**As
        filed with the Securities and Exchange Commission on November 14,
        2005**





**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549


______________________________________________





**FORM
      10-KSB/A**


**Amendment
      No. 1**





**[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**
              (State
                or other jurisdiction of
              incorporation
                or organization)****
            **13-2599131**
              (I.R.S.
                Employer
              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 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/A or any amendment to this Form 10-KSB/A. [ ]




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes [ ]  No [X]




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 SharesCommon
                Stock, par value $.01
            
            27,845,007












**Table
                Of
                Contents****Item**
            **Description**
            **Page**Restatement
            2**Part
                I**1.
            Description
                of Business
            32.
            Description
                of Property
            103.
            Legal
                Proceedings
            114.
            Submissions
                of Matters to a Vote of Security Holders
            12**Part
                II**5
            Market
                for Common Equity and Related Stockholder Matters
            126
            Management’s
                Discussion And Analysis of Financial Condition and Results of
                Operations
            177.
            Financial
                Statements
            318.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            318A.
            Controls
                and Procedures
            31**Part
                III**9.
            Directors,
                Executive Officers, Promoters and Control Persons; Compliance With
                Section
                16(a) of the Exchange Act
            3310.
            Executive
                Compensation
            3611.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            3912.
            Certain
                Relationships and Related Transactions
            4013.
            Exhibits
            4314.
            Principal
                Accountant Fees and Services
            43Signatures
            44Financial
                Statements and Exhibits
            46

















1





**Restatement**




This
      Amendment No. 1 on Form 10-KSB/A (“Form 10-KSB/A”) to the
      Company’s Annual Report on Form 10-KSB for the year ended December 31,
      2004, initially filed with the Securities and Exchange Commission (the “SEC”) on
      March 29, 2005, (“Original Filing”) reflects a restatement of the Consolidated
      Financial Statements of Windsortech, Inc. and Subsidiaries (the “Company”) for
      the year ended December 31, 2004, as discussed in Note 1 to the Consolidated
      Financial Statements.  The determination to restate these Financial
      Statements and other financial information was made as a result of management’s
      determination that the initial accounting for deferred income taxes related
      to
      the acquisition of QualTech International Corporation and QualTech Services
      Group, Inc. needed correction. The audited consolidated financial statements
      as
      of December 31, 2004 and for the year then ended have been restated to reflect
      the proper accounting treatment.





Deferred
      income taxes were not originally recorded for the book to tax basis differences
      of acquired intangible assets. The effect of this correction was to record
      a
      long-term deferred tax liability at the acquisition date of $1,326,000, with
      an
      offsetting increase to goodwill. This correction also caused a change in the
      deferred income tax provision for the year ended December 31, 2004, increasing
      the deferred tax benefit by $82,331.







Additionally,
      in 2004, the Company reversed a deferred tax asset valuation allowance related
      to net operating losses of WindsorTech that were incurred in 2002 and 2003.
      This
      was based on the Company’s determination that the deferred tax assets were more
      likely than not realizable in future periods, based on the Company’s projection
      of future taxable income related to its acquisition of QualTech. The reversal
      of
      the valuation allowance was originally recorded as a deferred income tax
      benefit. However, because the reversal of the valuation allowance was a result
      of the acquisition of QualTech, the offsetting adjustment should have been
      recorded in the purchase price allocation of the QualTech acquisition. The
      effect of this correction was to decrease the deferred tax benefit and goodwill
      by $180,649.





The
      restatements had no effect on pre-tax income or cash flow for the year ended
      December 31, 2004.





Portions
      of Notes 1, 4, 5, 9 and 15 of the Consolidated Financial Statements have been
      restated to reflect the above described adjustments.




This
      Form 10-KSB/A amends and restates Part II, Item 6 Management’s Discussion
      And Analysis of Financial Condition and Results of Operations and Part II,
      Item
      7 Financial Statements.  In addition, pursuant to the rules of the
      SEC, certain exhibits of the Original Filing has been amended to contain an
      updated consent of the Company’s independent registered public accounting firm
      and currently dated certifications from the Company’s Chief Executive Officer
      and Chief Financial Officer, as required by Sections 302 and 906 of the
      Sarbanes-Oxley act of 2002. Except
      as specifically indicated above, the Report has not been updated to reflect
      events occurring subsequently to the original filing date. Other events
      occurring after the filing of the Report or other disclosures necessary to
      reflect subsequent events will be addressed in reports filed with the Securities
      and Exchange Commission (“SEC”) subsequent to the date of this filing.









