600

       Total                                 $ 142,058             $ 89,065


         (1)  Audited-related  fees include  consultation  concerning  financial
         accounting and reporting standards and acquisitions, and work performed
         in connection with registration statements filed with the SEC.

         (2) Tax Fees include tax planning and  compliance for federal and state
         income taxes.

         (3) All Other Fees represents a manufacturing  process review conducted
         in 2003.

WindsorTech,  Inc.'s Audit Committee approves the engagement of an accountant to
render  all  audit  and  non-audit  services  prior  to  the  engagement  of the
accountant  based upon a proposal by the  accountant of estimated fees and scope
of the engagement.  WindsorTech, Inc.'s Audit Committee has received the written
disclosure  and the letter from Rubin,  Brown,  Gornstein & Co. LLP  required by
Independence  Standards  Board  Standard No. 1, as currently in effect,  and has
discussed with Rubin, Brown, Gornstein & Co. LLP their independence.

SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
Registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                               WINDSORTECH, INC.
                               (Registrant)

Dated:   March 28, 2005        By:                  /s/ MARC SHERMAN
                                     -------------------------------------------
                                                      Marc Sherman
                                                 Chief Executive Officer

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  Registrant and in the capacities and
on the dates indicated.

<TABLE>
<CAPTION>
<S>                                       <C>                                              <C>

               Signature                                 Title                                  Date
               ---------                                 -----                                  ----
           /s/ MARC SHERMAN                  Chairman of the Board, Chief                  March 28, 2005
---------------------------------------     Executive Officer and President
            (Marc Sherman)

        /s/ EDWARD L. CUMMINGS            Vice President, Treasurer and Chief              March 28, 2005
---------------------------------------      Financial Officer (Principal
          Edward L. Cummings                Financial Officer and Principal
                                                  Accounting Officer)

                                       41

<PAGE>


         /s/ SETH A. GROSSMAN                          Director                            March 28, 2005
---------------------------------------
           Seth A. Grossman

         /s/ R. KEITH ELLIOTT                          Director                            March 28, 2005
---------------------------------------
           R. Keith Elliott

      /s/ ROBERT W. VANHELLEMONT                       Director                            March 28, 2005
---------------------------------------
        Robert W. VanHellemont
</TABLE>


                                       42

<PAGE>


LIST OF EXHIBITS

Exhibit
Number    Description
--------  ----------------------------------------------------------------------

2.1       Agreement and Plan of Merger by and between  WindsorTech,  Inc., Delta
          States Oil,  Inc. and Alfred D. Morgan,  Ph. D dated  January 29, 2002
          (incorporated  herein by reference to Exhibit 99.1 to the Registrant's
          Current  Report on Form 8-K filed with the  Commission on February 13,
          2002 (Commission file number 000-07539)).

2.2       Agreement and plan of Merger by and among Windsortech,  Inc., Qualtech
          International  Corporation and Qualtech Service Group,  Inc. dated May
          1, 2004.

3.1       Certificate   of  Amendment  of  Certificate   of   Incorporation   of
          WindsorTech, Inc. **

3.2       Amended and Restated ByLaws of WindsorTech,  Inc. (Incorporated herein
          reference to Exhibit 3.2 to the Registrant's  Quarterly Report on Form
          10-QSB filed with the Commission on August 19, 2002  (Commission  file
          number 000-07539)).

3.3       Action by Consent in Writing of a Majority of  Stockholders  dated May
          19, 2004 concerning Amended and Restated By Laws.

3.4       Action by  Consent in Writing  of a  Majority  of  Stockholders  dated
          September 17, 2004 increasing the number of shares of the Corporation

4.1       Specimen Common Stock Certificate of WindsorTech,  Inc.  (Incorporated
          herein reference to Exhibit 4.1 to the  Registrant's  Quarterly Report
          on  Form  10-QSB  filed  with  the   Commission  on  August  19,  2002
          (Commission file number 000-07539)).

4.2       Form  of  Stock  Purchase  Agreements  with  Barron  Partners,   L.P.,
          Guerrilla Capital, and Odin Partners et al. dated May 26, 2004.

4.3       Form of Registration  Rights  Agreements with Barron  Partners,  L.P.,
          Guerrilla Capital, and Odin Partners et al. dated May 26, 2004.

4.4       Form of Common Stock Purchase Warrant at $1.50 per share dated May 28,
          2004.

4.5       Form of Common Stock Purchase Warrant at $3.60 per share dated May 28,
          2004

4.6       Form of Registration Rights Agreement with Joel Owens and Jolene Owens
          dated May 1, 2004.

10.1*     Employment and Non-Compete Agreement - Edward L. Cummings ***

10.2*     Employment and Non-Compete Agreement - David A. Loppert **

10.3*     Employment and Non-Compete Agreement - Carl C. Saracino **

10.4*     Employment and Non-Compete Agreement - Michael P. Sheerr **

10.5*     Employment and Non-Compete Agreement - Marc Sherman ***

10.6*     2002 Flexible  Stock Plan  (Incorporated  herein  reference to Exhibit
          10.6 to the  Registrant's  Quarterly  Report on Form 10-QSB filed with
          the Commission on April 16, 2002 (Commission file number 000-07539)).

10.7      Promissory  Note  executed by the  Company.  As of April 24, 2002 this
          note was paid in full  (Incorporated  herein reference to Exhibit 10.7
          to the  Registrant's  Quarterly  Report on Form 10-QSB  filed with the
          Commission on August 19, 2002 (Commission file number 000-07539)).

                                       43

<PAGE>

10.8      Loan Agreement by and among Marc Sherman, Edward L. Cummings, David A.
          Loppert, Carl C. Saracino, Michael P. Sheerr and WindsorTech, Inc., on
          and as of April 24, 2002  (Incorporated  herein  reference  to Exhibit
          10.8 to the  Registrant's  Quarterly  Report on Form 10-QSB filed with
          the Commission on August 19, 2002 (Commission file number 000-07539)).

10.9      Lease Agreement  (Incorporated herein reference to Exhibit 10.9 to the
          Registrant's Quarterly Report on Form 10-QSB filed with the Commission
          on August 19, 2002 (Commission file number 000-07539)).

10.10     Amendment  to Loan  Agreement  by and among  Marc  Sherman,  Edward L.
          Cummings,  David A. Loppert,  Carl C. Saracino,  Michael P. Sheerr and
          WindsorTech,  Inc.,  on and as of  September  30,  2002  (Incorporated
          herein reference to Exhibit 10.10 to the Registrant's Quarterly Report
          on Form  10-QSB  filed  with  the  Commission  on  November  11,  2002
          (Commission file number 000-07539)).

10.11     Second  Amendment to Loan Agreement by and among Marc Sherman,  Edward
          L. Cummings, David A. Loppert, Carl C. Saracino, Michael P. Sheerr and
          WindsorTech, Inc., on and as of February 28, 2003 (Incorporated herein
          reference to Exhibit  10.11 to the  Registrant's  Quarterly  Report on
          Form 10-QSB filed with the Commission on May 13, 2003 (Commission file
          number 000-07539)).

10.12     Employment and Non-Compete Agreement - Joel L. Owens

10.13***  Third Amendment to Loan Agreement by and among Marc Sherman, Edward L.
          Cummings, Carl C. Saracino,  Michael P. Sheerr and WindsorTech,  Inc.,
          on and as of March 29, 2004.

12.1***   Statement re computation of ratios.

16.1      Letter from Milton Reece, CPA ("Reece") concurring with the statements
          made by the  Registrant  in the Current  Report on Form 8-K  reporting
          Reece's   resignation  as  the   Registrant's   principal   accountant
          (incorporated  herein by reference  to Exhibit 16 to the  Registrant's
          Current  Report on Form 8-K filed with the  Commission on February 13,
          2002 (Commission file number 000-07539)).

23.1***   Consent of Rubin, Brown, Gornstein & Co. LLP

31.1***   CEO Certification

31.2***   CFO Certification

32.1***   Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002.

----------------
*      Management contract or compensatory plan.
**   Incorporated  herein  by  reference  to the same  numbered  exhibit  in the
     Registrant's  Transition Report on Form 10-KSB filed with the Commission on
     April 1, 2002 (Commission file number 000-07539).
***  Attached hereto.

There are no other  documents  required to be filed as an Exhibit as required by
Item 601(a) of Regulation S-B.

                                       44

<PAGE>





Contents
--------------------------------------------------------------------------------
                                                                            Page

Report of Independent Registered Public
    Accounting Firm..........................................................F-1


Financial Statements

    Consolidated Balance Sheets..............................................F-2

    Consolidated Statements Of Operations....................................F-3

    Consolidated Statements Of Stockholders' Equity..........................F-4

    Consolidated Statements Of Cash Flows....................................F-5

    Notes To Consolidated Financial Statements........................F-6 - F-29


<PAGE>

                     Report Of Independent Registered Public
                                 Accounting Firm


Board of Directors and Stockholders
Windsortech, Inc.
Hightstown, New Jersey


We have audited the  accompanying  consolidated  balance sheets of  Windsortech,
Inc.  and  subsidiaries  as of  December  31,  2004  and  2003  and the  related
consolidated  statements of operations,  stockholders' equity and cash flows for
the years then ended.  These financial  statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Windsortech,  Inc.  and  subsidiaries  as of December  31, 2004 and 2003 and the
results of their  operations  and their cash flows for the years then ended,  in
conformity with accounting principles generally accepted in the United States of
America.

/s/ Rubin, Brown, Gornstein & Co. LLP
-------------------------------------
St. Louis, Missouri
January 28, 2005

                                                                        Page F-1

<PAGE>

                       WINDSORTECH, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
                           CONSOLIDATED BALANCE SHEETS
                 For The Years Ended December 31, 2004 And 2003


<TABLE>
<CAPTION>
<S>                                                                                <C>                 <C>

                                     Assets
                                                                                               December 31,
                                                                                  ---------------------------------------
                                                                                               2004                2003
                                                                                  ---------------------------------------
Current Assets
 Cash and cash equivalents                                                         $        844,939    $        270,155
 Accounts receivable, net of reserve of $50,000
  and $20,000 in 2004 and 2003, respectively                                              3,612,530             223,326
 Accounts receivable - related party                                                        119,046              37,173
 Inventories                                                                              2,721,505             358,380
 Prepaid expenses and other assets                                                          165,741              46,906
 Deferred income taxes                                                                       67,511              14,528
-------------------------------------------------------------------------------------------------------------------------
   Total Current Assets                                                                   7,531,272             950,468

Property And Equipment, Net                                                                 552,560             263,187

Goodwill                                                                                  1,980,443                  --

Intangibles, Net                                                                          3,188,896                  --

Deferred Income Taxes                                                                       127,799             112,492

Other Assets                                                                                 89,843              64,851
-------------------------------------------------------------------------------------------------------------------------

                                                                                   $     13,470,813    $      1,390,998
=========================================================================================================================

                                           Liabilities And Stockholders' Equity
Current Liabilities
 Current maturities of notes payable                                               $        603,376    $          7,555
 Revolving lines of credit                                                                1,155,500               7,192
 Accounts payable                                                                         1,590,928             268,958
 Accrued expenses                                                                           265,391             152,796
 Accrued payroll - principal stockholders                                                    86,724             277,075
 Deferred revenue                                                                           346,031                  --
 Other current liabilities                                                                  123,481                  --
-------------------------------------------------------------------------------------------------------------------------
   Total Current Liabilities                                                              4,171,431             713,576

Notes Payable                                                                               255,000             503,403
-------------------------------------------------------------------------------------------------------------------------

   Total Liabilities                                                                      4,426,431           1,216,979
-------------------------------------------------------------------------------------------------------------------------

Commitments And Contingencies (Note 12)

Stockholders' Equity
 Preferred shares: authorized 5,000,000 in 2004
  and 2003, $0.01 par value, none issued                                                         --                 --
 Common shares: authorized 55,000,000 in 2004 and 35,000,000 in 2003,
  $0.01 par value; 25,550,007 shares issued and outstanding
  in 2004 and 16,468,754 issued and outstanding in 2003                                     255,500            164,688
 Additional paid-in capital                                                               9,421,356            774,599
 Retained earnings (deficit)                                                               (632,474)          (765,268)
-------------------------------------------------------------------------------------------------------------------------
   Total Stockholders' Equity                                                             9,044,382            174,019
-------------------------------------------------------------------------------------------------------------------------

                                                                                   $     13,470,813    $     1,390,998
=========================================================================================================================
</TABLE>


See the accompanying notes to consolidated financial statements.

                                                                        Page F-2

<PAGE>

                       WINDSORTECH, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
<S>                                                                                <C>                  <C>
                                                                                              For The Years
                                                                                            Ended December 31,
                                                                                  ---------------------------------------
                                                                                                2004                2003
                                                                                  ---------------------------------------

Revenue                                                                            $      22,079,796    $      7,484,472

Cost Of Sales                                                                             16,651,383           5,492,061
-------------------------------------------------------------------------------------------------------------------------

Gross Profit                                                                               5,428,413           1,992,411

Selling, General And Administrative Expenses                                               4,835,565           1,988,091

Depreciation And Amortization                                                                391,672              71,973

Interest Expense, Net                                                                         83,307              79,656
-------------------------------------------------------------------------------------------------------------------------

Income (Loss) Before Provision (Benefit) For Income Taxes                                    117,869            (147,309)

Provision (Benefit) For Income Taxes                                                         (14,925)              1,900
-------------------------------------------------------------------------------------------------------------------------

Net Income (Loss)                                                                  $         132,794    $       (149,209)
=========================================================================================================================

Net Income (Loss) Per Common Share - Basic                                         $            0.01    $          (0.01)
=========================================================================================================================

Net Income (Loss) Per Common Share - Diluted                                       $            0.01    $          (0.01)
=========================================================================================================================

Weighted Average Number of Common Shares
 Outstanding - Basic                                                                      24,659,853          15,661,593
=========================================================================================================================

Weighted Average Number of Common Shares
 Outstanding - Diluted                                                                    27,944,181          15,661,593
=========================================================================================================================
</TABLE>

--------------------------------------------------------------------------------

See the accompanying notes to consolidated financial statements.

                                                                        Page F-3


<PAGE>

                       WINDSORTECH, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 For The Years Ended December 31, 2004 And 2003

<TABLE>
<CAPTION>
<S>               <C>                          <C>             <C>             <C>                 <C>                <C>

                                                                                                                           Total
                                                     Common Stock                  Additional         Retained       Stockholders'
                                          -------------------------------            Paid-In         Earnings              Equity
                                                   Shares         Amount             Capital         (Deficit)           (Deficit)
                                          ----------------------------------------------------------------------------------------

Balance - January 1, 2003                      14,914,168      $ 149,142       $   176,648         $  (616,059)       $   (290,269)

Common Stock Issued                             1,554,586         15,546           481,951                  --             497,497

Common Stock Warrants Issued                           --             --           116,000                  --             116,000

Net Loss                                               --             --                --            (149,209)           (149,209)
----------------------------------------------------------------------------------------------------------------------------------

Balance - December 31, 2003                    16,468,754        164,688           774,599            (765,268)            174,019

Common Stock Issued                             7,957,831         79,578         4,946,811                  --           5,026,389

Common Stock Warrants Issued                           --             --         1,521,261                  --           1,521,261

Exercise of Stock Options                         500,000          5,000           894,050                  --             899,050

Tax Effect Of Exercise of Stock Options                --             --            42,003                  --              42,003

Exercise of Stock Warrants                        500,000          5,000           745,000                  --             750,000

Stock Option Compensation                              --             --           289,666                  --             289,666

Shares Issued for Services                        123,422          1,234           207,966                  --             209,200

Net Income                                             --             --                --             132,794             132,794
----------------------------------------------------------------------------------------------------------------------------------

Balance - December 31, 2004                    25,550,007      $ 255,500       $ 9,421,356         $  (632,474)       $  9,044,382
==================================================================================================================================
</TABLE>


--------------------------------------------------------------------------------
See the accompanying notes to consolidated financial statements.