2






**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:


·
            Our
                growth strategies.


·
            Anticipated
                trends in our business and
                demographics.


·
              Our
                  ability to successfully integrate the business operations of recently
                  acquired companies; and
 ·
              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/A to “we”, “us,” “our,” “the Company,” and “Windsortech,”
mean Windsortech, Inc. and our subsidiaries, unless the context otherwise
      requires.






3






**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.






4





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






5




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






6




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.







7




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, Form 10-KSB/A ,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.






8





**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.






9





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.






10




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
            
            
            398,0002006
            
            
            380,0002007
              2008
              2009
            
            
            217,000
              187,000
              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.






11





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
              
              $
              2.00Second
                  Quarter
              
              
              2.30
              
              
              1.05Third
                  Quarter
              
              
              2.25
              
              
              1.19Fourth
                  Quarter
              
              
              3.57
              
              
              1.65
   12
   **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:




**Plan
                Category**
            
            **Number
                of Securities to be issued upon exercise of outstanding options,
                warrants
                and rights**
              **(a)**
            
            **Weighted-average
                exercise price of outstanding options, warrants and
                rights**
              **(b)**
            
            **Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))**
              **(c)**Equity
                compensation plans approved by security holders
            
            
            6,275,000
            
            $
            1.428
            
            
            1,333,292Equity
                compensation plans not approved by security holders
            
            
            1,350,000
            
            $
            0.026
            
            
            -Total
            
            
            7,625,000
            
            $
            1.18
            
            
            1,333,292




***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.






13




*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.