                                                                        Page F-4


<PAGE>


                       WINDSORTECH, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
<S>                                                                                         <C>              <C>
                                                                                              For The Years
                                                                                            Ended December 31,
                                                                                  ---------------------------------------
                                                                                                2004                2003
                                                                                  ---------------------------------------
Cash flows from operating activities
 Net income (loss)                                                                          $   132,794      $  (149,209)
 Adjustments to reconcile net income (loss) to net cash provided
  by (used in) operating activities:
   Depreciation and amortization                                                                391,672           71,973
   Stock option compensation expense                                                            289,666               --
   Deferred income taxes                                                                        (60,583)              --
   Common stock issued for services                                                             209,200               --
   Stock warrants issued for services                                                                --           60,000
   Change in assets and liabilities:
    Accounts receivable                                                                      (2,177,369)        (235,502)
    Inventories                                                                              (1,538,500)          68,760
    Prepaid expenses and other current assets                                                  (104,125)          47,143
    Other assets                                                                                 (2,512)          (1,250)
    Accounts payable and accrued expenses                                                       714,261          323,785
-------------------------------------------------------------------------------------------------------------------------
Net Cash Provided By (Used In) Operating Activities                                          (2,145,496)         185,700
-------------------------------------------------------------------------------------------------------------------------

Cash Flows From Investing Activities
 Payments for patent and trademark                                                               (3,010)         (24,216)
 Acquisition of business, net of cash acquired                                               (3,005,375)              --
 Purchases of property and equipment                                                           (206,111)         (88,142)
-------------------------------------------------------------------------------------------------------------------------
Net Cash Used In Investing Activities                                                        (3,214,496)        (112,358)
-------------------------------------------------------------------------------------------------------------------------

Cash Flows From Financing Activities
 Proceeds from the issuance of common stock and warrants                                      3,300,000          493,997
 Stock warrants exercised                                                                       750,000               --
 Stock options exercised                                                                        899,050               --
 Net amounts borrowed (paid) under revolving lines of credit                                    638,308         (333,828)
 Amounts borrowed - notes payable                                                               500,000               --
 Principal payments - notes payable                                                            (152,582)         (17,739)
-------------------------------------------------------------------------------------------------------------------------
Net Cash Provided By Financing Activities                                                     5,934,776          142,430
-------------------------------------------------------------------------------------------------------------------------

Net Increase In Cash And Cash Equivalents                                                       574,784          215,772

Cash And Cash Equivalents - Beginning Of Year                                                   270,155           54,383
-------------------------------------------------------------------------------------------------------------------------

Cash And Cash Equivalents - End Of Year                                                     $   844,939      $   270,155
=========================================================================================================================

Supplemental Disclosure Of Cash Flow Information
 Income taxes paid (refunds received)                                                       $       550      $   (70,800)
 Interest paid                                                                                   58,561          114,980
-------------------------------------------------------------------------------------------------------------------------
 Supplemental Cash Flow Information (Note 14)
-------------------------------------------------------------------------------------------------------------------------
</TABLE>


--------------------------------------------------------------------------------
See the accompanying notes to consolidated financial statements.


                                                                        Page F-5


<PAGE>



                       WINDSORTECH, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2004 And 2003


1.       Summary Of Significant Accounting Policies

         Business Organization

         The  Company is a  technology  services  company and its  products  are
         geared towards both the users of business-computing hardware (desktops,
         laptops,  related  peripherals  and  servers)  as well as the  users of
         enterprise-class  hardware  (mainframes,   midrange  processors,  large
         storage,  controllers,  etc.).  The Company  offers  data  destruction,
         regulatory  compliance  services and remarketing  services for IT asset
         management.

         The Company purchases its products from a variety of sources, including
         Fortune 1000 companies,  as well as leasing and finance companies,  and
         re-sells  a wide  range of used  and  refurbished  products,  including
         mainframe   processors   and   associated   tape  and  disk   products,
         connectivity   products,   midrange  processors,   laptop  and  desktop
         computers,  monitors,  processors, CD/DVD disk drives, modems, printers
         and  memory.  Only  mainframe  and  associated   peripherals  that  are
         manufactured  by IBM are  remarketed.  The majority of the PC computers
         the  Company  sells are brand name Intel  Pentium-class  or  equivalent
         products  manufactured  by IBM, Dell,  Compaq,  Apple,  Sony,  Fujitsu,
         Hewlett-Packard, Gateway, Toshiba and other major manufacturers.

         On  May  28,  2004,  the  Company  purchased   QualTech   International
         Corporation and QualTech Services Group,  Inc.  QualTech  International
         Corporation   sells  refurbished  IBM  mainframes  and  associated  IBM
         peripherals to companies  around the world.  QualTech  Services  Group,
         Inc. provides hardware  maintenance  solutions and information  systems
         consulting services to businesses in the United States.

         The Company has office and warehouse  space in Hightstown,  New Jersey,
         and Eagan,  Minnesota,  and  satellite  sales and business  development
         offices  in  California,  Colorado,  Connecticut,  Illinois,  New York,
         Texas, Florida, Michigan and Wyoming.

         Principles Of Consolidation

         The  financial  statements  include the accounts of the Company and its
         wholly owned subsidiaries.  All significant  inter-company accounts and
         transactions have been eliminated in consolidation.

--------------------------------------------------------------------------------
                                                                        Page F-6


<PAGE>

WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements


         Estimates

         The  preparation of financial  statements in conformity with accounting
         principles  generally accepted in the United States of America requires
         management to make estimates and  assumptions  that affect the reported
         amounts of assets and liabilities  and disclosure of contingent  assets
         and  liabilities  at the  date  of the  financial  statements  and  the
         reported amounts of revenues and expenses during the reporting  period.
         Actual results could differ from those estimates.


         Revenue Recognition

         For product sales, the Company  recognizes revenue at the time products
         are shipped and title is  transferred,  which is in accordance with the
         stated shipping  terms.  Revenue is recognized in accordance with these
         shipping  terms so long as a  purchase  order,  electronic,  written or
         phone  commitment  has been  received or a contract has been  executed,
         there are no uncertainties  regarding  customer  acceptance,  the sales
         price is fixed and determinable and  collectibility is deemed probable.
         If uncertainties exist regarding customer acceptance or collectibility,
         revenue is recognized when those uncertainties have been resolved.  The
         Company  provides  a  limited  warranty  on some of its  products.  The
         Company analyzes its estimated warranty costs and provides an allowance
         as  necessary,  based on  experience.  At December 31, 2004 and 2003, a
         warranty reserve was not considered necessary.


         Asset  management  fees are  recognized  once the  services  have  been
         performed   and  the  results   reported   to  the  client.   In  those
         circumstances  where the Company disposes of the client's  product,  or
         purchases the product from the client for resale, revenue is recognized
         as a "product sale" described above.

         Maintenance  service  revenue  is  recognized  when  the  services  are
         performed in accordance with the service agreement. Any prepaid service
         contracts are deferred and  recognized  over the term of the applicable
         agreements on a straight-line basis.

         Cash And Cash Equivalents

         The Company considers all liquid instruments purchased with maturity of
         three months or less to be cash equivalents.

--------------------------------------------------------------------------------
                                                                        Page F-7


<PAGE>


WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements


         Accounts Receivable

         Accounts  receivable  are  stated at the amount  management  expects to
         collect from  outstanding  balances.  Management  provides for probable
         uncollectible  amounts  through a charge to earnings  and a credit to a
         valuation  allowance  based on its  assessment of the current status of
         individual   accounts.   Balances  that  are  still  outstanding  after
         management  has used  reasonable  collection  efforts  are  written off
         through  a charge  to the  valuation  allowance  and a credit  to trade
         accounts receivable.

         Inventories

         Inventories  consist primarily of computer hardware,  parts and related
         products,  and are  valued  at the  lower of  average  cost or  market.
         Substantially  all  inventory  items are  finished  goods.  The Company
         closely monitors and analyzes inventory for potential  obsolescence and
         slow-moving items on an item-by-item basis.  Inventory items determined
         to be  obsolete or slow  moving are  reduced to net  realizable  value.
         Inventory  in-transit  consists  of items of  inventory  for  which the
         Company has purchased  and assumed the risk of loss,  but which has not
         yet been received into stock at the Company's facility.

         Property And Equipment

         Property  and  equipment  is  stated  at  cost,   net  of   accumulated
         depreciation.  Expenditures  for  maintenance  and  repairs are charged
         against  operations as incurred.  Upon  retirement or sale,  any assets
         disposed are removed from the accounts and any  resulting  gain or loss
         is reflected in the results of operations.

         Property,  equipment,  leasehold  improvements,  computer  hardware and
         software are  depreciated or amortized using the  straight-line  method
         over two to five-year  periods.  Capitalized  values of property  under
         leases are amortized  over the life of the lease or the estimated  life
         of the asset, whichever is less.

         Impairment  losses  on  long-lived   assets,   such  as  equipment  and
         improvements,  are recognized  when events or changes in  circumstances
         indicate that the undiscounted  cash flows estimated to be generated by
         such assets are less than their carrying value and, accordingly, all or
         a portion of such  carrying  value may not be  recoverable.  Impairment
         losses are then measured by comparing the fair value of assets to their
         carrying amounts.


--------------------------------------------------------------------------------
                                                                        Page F-8


<PAGE>

WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements


         Deposits

         Deposits principally consist of the lease deposit for the Company's New
         Jersey  facility.  This deposit is refundable at the  expiration of the
         lease.  Since the lease term extends  beyond 12 months,  the deposit is
         classified as a long-term asset in other assets on the balance sheet.

         Advertising Costs

         Advertising  costs are  expensed  on the first  date the  advertisement
         takes  place.  Advertising  expense  amounted  to  $184,163 in 2004 and
         $14,784 in 2003.

         Income Taxes

         Deferred tax assets and  liabilities  are recognized for the future tax
         consequences  attributable  to the  differences  between the  financial
         statement carrying amounts of existing assets and liabilities and their
         respective tax bases.  Deferred tax assets and liabilities are measured
         using  enacted  tax rates  expected  to apply to taxable  income in the
         years in which those temporary differences are expected to be recovered
         or settled.  The effect on  deferred  tax assets and  liabilities  of a
         change in tax rates is recognized in income in the period that includes
         the  enactment  date.  A valuation  allowance  is provided  against net
         deferred tax assets  where the Company  determines  realization  is not
         currently judged to be more likely than not.

         Earnings (Loss) Per Share

         Basic  earnings  (loss)  per  share  is  computed  on the  basis of the
         weighted average number of common share  outstanding.  Diluted earnings
         per share is computed on the basis of the  weighted  average  number of
         common  shares  outstanding  plus the effect of all dilutive  potential
         common shares that were outstanding during the period.


--------------------------------------------------------------------------------
                                                                        Page F-9

<PAGE>


WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements


         The following  table presents the  computation of basic and diluted net
income (loss) per share:

<TABLE>
<CAPTION>
<S>                                                                                <C>               <C>

                                                                                          2004                2003
                                                                             ------------------ --------------------

           Net income (loss)                                                       $   132,794       $    (149,209)
           ================================================================= ================== ====================

           Determination of basic and diluted shares:
               Basic weighted average shares outstanding                            24,659,853           15,661,593
               Effect of dilutive securities:
                    Stock options                                                    1,978,028                   --
                    Warrants                                                         1,306,300                   --
           ----------------------------------------------------------------- ------------------ --------------------

           Diluted weighted average shares outstanding                              27,944,181           15,661,593
           ================================================================= ================== ====================

           Net Income (Loss) Per Common Share - Basic                              $      0.01       $       (0.01)
           ================================================================= ================== ====================

           Net Income (Loss) Per Common Share - Diluted                            $      0.01       $       (0.01)
           ================================================================= ================== ====================
</TABLE>

         In 2003, the Company  excluded  420,869  weighted  average common share
         equivalents  related to stock  options  and  106,775  weighted  average
         common share equivalents related to stock warrants because their effect
         would have been anti-dilutive.

         Fair Value Of Financial Instruments

         The carrying amounts of financial  instruments  including cash and cash
         equivalents,  accounts receivable and accounts payable approximate fair
         value due to the relatively  short maturity of these  instruments.  The
         carrying  value of the notes  payable  and capital  lease  obligations,
         including  the  current  portion,  approximate  fair value based on the
         incremental  borrowing  rates  currently  available  to the Company for
         financing with similar terms and maturities.


         Stock-Based Compensation

         The Company accounts for stock-based employee compensation arrangements
         in accordance with the provisions of Accounting  Principles Board (APB)
         Opinion No. 25, Accounting for Stock Issued to Employees,  and complies
         with the  disclosure  provisions  of Statement of Financial  Accounting
         Standards  (SFAS) No. 123,  Accounting  for  Stock-Based  Compensation.
         Under APB  Opinion No. 25,  compensation  cost is  recognized  over the
         vesting  period based on the  difference,  if any, on the date of grant
         between  the fair  value  of the  Company's  stock  and the  amount  an
         employee must pay to acquire the stock.

--------------------------------------------------------------------------------
                                                                       Page F-10

<PAGE>


WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements


         Had compensation cost for these plans been determined based on the fair
         value at the grant dates for awards under these plans,  consistent with
         the  alternative  method set forth  under SFAS No. 123,  the  Company's
         expenses  for the years  ended  December  31,  2004 and 2003 would have
         increased. The pro forma amounts are indicated below:


         <TABLE>
         <CAPTION>
         <S>                                                         <C>                    <C>

                                                                               2004               2003
                                                                  ---------------------------------------

         Net income (loss), as reported                              $      132,794         $ (149,209)
         Add:  Stock-based employee compensation
            expense included in reported net income
            (loss), net of related tax effects                              176,696                  --
         Deduct:  Total stock-based employee
            compensation expense determined under
            fair value based method for all awards, net
            of related tax effects                                       (6,567,287)          (379,426)
         ------------------------------------------------------------------------------------------------
         Proforma net income (loss)                                  $   (6,257,797)        $ (528,635)
         ================================================================================================
         Earnings (loss) per share:
            Basic - as reported                                             $  0.01            $ (0.01)
            Diluted - as reported                                           $  0.01            $ (0.01)
         ------------------------------------------------------------------------------------------------
            Basic - Proforma                                                $ (0.22)           $ (0.03)
            Diluted - Proforma                                              $ (0.22)           $ (0.03)

         </TABLE>



         The  weighted  average per share fair value of the options  granted was
         $1.25  and  $1.58  for the  years  ended  December  31,  2004 and 2003,
         respectively. The fair value of each option granted is estimated on the
         date of grant  using the  Black-Scholes  option-pricing  model with the
         following weighted-average assumptions:

                                                     2004               2003
                                       ----------------------------------------
         Risk-free interest rates                    3.69%              3.15%
         Expected option lives                     5 years            5 years
         Expected volatilities                        101%               117%
         Expected dividend yields                       0%                 0%

--------------------------------------------------------------------------------
                                                                       Page F-11

<PAGE>

WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements


         Impact Of Recently Issued Accounting Standards

         In May 2003,  the Financial  Accounting  Standards  Board (FASB) issued
         SFAS  No.  150,  Accounting  for  Certain  Financial  Instruments  with
         Characteristics   of  Both   Liabilities  and  Equity.   SFAS  No.  150
         establishes standards for how an issuer classifies and measures certain
         financial  instruments  with  characteristics  of both  liabilities and
         equity. It requires that an issuer classify a financial instrument that
         is within its scope as a liability (or an asset in some circumstances).
         Many of those  instruments were previously  classified as equity.  SFAS
         No. 150 is effective for financial instruments entered into or modified
         after May 31, 2003,  and otherwise is effective at the beginning of the
         first  interim  period  beginning  after  June  15,  2003.  It is to be
         implemented  by  reporting  the  cumulative   effect  of  a  change  in
         accounting  principle  for  financial  instruments  created  before the
         issuance date of the  statement and still  existing at the beginning of
         the interim  period of  adoption.  Restatement  is not  permitted.  The
         Company  adopted the provisions of SFAS No. 150 effective July 1, 2003,
         which had no impact on the Company's  financial  position or results of
         operations.

         In  November  2002,  the  FASB  issued  Interpretation  (FIN)  No.  45,
         Guarantor's  Accounting and  Disclosure  Requirements  for  Guarantees,
         Including   Indirect   Guarantees  of  Indebtedness  of  Others.   This
         interpretation  elaborates on the disclosures to be made by a guarantor
         in  its  financial  statements  about  its  obligations  under  certain
         guarantees  that it has issued.  It also  clarifies that a guarantor is
         required to recognize, at the inception of a guarantee, a liability for
         the fair value of the  obligation  undertaken in issuing the guarantee.
         The Company adopted this interpretation in 2003, which had no impact on
         the Company's financial position or results of operations.

         In December 2003,  the FASB issued No. 46 (revised  December 2003) (FIN
         46R),  Consolidation of Variable Interest Entities, which addresses how
         a business  enterprise  should  evaluate  whether it has a  controlling
         financial  interest in an entity through means other than voting rights
         and accordingly should consolidate the entity. FIN 46R replaces FIN No.
         46,  Consolidation of Variable Interest  Entities,  which was issued in
         January 2003. The Company will be required to apply FIN 46R to variable
         interests in variable  interest  entities (VIEs) created after December
         31,  2003.  For any VIEs that must be  consolidated  under FIN 46R that
         were  created  before  January 1, 2004,  the  assets,  liabilities  and
         noncontrolling  interests  of the VIE  initially  would be  measured at
         their carrying amounts with any difference between the net amount added
         to the  balance  sheet and any  previously  recognized  interest  being
         recognized  as  the  cumulative  effect  of an  accounting  change.  If
         determining the carrying amounts is not practicable,  fair value at the
         date  FIN  46R  first  applies  may be  used  to  measure  the  assets,
         liabilities  and  noncontrolling  interest of the VIE.  The adoption of
         this  standard  had no impact on the  Company's  financial  position or
         results of operations.