**Name/Entity/Nature**
              **Date
                  Issued**
              **Note**
              **Number
                  of****Persons**
              **Issued
                  For**
              **Number
                  of Common**
                **Shares**Edward
                  L. Cummings
              Oct
                  - 2001
              1
              1
              Capital
                  Contribution
              5,000,000David
                  A. Loppert
              Oct
                  - 2001
              1
              1
              Capital
                  Contribution
              5,000,000Carl
                  C. Saracino
              Oct
                  - 2001
              1
              1
              Capital
                  Contribution
              5,000,000Michael
                  P. Sheerr
              Oct
                  - 2001
              1
              1
              Capital
                  Contribution
              5,000,000Marc
                  Sherman
              Oct
                  - 2001
              1
              1
              Capital
                  Contribution
              5,000,000Edward
                  L. Cummings
              Jan
                  - 2002
              2
              1
              Merger
                  Consideration
              1,800,000David
                  A. Loppert
              Jan
                  - 2002
              2
              1
              Merger
                  Consideration
              1,800,000
 Carl
                    C. Saracino
                Jan
                    - 2002
                2
                1
                Merger
                    Consideration
                1,800,000
   14
  **Name/Entity/Nature**
                **Date
                    Issued**
                **Note**
                **Number
                    of****Persons**
                **Issued
                    For**
                **Number
                    of Common**
                  **Shares**
 Michael
                      P. Sheerr
                  Jan
                      - 2002
                  2
                  1
                  Merger
                      Consideration
                  1,800,000Marc
                      Sherman
                  Jan
                      - 2002
                  2
                  1
                  Merger
                      Consideration
                  1,800,000Leonard
                      P. Stone
                  Jan
                      - 2002
                  3
                  1
                  Finders
                      Fee
                  450,000William
                      J. Barbera
                  Jan
                      - 2002
                  3
                  1
                  Finders
                      Fee
                  180,000Frederic
                      E. Smithline
                  Jan
                      - 2002
                  4
                  1
                  Services
                      Rendered
                  600,000Brian
                      Cockerham
                  Dec
                      - 2002
                  5
                  1
                  Compensation
                  5,000Edward
                      L. Cummings
                  Dec
                      - 2002
                  5
                  1
                  Compensation
                  500,000Erik
                      Cummings
                  Dec
                      - 2002
                  5
                  1
                  Compensation
                  50,000David
                      Harris
                  Dec
                      - 2002
                  5
                  1
                  Compensation
                  150,000Robert
                      Jackson
                  Dec
                      - 2002
                  5
                  1
                  Compensation
                  150,000David
                      A. Loppert
                  Dec
                      - 2002
                  5
                  1
                  Compensation
                  500,000Eleanor
                      McDonald
                  Dec
                      - 2002
                  5
                  1
                  Compensation
                  5,000Wayne
                      Neuls
                  Dec
                      - 2002
                  5
                  1
                  Compensation
                  5,000Lou
                      Nuccio
                  Dec
                      - 2002
                  5
                  1
                  Compensation
                  50,000Carl
                      C. Saracino
                  Dec
                      - 2002
                  5
                  1
                  Compensation
                  500,000Michael
                      P. Sheerr
                  Dec
                      - 2002
                  5
                  1
                  Compensation
                  500,000Marc
                      Sherman
                  Dec
                      - 2002
                  5
                  1
                  Compensation
                  500,000Stanley
                      Adelman
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  5,000Harvey
                      Albert
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  15,000Mike
                      Belise & Linda A Gary
                  July
                      - 03
                  6
                  2
                  Private
                      Placement Shares
                  71,429Bismark
                      Intervest, Inc.
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  300,000Edward
                      L. Cummings
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  61,200John
                      R. Doss
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  300,000Steven
                      Gadon & Barbara Gadon
                  July
                      - 03
                  6
                  2
                  Private
                      Placement Shares
                  85,000Andrew
                      L. Granat
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  15,000Alan
                      J Haber
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  3,000Barry
                      S. Hanburger
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  2,500Bernard
                      & Carol Harris, JT TEN WROS
                  July
                      - 03
                  6
                  2
                  Private
                      Placement Shares
                  2,000John
                      D. Wright, cust for Jonathan Martin Harris, Minor
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  1,000Rodney
                      D. and Linda L. Johnson, JT TEN WROS
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  2,000Craig
                      G. Langweiler
                  July
                      - 03
                  6
                  2
                  Private
                      Placement Shares
                  10,000Monte
                      Lang & Lillian M Lang, JT TEN WROS
                  July
                      - 03
                  6
                  2
                  Private
                      Placement Shares
                  30,000Max
                      & Delayne Loppert, JT TEN WROS
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  70,000Anne
                      E.B. Loppert, Minor, David A. Loppert, Custodian
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  43,500Jeffrey
                      E.B. Loppert, Minor, David A. Loppert, Custodian
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  43,500Martin
                      Miller
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  2,857Robert
                      & Penni Parker, JT TEN WROS
                  July
                      - 03
                  6
                  2
                  Private
                      Placement Shares
                  14,300
   15
  **Name/Entity/Nature**
                  **Date
                      Issued**
                  **Note**
                  **Number
                      of****Persons**
                  **Issued
                      For**
                  **Number
                      of Common**
                    **Shares**
 RBC
                      Dain Rauscher Custodian, FBO Harvey Albert IRA
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  20,000Lois
                      G. Rosenberg
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  500Paul
                      Rosen & Wendy Rosen
                  July
                      - 03
                  6
                  2
                  Private
                      Placement Shares
                  85,000Carl
                      Saracino
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  15,000Philip
                      & Lilyan Sherman, JT TEN WROS
                  July
                      - 03
                  6
                  2
                  Private
                      Placement Shares
                  20,000Michael
                      P. Sheerr
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  44,000Alexandra
                      J. Sherman, Minor, Marc Sherman Custodian
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  28,433Maximilian
                      B. Sherman, Minor, Marc Sherman Custodian
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  28,433Zachary
                      T. Sherman, Minor, Marc Sherman Custodian
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  28,434Jonathan
                      E. Stoll
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  2,500Gail
                      M. Thompson
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  1,000Jack
                      B. Tull Sr.
                  July
                      - 03
                  6
                  1
                  Private
                      Placement Shares
                  3,000John
                      D. & Dorothy J. Wright, JT TEN WROS
                  July
                      - 03
                  6
                  2
                  Private
                      Placement Shares
                  1,000Bismark
                      Intervest, Inc.
                  July
                      - 03
                  7
                  1
                  Private
                      Placement Shares
                  100,000Edith
                      Newman Revocable Trust
                  July
                      - 03
                  7
                  1
                  Private
                      Placement Shares
                  20,000Paul
                      Lee Newman Roth IRA
                  July
                      - 03
                  7
                  1
                  Private
                      Placement Shares
                  50,000Paul
                      Lee Newman
                  July
                      - 03
                  7
                  1
                  Private
                      Placement Shares
                  30,000Michael
                      Weiss
                  May
                      - 04
                  8
                  1
                  Private
                      Placement Shares
                  83,400Odin
                      Partners, LP
                  May
                      - 04
                  8
                  1
                  Private
                      Placement Shares
                  116,600Barron
                      Partners, LP
                  May
                      - 04
                  8
                  1
                  Private
                      Placement Shares
                  4,833,333Guerilla
                      Partners, LP
                  May
                      - 04
                  8
                  1
                  Private
                      Placement Shares
                  716,600Guerilla
                      IRA Partners, LP
                  May
                      - 04
                  8
                  1
                  Private
                      Placement Shares
                  83,400Bismark
                      Investment
                  May
                      - 04
                  8
                  1
                  Private
                      Placement Shares
                  166,667Joel
                      Owens
                  May
                      - 04
                  9
                  1
                  Acquisition
                  1,715,911Jolene
                      Owens
                  May
                      - 04
                  9
                  1
                  Acquisition
                  241,920Robert
                      Jackson
                  Nov
                      - 04
                  10
                  1
                  Exercise
                      of Stock Options
                  200,000Carl
                      Saracino
                  Nov
                      - 04
                  10
                  1
                  Exercise
                      of Stock Options
                  150,000Michael
                      Sheerr
                  Nov
                      - 04
                  10
                  1
                  Exercise
                      of Stock Options
                  150,000Guerilla
                      IRA Partners, LP
                  Oct
                      - 04
                  11
                  1
                  Exercise
                      of Stock Warrants
                  41,700Guerilla
                      Partners, LP
                  Oct
                      - 04
                  11
                  1
                  Exercise
                      of Stock Warrants
                  358,300Odin
                      Partners, LP
                  Oct
                      - 04
                  11
                  1
                  Exercise
                      of Stock Warrants
                  58,300Michael
                      Weiss
                  Oct
                      - 04
                  11
                  1
                  Exercise
                      of Stock Warrants
                  41,700Burger,
                      Trailor, Farmer
                  Jul
                      - 04
                  12
                  1
                  Shares
                      Issued for Services
                  105,422Burger,
                      Trailor, Farmer
                  Dec
                      - 04
                  12
                  1
                  Shares
                      Issued for Services
                  18,000