--------------------------------------------------------------------------------
                                                                       Page F-12

<PAGE>

WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements


         In December 2004, the FASB issued SFAS No. 123R,  Share-Based  Payment.
         SFAS  No.  123R  requires   measurement  of  all  employee  stock-based
         compensation awards using a fair value method and the recording of such
         expense in the  consolidated  financial  statements.  In addition,  the
         adoption of SFAS No. 123R will require additional accounting related to
         the income tax effects and  additional  disclosure  regarding  the cash
         flow effects resulting from share-based payment arrangements.  SFAS No.
         123R is  effective  for the  Company  beginning  January 1,  2006.  The
         Company  currently  plans to adopt  SFAS No.  123R  using the  modified
         prospective  method.  The Company is currently  assessing the impact of
         the adoption of SFAS No. 123R to its results of  operations,  financial
         condition and compensation strategies.


2.       Inventories

                                                           2004            2003
                                              ----------------------------------
         Finished goods                             $ 2,546,733       $ 276,794
         Inventory in transit                           189,772          96,586
         Allowance for excess and obsolescence          (15,000)        (15,000)
         -----------------------------------------------------------------------
                                                    $ 2,721,505       $ 358,380
         =======================================================================


3.       Property And Equipment
                                                           2004            2003
                                              ----------------------------------
         Furniture and fixtures                     $    89,786       $  15,759
         Equipment                                      417,537         161,495
         Leasehold improvements                          31,859           7,427
         Computer equipment and software                286,061         157,237
         -----------------------------------------------------------------------
                                                        825,243         341,918
         Less:  Accumulated depreciation               (272,683)        (93,326)
         -----------------------------------------------------------------------
                                                        552,560         248,592
         Construction in progress                            --          14,595
         -----------------------------------------------------------------------
                                                    $   552,560       $ 263,187
         =======================================================================

         At December 31, 2004 and 2003, equipment includes assets acquired under
         capital lease obligations in the amount of $32,135. Related accumulated
         depreciation  amounted to $ 17,723 and $11,291 at December 31, 2004 and
         2003, respectively.  Amortization expense of these assets under capital
         leases is included in depreciation expense.

--------------------------------------------------------------------------------
                                                                       Page F-13


<PAGE>

WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements


         Depreciation and  amortization  charged against income for all property
         and  equipment  amounted  to  $179,357  and $71,771 for the years ended
         December 31, 2004 and 2003, respectively.

4.       Business Acquisitions

         In  May  2004,  the  Company  completed  the  purchase  of  all  of the
         outstanding  shares  of  QualTech  International  Corporation  and  its
         affiliate,  QualTech Services Group, Inc.,  (collectively  "QualTech").
         QualTech   International   Corporation  is  a  worldwide  re-seller  of
         refurbished  IBM mainframes and  associated IBM  peripherals.  QualTech
         Services  Group,  Inc.  provides  hardware  maintenance  solutions  and
         information  systems  consulting  services to  businesses in the United
         States.  The Company's  primary reasons for the acquisition of QualTech
         were to expand the  Company's  product  offerings to include  mainframe
         hardware  and  mainframe  hardware  services,  to acquire  an  existing
         Fortune 1000  customer  base to allow the Company to market its current
         product  offerings  to these  customers  and to acquire a leader in its
         industry  with talented  personnel to enhance the Company's  expertise.
         The  acquisition  was  accounted  for  using  the  purchase  method  of
         accounting, and the results of operations of the acquired companies are
         included from the effective acquisition date of May 1, 2004.

         The cost of the acquired  entities of $6,600,000  included  payments to
         QualTech's  shareholders of $6,500,000 of which  $3,250,000 was in cash
         and  $3,250,000  was in the Company's  common  stock.  The value of the
         Company's  stock was based on its average  market  value  several  days
         prior  to  the  acquisition.   Direct  acquisition  costs,   consisting
         primarily of legal fees, were $100,000.

         In addition to the initial  purchase  price  described  in the previous
         paragraph,  additional  contingent  consideration is payable,  based on
         QualTech meeting certain  objectives.  QualTech  shareholders  shall be
         entitled to receive 5.5 times the average  income after taxes,  for the
         two year  period  following  the  effective  date of the  merger,  that
         exceeds  $1,100,000.  A minimum of 50% of this  amount is to be paid in
         cash.  The  remainder  is to be paid in  Company  stock  or cash at the
         discretion of the Company. At the end of the first anniversary,  if the
         net income is less than $1,100,000, then no additional consideration is
         due.  Any  amounts  paid  under  this   agreement  will  be  considered
         additional purchase price.

--------------------------------------------------------------------------------
                                                                       Page F-14


<PAGE>

WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements

         The  allocation of the aggregate  purchase price was performed with the
         assistance  of  an  independent  valuation  firm.  The  purchase  price
         allocation  identified  $3,400,000  of  intangible  assets  other  than
         goodwill.  The goodwill  recognized  amounted to  $1,980,443.  Goodwill
         recorded in connection with this  acquisition  will not be amortized to
         expense,  but will be subject to  periodic  testing for  impairment  in
         accordance with SFAS No 142, Goodwill and Other Intangible Assets. None
         of this goodwill is expected to be deductible for tax purposes.

         The  fair  value  of the  net  assets  of  QualTech  as of the  date of
         acquisition is as follows:

         Cash                                                      $    345,281
         Accounts receivable                                          1,293,708
         Inventory                                                      824,625
         Fixed assets                                                   262,617
         Other assets                                                    35,393
         Intangible assets                                            3,400,000
         Goodwill                                                     1,980,443
         Accounts payable                                              (603,480)
         Accrued expenses                                              (129,927)
         Short-term debt                                               (510,000)
         Other liabilities                                             (298,660)
         -----------------------------------------------------------------------
                                                                   $ 6,600,000
         =======================================================================

         Unaudited Proforma Results

         The  following  unaudited  proforma  condensed  consolidated  financial
         information  for the  years  ended  December  31,  2004  and  2003,  is
         presented  to show the  results of the  Company  to give  effect to the
         acquisition of QualTech  International  Corporation  and its affiliate,
         QualTech Services Group, Inc., as if it had occurred on January 1, 2003
         and 2004. The proforma results include certain  adjustments,  including
         increased  amortization  related  to  intangible  assets  and  are  not
         necessarily  indicative  of what the  results  would  have been had the
         transactions actually occurred on those dates.

--------------------------------------------------------------------------------
                                                                       Page F-15

<PAGE>


WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements


                                                         2004            2003
                                              ---------------------------------
         Net revenue                             $ 30,890,968    $ 21,962,181
         Net income (loss)                            265,702         (159,341)
         Earnings (loss) per share - basic             $ 0.01          $ (0.01)
         Earnings (loss) per share - diluted           $ 0.01          $ (0.01)
         Weighted average shares - basic           24,602,246      23,619,424
         Weighted average shares - diluted         32,464,038      23,619,424


5.       Goodwill and Other Intangible Assets

         In accordance  with the SFAS No. 142, the Company is required to assess
         goodwill  and   indefinite-lived   intangible   assets  for  impairment
         annually,  or more frequently if circumstances  indicate impairment may
         have occurred.  The Company  performed an impairment test in the fourth
         quarter of 2004,  and has  determined  that the carrying  value of such
         assets were not impaired. At December 31, 2004, the balance of goodwill
         and intangible assets is as follows:

         Goodwill                                                $ 1,980,443
         Intangible assets with indefinite lives                     910,000
         Intangibles with definite lives                           2,278,896
         --------------------------------------------------- -------------------
                                                                 $ 5,169,339
         =================================================== ===================

         Intangibles  with indefinite  lives relate  principally to trade names.
         Intangibles with definite lives relate principally to the following:


<TABLE>
<CAPTION>
<S>                                 <C>                  <C>                  <C>           <C>                       <C>
                                                              2004          Accumulated                     Amortization
                                           Cost       Amortization         Amortization             Net      Life (years)
                                 --------------- -------------------- ------------------ --------------- -----------------

         Customer Lists             $ 1,640,000          $ 121,472            $ 121,472     $ 1,518,528               9.0
         Database                       400,000             29,632               29,632         370,368               9.0
         Employee Non-
             competes                   450,000             60,000               60,000         390,000               5.0
         ----------------------- --------------- -------------------- ------------------ --------------- -----------------
         Total                      $ 2,490,000          $ 211,104            $ 211,104     $ 2,278,896
         ======================= =============== ==================== ================== =============== =================
</TABLE>

         Amortization  of intangibles is computed on a  straight-line  basis and
         based on December 31, 2004 balances,  expected  amortization expense in
         each of the next five years is approximately $317,000 per year.