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 Consideration shares issued in January 2002 as discussed
                  in note 2
                  below and were subsequently cancelled.
   16
  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.






17




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:


·
            Our
                growth strategies.


·
            Anticipated
                trends in our business and
                demographics.


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






18




Year
                Ended
            
            Year
                EndedDecember
                31, 2004
            
            December
                31, 2003**(restated)**%
            
            %Revenue
            
            
            100.0
            
            
            100.0Cost
                of sales
            
            
            75.4
            
            
            73.4Gross
                profit
            
            
            24.6
            
            
            26.6Selling,
                general and administrative expenses
            
            
            21.9
            
            
            26.6Depreciation
                and amortization
            
            
            1.8
            
            
            1.0Interest
                expense
            
            
            0.4
            
            
            1.0Income
                (loss) before provision for income taxes
            
            
            0.5
            
            
            (2.0
            )Provision
                for income taxes
            
            
            0.3
            
            
            —Net
                income (loss)
            
            
            0.2
            
            
            (2.0
            )




***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
                EndedDecember
                31, 2004
            
            December
                31, 2003RevenueProducts
            
            $
            20,605,647
            
            $
            7,454,235Services
            
            
            1,474,149
            
            
            30,237Total
                Revenue
            
            $
            22,079,796
            
            $
            7,484,472




Our
      revenue by geographic segment is as follows:




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









19




We
      operate solely in the United States and have no assets in foreign countries.
      However, we sell to 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 tax expense during 2004. Tax expense during 2004 was $83,393,
      with an effective tax rate of 71%. The high effective tax rate was due to
      QualTech incurring state income taxes in jurisdictions where the Company could
      not file consolidated income taxes. During 2003, the Company did not recognize
      a
      deferred tax benefit as it increased its deferred tax asset valuation allowance.