--------------------------------------------------------------------------------
                                                                       Page F-16

<PAGE>


WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements


6.       Other Assets

                                                       2004            2003
                                              --------------- -----------------

         Deposits                                  $ 63,341         $ 40,837
         Trademark                                    3,010               --
         Patent, net of amortization of
             $1,413 in 2004 and $202 in 2003         22,803           24,014
         Other                                          689               --
         ------------------------------------ --------------- -----------------
                                                   $ 89,843         $ 64,851
         ==================================== =============== =================

         The patent is being amortized over a 20-year life. Patent  amortization
         expense  in 2004  amounted  to  $1,211  and in 2003  amounted  to $202.
         Expected  amortization  expense  in  each of the  next  five  years  is
         approximately $1,211 per year.


7.       Financing Arrangements

<TABLE>
<CAPTION>
<S>                                                                         <C>                <C>

                  Notes payable consist of the following:
                                                                                2004               2003
                                                                  ---------------------------------------

         Notes   payable,   principal   stockholders,    secured   by
         substantially  all of the  Company's  assets,  with interest
         only  payments  at 12%  payable  monthly  in  arrears,  with
         $100,000 and $255,000 in principal and accrued  interest due
         and payable on January 31, 2005 and January 31, 2006,
         respectively.                                                     $ 355,000          $ 500,000

         Notes payable - stockholder, secured by substantially all of
         the Company's  assets,  with interest only payments at prime
         plus 2% (7.25% at  December  31,  2004)  payable  monthly in
         arrears, with $500,000 in principal
         and accrued interest due and payable on April 1, 2005.              500,000                 --

         Capital lease obligations                                             3,376             10,958
         ------------------------------------------------------------------------------------------------
                                                                             858,376            510,958
         Less current maturities                                             603,376              7,555
         ------------------------------------------------------------------------------------------------
                                                                           $ 255,000          $ 503,403
         ================================================================================================
</TABLE>

--------------------------------------------------------------------------------
                                                                       Page F-17


<PAGE>


WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements


         On April 24, 2002,  the Company  entered into a secured loan  agreement
         with its principal stockholders.  This agreement, as amended,  provides
         for each  principal  stockholder  to loan the Company  $110,000 (for an
         aggregate of $550,000). The loan agreement, as amended, provides, among
         other  standard and  customary  terms,  that when the Company  arranges
         permanent long or short-term financing, the principal stockholder loans
         will be  subordinate  to such  permanent  financing,  if  required.  At
         maturity,  and  at the  election  of the  principal  stockholders,  the
         Company shall repay such loans in cash or in a combination  of cash and
         shares of the Company's common stock,  with such common stock valued at
         the current  "market  value"  determined  by a  professional  valuation
         service.

         The Company has also entered into a secured loan  agreement with Barron
         Partners,  LP,  one  of  its  principal  stockholders.  This  agreement
         provides  for a  short-term  loan  to  the  Company  in the  amount  of
         $500,000,  due and payable on April 1, 2005. At December 31, 2004,  all
         interest due under this note had been paid.

         Both of these loans are collateralized by all of the Company's assets.

         Revolving Lines Of Credit

         The Company has entered  into  revolving  lines of credit with  certain
         principal stockholders in the aggregate of $500,000. Advances under the
         lines are at the discretion of such principal stockholders, and are due
         on demand. At December 31, 2004 and 2003, $0 and $7,192,  respectively,
         had been advanced.

         The  Company  has  two  revolving  line-of-credit  agreements  for  its
         QualTech  subsidiaries.  The first loan provides for borrowings limited
         to the lesser of  $750,000  or the  borrowing  base of 75% of  eligible
         accounts receivable plus 25% of inventories,  with eligible inventories
         not to exceed  $1,200,000.  Interest on this loan is payable monthly at
         the prime rate (5.25% at December 31,  2004),  with all  principal  due
         April 30,  2005.  Borrowings  under this loan  amounted  to $452,500 at
         December 31, 2004.

         The  second  loan  provides  for  borrowings  limited  to the lesser of
         $1,500,000 or the borrowing base of 75% of eligible accounts receivable
         plus  25% of  inventories,  with  eligible  inventories  not to  exceed
         $1,200,000. Interest on this loan is payable at the prime rate plus one
         percent (6.25% at December 31, 2004),  with all principal due April 30,
         2005.  Borrowings  under this loan amounted to $703,000 at December 31,
         2004.

--------------------------------------------------------------------------------
                                                                       Page F-18

<PAGE>


WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements


         Both of these  loans are  guaranteed  by an officer of the  Company and
         collateralized  by  QualTech's  assets.  QualTech  is also  required to
         maintain a total  liabilities to tangible net worth ratio not in excess
         of 2.5 to 1. QualTech was in compliance  with this covenant at December
         31, 2004.


8.       Stockholders' Equity

         Stock Option Grants

         In  October  2001,  the  Company  granted   1,350,000  options  to  its
         shareholders  and  employees  to acquire  shares of its common stock at
         $0.026 per common share pursuant to individual option grants. The terms
         of the grants  provided for immediate  vesting,  and the options may be
         exercised at any time for a period of ten years  commencing  October 1,
         2001.

         In January 2002, the Company's  stockholders approved the 2002 Flexible
         Stock Plan (the "2002 Plan"). Under the 2002 Plan, the number of shares
         which may be issued or sold, or for which options,  stock  appreciation
         rights  (SAR's)  or  performance  shares  may  be  granted  to  certain
         directors,  officers and employees of the Company is 5,000,000, plus an
         annual  increase,  effective  the  first  day  of  each  calendar  year
         commencing with 2003, equal to 10% of the number of shares  outstanding
         as of the first  day of such  calendar  year but in no event  more than
         30,000,000 shares in the aggregate.

         A summary of stock option activity is as follows:

<TABLE>
<CAPTION>
<S>                                                         <C>            <C>               <C>            <C>

                                                                   2004                            2003
                                                       ------------------------------  -------------------------------
                                                                         Weighted-                        Weighted-
                                                                           Average                         Average
                                                                          Exercise                         Exercise
                                                              Shares        Price          Shares           Price
                                                       --------------- --------------  --------------- ---------------

           Outstanding - Beginning of Period                5,525,000      $ 0.999           2,560,000      $ 0.026
           Granted                                          2,600,000        1.684           2,965,000        1.839
           Exercised                                         (500,000)      (1.803)                 --           --
           Forfeited                                               --           --                  --           --
           ------------------------------------------- --------------- --------------  --------------- ---------------

           Outstanding on December 31                       7,625,000      $ 1.180           5,525,000      $ 0.999
           =========================================== =============== ==============  =============== ===============

           Exercisable on December 31                       7,175,000      $ 1.148           2,935,000      $ 0.116
           =========================================== =============== ============== = =============== ===============
</TABLE>

--------------------------------------------------------------------------------
                                                                       Page F-19

<PAGE>


WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements


         The  following   table   summarizes   information   about  the  options
         outstanding at December 31, 2004:

<TABLE>
<CAPTION>
<S>              <C>                    <C>                     <C>           <C>            <C>              <C>
                                                                                            Exercisable Stock
                                               Outstanding Stock Options                           Options
                                   ---------------------------------------------------  ------------------------------

                                                          Weighted-
                                                            Average         Weighted-                       Weighted-
                         Range Of                         Remaining           Average                         Average
                         Exercise                       Contractual          Exercise                        Exercise
                           Prices           Shares             Life             Price            Shares         Price
            ---------------------- --------------- ----------------- -----------------  --------------- --------------
                          $ 0.026       2,775,000               7.0           $ 0.026        2,775,000        $ 0.026
                 $ 1.44 to $ 1.90       2,525,000               9.8           $ 1.685        2,075,000        $ 1.686
                   $2.00 to $2.13       2,325,000               9.7           $ 2.008        2,325,000        $ 2.008
                                   ---------------                                      ---------------
                                        7,625,000                                            7,175,000
                                   ===============                                      ===============
</TABLE>

         The Company applies APB Opinion No. 25 and related  interpretations  in
         accounting for all grants.

         As the  result of a court  decision  in 2004,  1,100,000  fully  vested
         options were required to be granted to an employee at an exercise price
         of $1.10 per share.  The price was $0.25 below the market  price of the
         stock at the date of grant and, accordingly, an expense was recorded in
         2004 in the amount of $275,000.

         Additionally,  400,000  options  were issued to employees in 2004 at an
         exercise  price of $1.66 per  share.  This was $0.19  below the  market
         price of the  stock at the date of  grant  and is being  expensed  on a
         straight-line basis over the three year vesting life of the options. An
         expense in the amount of $14,666 was recorded in 2004.

         For the remainder of the options  granted in 2004,  the exercise  price
         was  equal  to the  fair  market  value  at the  date  of  grant,  and,
         accordingly,  no  compensation  cost has been  recognized  under  these
         grants.

         Warrants

         In July 2003,  the  Company  issued  400,000  warrants  for  investment
         banking  services.  These  warrants have an exercise price of $0.50 per
         share,  and are exercisable from the date of issuance through 36 months
         after the effective date of a registration  statement  registering  the
         shares of common stock  underlying  the warrants.  These  warrants were
         valued at $60,000 and recorded as expense when issued.

--------------------------------------------------------------------------------
                                                                       Page F-20

<PAGE>


WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements


         In August 2003,  the Company  issued 20 Units at a price of $10,000 per
         Unit.  Each Unit  consists of (i) 10,000  shares of common  stock,  and
         warrants to purchase  10,000 shares of common stock,  exercisable for a
         period of three  years at an exercise  price of $1.00 per share.  These
         warrants  were valued at $56,000,  based on the relative  fair value of
         the warrants as compared to the common stock issued.

         In May  2004,  the  Company  issued  6,000,000  warrants  to a group of
         investors in  connection  with the sale of  6,000,000  shares of common
         stock.  3,000,000 of the warrants are  exercisable for a period of five
         years at a price of $1.50 per share and  3,000,000  of the warrants are
         exercisable  for a period of five  years at a price of $3.60 per share.
         These  warrants were valued at  $1,521,261,  based on the relative fair
         value of the warrants as compared to the common stock issued.

         In October 2004, the Company  issued 350,000  warrants with an exercise
         price of  $2.00 to  certain  warrant  holders  in  exchange  for  their
         exercise of 500,000 warrants for which the Company  received  $750,000.
         The fair value of the 350,000 new  warrants  plus the fair value of the
         500,000  warrants  with a decreased  exercise  period was less than the
         fair value of the 500,000 warrants before the modification. As such, no
         value was assigned to the new warrants.

         A schedule of common stock warrant activity is as follows:

<TABLE>
<CAPTION>
<S>                                                                            <C>                      <C>

                                                                               Number Of        Weighted Average
                                                                                  Shares          Exercise Price
                                                                      ---------------------------------------------------

             Outstanding at December 31, 2002                                         --                     --
             Warrants granted                                                    600,000                $ 0.667
             ------------------------------------------------------------------------------------------------------------

             Outstanding at December 31, 2003                                    600,000                  0.667
             Warrants granted                                                  6,350,000                  2.520
             Warrants exercised                                                 (500,000)                 1.500
             ------------------------------------------------------------------------------------------------------------

             Outstanding at December 31, 2004                                  6,450,000                $ 2.426
             ============================================================================================================
</TABLE>

--------------------------------------------------------------------------------
                                                                       Page F-21

<PAGE>


WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements

<TABLE>
<CAPTION>
<S>               <C>                   <C>                    <C>            <C>           <C>               <C>

         The  following  table   summarizes   information   about  the  warrants
outstanding at December 31, 2004:
                                               Outstanding Stock Warrants                   Exercisable Warrants
                                   ---------------------------------------------------  ------------------------------
                                                          Weighted-
                                                            Average         Weighted-                       Weighted-
                         Range Of                         Remaining           Average                         Average
                         Exercise                       Contractual          Exercise                        Exercise
                           Prices          Number              Life             Price          Shares           Price
            ---------------------- --------------- ----------------- -----------------  -------------- ---------------
                  $ 0.50 - $ 1.00         600,000              1.58           $ 0.667         600,000         $ 0.667
                  $ 1.50 - $ 2.00       2,850,000              4.19           $ 1.560       2,850,000         $ 1.560
                            $3.60       3,000,000              4.38           $ 3.600       3,000,000         $ 3.600
                                   ---------------                                      --------------
                                        6,450,000                                           6,450,000
                                   ===============                                      ==============
</TABLE>


9.       Income Taxes

         The provision (benefit) for income taxes consists of the following:

                                                     2004                2003
                                       ---------------------------------------
Current                                       $    45,658        $      1,900
Deferred                                          (60,583)                  --
------------------------------------------------------------------------------
                                              $   (14,925)       $      1,900
==============================================================================

         The tax effects of temporary  differences and  carryforwards  that give
         rise to  significant  portions of deferred  tax assets and  liabilities
         consist of the following:

                                                          2004             2003
                                                --------------------------------
         Deferred Tax Assets
            Liabilities and reserves               $    68,254      $    14,528
            Net operating loss carryforwards           228,273          331,387
            Stock options                                5,720               --
            Inventory capitalization                    29,250               --
         -----------------------------------------------------------------------
            Gross deferred tax assets                  331,497          345,915
            Valuation allowance                             --         (180,648)
         -----------------------------------------------------------------------
                                                       331,497          165,267
         -----------------------------------------------------------------------
         Deferred Tax Liabilities
            Property and equipment                      93,576           28,881
            Prepaid expenses                            33,698               --
            Patent and trademark                         8,913            9,366
         -----------------------------------------------------------------------
                                                       136,187           38,247
         -----------------------------------------------------------------------
         Net Deferred Tax Asset                    $   195,310      $   127,020
         =======================================================================


--------------------------------------------------------------------------------
                                                                       Page F-22


<PAGE>



WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements


         The current and  long-term  components of the deferred tax asset are as
follows:

                                                      2004                2003
                                            -----------------------------------

         Current deferred tax asset             $   67,511          $   14,528
         Long-term deferred tax asset              127,799             112,492
         ----------------------------------------------------------------------

                                                 $ 195,310           $ 127,020
         ======================================================================

         At December 31, 2004,  the Company had  aggregate  net  operating  loss
         carryforwards  of  approximately  $576,000 for income tax purposes that
         expire beginning in 2022.

         The reconciliation of the effective tax rate with the statutory federal
         income tax benefit rate is as follows:

                                                       2004               2003
                                              ----------------------------------
         Statutory rate                                34%                34%
         State income taxes, net of
          federal benefits                             28                  5
         Change in deferred tax asset
          valuation allowance                        (153)               (36)
         Amortization of intangibles                   70                 --
         Meals and entertainment                        8                 (3)
         Other                                         --                 (1)
         -----------------------------------------------------------------------
                                                      (13)%               (1)%
         =======================================================================

         In  2004,  the  Company  reversed  the  deferred  tax  asset  valuation
         allowance.  This was  based  on the  Company's  determination  that the
         deferred  tax assets  were more likely  than not  realizable  in future
         periods.  This judgment was based on the Company's projection of future
         taxable income.


10.      Concentrations

         Major Customers

         For the years ended December 31, 2004 and 2003,  sales to the Company's
         top ten  customers  (including  sales to a related party - see Note 12)
         comprised 39% and 51% of revenue,  respectively.  These  customers also
         comprised 60% and 67% of the combined accounts  receivable and accounts
         receivable - related party at December 31, 2004 and 2003, respectively.


--------------------------------------------------------------------------------
                                                                       Page F-23


<PAGE>


WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements


         Purchases

         The Company purchases a majority of its products from a small number of
         suppliers. Approximately 20% and 30% of product purchases were from two
         vendors for the years ended December 31, 2004 and 2003, respectively.


11.      Benefit Plan

         The  Company has a 401(k)  defined  contribution  benefit  plan for all
         eligible  employees.  The Company contributes 3% of eligible employees'
         salaries to the plan.  The Company  contributed  $47,397 and $28,347 to
         the  plan  during  the  years  ended   December  31,  2004,  and  2003,
         respectively.


12.      Commitments And Contingencies

         Lease

         The Company has an operating lease on New Jersey real property expiring
         in the year 2006. In addition to fixed rentals, the real property lease
         requires  the Company to pay all  maintenance,  real  estate  taxes and
         insurance.

         The Company  has an  operating  lease on New  Hampshire  real  property
         expiring in the year 2006.

         The Company has an operating lease on Minnesota real property  expiring
         in the year 2009. In addition to fixed rentals, the real property lease
         requires the Company to pay its pro-rata share of all maintenance, real
         estate taxes, and insurance.

         Rent expense and other  charges  totaled  $305,792 and $192,305 for the
         years ended December 31, 2004 and 2003,  respectively.

--------------------------------------------------------------------------------
                                                                       Page F-24


<PAGE>


WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements


         The approximate minimum payments  required under these operating leases
         at December 31, 2004 are:

         Year                                               Amount
         ------------------------------------ ----------------------
         2005                                         $    398,000
         2006                                              380,000
         2007                                              217,000
         2008                                              178,000
         2009                                              148,000
         ------------------------------------ ----------------------
                                                      $  1,321,000
         ==================================== ======================

         Environmental

         The  Company  recycles  used  equipment  that  may  contain   hazardous
         materials.  The  Company  contracts  with a licensed  waste  management
         company for the purpose of recycling or destruction of these  materials
         in accordance with all applicable environmental  standards.  Therefore,
         management  believes  it is not  necessary  to record a  liability  for
         environmental contingencies in the accompanying financial statements.

         Legal Proceedings

         The  Company  is party to legal  proceedings  arising  in the  ordinary
         course of business. In the opinion of management, these proceedings are
         not likely to have a material adverse affect on the financial position,
         results of  operations  or cash flows of the  Company.  The estimate of
         potential impact on the Company could change in the future.


13.      Related Party Transactions

         In 2004 and 2003, the Company had sales to two customers related to two
         stockholders  and officers of the Company.  Sales to such customers for
         the years ended  December 31, 2004 and 2003  amounted to  approximately
         $1,123,000 and $958,000,  respectively.  Accounts receivable from these
         customers  amounted  to $119,046  and $37,173 at December  31, 2004 and
         2003, respectively.


--------------------------------------------------------------------------------
                                                                       Page F-25


<PAGE>


WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements


14.      Supplemental Cash Flow Information

         During 2004,  the Company  issued 123,422 shares of its common stock to
         settle an accounts  payable balance with a vendor for $209,200.  During
         2004, the Company issued 1,957,831 shares of its common stock valued at
         $3,250,000 as partial payment for the  acquisition of QualTech.  During
         2003,  the  Company  issued  shares  of its  common  stock to settle an
         accounts payable balance with a vendor for $59,500.


15.      Segment Information

         As a result of the acquisition of Qualtech International,  Inc. and its
         affiliate,  Qualtech Services Group,  Inc., the company began operating
         in three  business  segments:  Data Security & Compliance,  Data Center
         Hardware,  and  Data  Center  Maintenance.  The  overall  concept  that
         Windsortech,  Inc. employs in determining its operating  segments is to
         present the results in a manner consistent with how the chief operating
         decision maker and executive  management view the  businesses,  how the
         businesses are organized as to segment management, and the focus of the
         businesses  with regards to the types of products and services  offered
         and the target market.

         Data Security & Compliance Segment

         This segment provides data security and regulatory  compliance services
         for  end-of-life  business-computing  IT assets.  The Company  offers a
         variety of  services  to help  companies  with  these  assets to ensure
         compliance  with federal and state mandates  regulating the disposal of
         such assets.  In addition,  this segment  re-sells a wide range of used
         and  refurbished  computer  products,  including  servers,  laptop  and
         desktop computers, monitors, PC processors, CD/DVD disk drives, modems,
         printers and memory.

         Data Center Hardware Segment

         This  segment  remarkets  refurbished  mainframe  processors,  midrange
         processors and associated  peripherals including tape and disk products
         and connectivity  products. The Company is one of the leading resellers
         of  refurbished  enterprise-class  hardware and  associated  peripheral
         products to companies around the world.

--------------------------------------------------------------------------------
                                                                       Page F-26

<PAGE>



WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements


         Data Center Maintenance

         This segment provides hardware maintenance services on enterprise-class
         hardware and associated  peripheral products to companies in the United
         States.

         The accounting policies of the operating segments are the same as those
         described in the summary of  significant  accounting  policies,  except
         that intersegment sales and transfers are generally accounted for as if
         the sales or transfers  were to third parties at current market prices.
         These amounts have been eliminated in consolidation.

<TABLE>
<CAPTION>
<S>                                                  <C>                 <C>

                                                             2004               2003
                                                ---------------------------------------
         Revenues
             Data Security & Compliance              $ 10,388,674        $ 7,484,472
             Data Center Hardware                      11,155,459                 --
             Data Center Maintenance                    1,219,646                 --
             Intersegment Elimination                    (683,983)                --
         ------------------------------------------------------------------------------
                Consolidated Total                   $ 22,079,796        $ 7,484,472
         ==============================================================================
         Product Revenue
             Data Security & Compliance             $   9,450,188        $ 7,454,235
             Data Center Hardware                      11,155,459                 --
             Data Center Maintenance                           --                 --
         ------------------------------------------------------------------------------
                Consolidated Total                   $ 20,605,647        $ 7,454,235
         ==============================================================================
         Service Revenue
             Data Security & Compliance            $      254,503      $      30,237
             Data Center Hardware                              --                 --
             Data Center Maintenance                    1,219,646                 --
         ------------------------------------------------------------------------------
                Consolidated Total                  $   1,474,149      $      30,237
         ==============================================================================
         Income (Loss) Before Provision
            (Benefit) for Income Taxes
             Data Security & Compliance             $    (983,059)       $  (147,309)
             Data Center Hardware                       1,067,296                 --
             Data Center Maintenance                       33,632                 --
         ------------------------------------------------------------------------------
                Consolidated Total                 $      117,869        $  (147,309)
         ==============================================================================
</TABLE>

--------------------------------------------------------------------------------
                                                                       Page F-27

<PAGE>


WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements



                                                        2004               2003
                                            ------------------------------------
         Depreciation And Amortization
             Data Security & Compliance       $      113,519      $      71,973
             Data Center Hardware                    240,351                 --
             Data Center Maintenance                  37,802                 --
         -----------------------------------------------------------------------
                  Consolidated Total          $      391,672      $      71,973
         =======================================================================


         Interest Expense, Net
              Data Security & Compliance      $       67,172      $      79,656
              Data Center Hardware                    16,135                 --
              Data Center Maintenance                     --                 --
         -----------------------------------------------------------------------
                  Consolidated Total          $       83,307      $      79,656
         =======================================================================


         Segment Assets
              Data Security & Compliance      $    4,556,736      $   1,390,998
              Data Center Hardware                 8,036,107                 --
              Data Center Maintenance                877,970                 --
         -----------------------------------------------------------------------

                  Consolidated Total          $   13,470,813      $   1,390,998
         =======================================================================


         Goodwill
              Data Security & Compliance      $           --      $          --
              Data Center Hardware                 1,823,157                 --
              Data Center Maintenance                157,286                 --
         -----------------------------------------------------------------------

                  Consolidated Total          $    1,980,443      $          --
         =======================================================================


         Expenditures For Property And
            Equipment
              Data Security & Compliance      $       93,129      $      88,142
              Data Center Hardware                     9,938                 --
              Data Center Maintenance                103,044                 --
         -----------------------------------------------------------------------

                  Consolidated Total          $      206,111      $      88,142
         =======================================================================

--------------------------------------------------------------------------------
                                                                       Page F-28

<PAGE>


WINDSORTECH, INC.
--------------------------------------------------------------------------------
Notes To Consolidated Financial Statements


         Company Data By Geographic Segment

         The Company  operates  solely in the United States and has no assets in
         foreign  countries.  All of  the  Company's  purchases  and  sales  are
         denominated  in US dollars.  The Company has not  recorded  any foreign
         currency transaction gains or losses in 2004 or 2003.

         For the years ended December 31, 2004 and 2003,  export sales comprised
         18% and 30% of revenue, respectively.

         Revenue by Geographic Segment comprised:

                                                    2004               2003
                                          --------------------------------------
         United States                      $ 18,094,977        $ 5,198,400
         Asia                                    983,921            817,707
         Europe                                  382,866            349,715
         Africa                                  604,686            703,073
         United Kingdom                        1,333,544            155,834
         Canada                                  506,262            223,458
         Australia                                63,150             24,500
         South America                           110,390             11,785
         -----------------------------------------------------------------------
                                            $ 22,079,796        $ 7,484,472
         =======================================================================

--------------------------------------------------------------------------------
                                                                       Page F-29


<PAGE>