**Segments**






20





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





**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
                EndedDecember
                31, 2004
            
            December
                31, 2003**(restated)**Revenue
            
            $
            10,388,674
            
            $
            7,484,472Gross
                Profit
            
            
            2,412,138
            
            
            1,992,411Selling,
                General and Administration
            
            
            3,003,403
            
            
            1,988,091Depreciation
                and Amortization
            
            
            113,519
            
            
            71,973Interest
                Expense, Net
            
            
            67,172
            
            
            79,656Income
                (Loss) Before Provisionfor
                Income Taxes
            
            
            (983,059
            )
            
            (147,309
            )Segment
                Assets
            
            
            4,428,937
            
            
            88,142Goodwill
            
            
            -
            
            
            -Expenditures
                for Property andEquipment
            
            
            93,129
            
            
            1,390,998





21




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
                EndedDecember
                31, 2004
            
            December
                31, 2003**(restated)**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 Provisionfor
                Income Taxes
            
            
            1,067,296
            
            
            -Segment
                Assets
            
            
            9,090,494
            
            
            -Goodwill
            
            
            2,877,544
            
            
            -Expenditures
                for Property andEquipment
            
            
            9,938
            
            
            -









22


**Data
      Center Maintenance Segment**





Year
                Ended
            
            Year
                EndedDecember
                31, 2004
            
            December
                31, 2003**(restated)**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 Provisionfor
                Income Taxes
            
            
            33,632
            
            
            -Segment
                Assets
            
            
            968,934
            
            
            -Goodwill
            
            
            248,250
            
            
            -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.






23




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 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 five 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






24




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 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.








25




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 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***








26




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 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:





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


·
            disruption
                of our ongoing business;


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


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


·
            inability
                to commercialize acquired technology;
                and


·
            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:






27




·
            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;




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




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




·
            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:






28




**Name**
            **Position**Marc
                Sherman
            Chairman,
                President and Chief Executive Officer, DirectorJoel
                L. Owens
            Executive
                Vice President Data Center Hardware and Data Center Services
                GroupEdward
                L. Cummings
            Vice
                President, CFO, Treasurer, DirectorDavid
                M. Harris
            Vice
                President, Information Technology and
                Systems




***Anti-Takeover
      Provisions***




Certain
      provisions of our Amended and Restated Certificate of 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






29




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.




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*






30




*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 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/A are listed
      in Item 13 and begin immediately after Item 14 on pages F-1 through
      F-30.




**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**




It
        is the
        Chief Executive Officer’s and the Chief Financial Officer’s responsibility to
        ensure that we maintain disclosure controls and procedures designed to provide
        reasonable assurance that material information, both financial and
        non-financial, and other information required under the securities laws to
        be
        disclosed is identified and communicated to senior management on a timely
        basis.
        Our disclosure controls and procedures include mandatory communication of
        material events, automated accounting processing and reporting, management
        review of monthly results and an established system of internal
        controls.




31




Our
        Disclosure Controls were designed to provide reasonable assurance that the
        controls and procedures would meet their objectives. Our management, including
        the CEO and CFO, does not expect that our Disclosure Controls will prevent
        all
        error and all fraud. A control system, no matter how well designed and operated,
        can provide only reasonable assurance of achieving the designed control
        objectives and management is required to apply its judgment in evaluating
        the
        cost-benefit relationship of possible controls and procedures. Because of
        the
        inherent limitations in all control systems, no evaluation of controls can
        provide absolute assurance that all control issues and instances of fraud,
        if
        any, within the Company have been detected. These inherent limitations include
        the realities that judgments in decision-making can be faulty, and that
        breakdowns can occur because of simple errors or mistakes. Additionally,
        controls can be circumvented by the individual acts of some persons, by
        collusions of two or more people, or by management override of the control.
        Because of the inherent limitations in a cost-effective, maturing control
        system, misstatements due to error or fraud may occur and not be detected.
  The
        evaluation of our Disclosure Controls included a review of the controls’
objectives and design, our implementation of the controls and the effect
        of the
        controls on the information generated for use in this Form 10-KSB/A. We are
        reporting a control weakness related to our corporate tax accounting function.
        This weakness related specifically to the Company not maintaining sufficient
        resources in the corporate tax accounting function to accurately identify,
        evaluate and report, in a timely manner, non-routine and complex transactions.
        This deficiency resulted in errors in the Company’s accounting for income taxes.
        These errors were corrected in our amended Form 10-KSB/A for the year ended
        December 31, 2004. Upon identification of this control weakness, immediate
        corrective action was undertaken. Remediation will include the following:
  ·
              Where
                  necessary, we will retain outside experts to supplement our core
                  knowledge
                  of the complexities around both current and deferred income tax
                  accounts.
                  These resources, when combined with our existing resources, will
                  enable us
                  to comply with the technical complexities of accounting for income
                  taxes.
  ·
              A
                  formal policy governing all key aspects of accounting for income
                  taxes
                  will be developed and adopted.
  ·
              We
                  will increase the training of our corporate accountants on accounting
                  for
                  income taxes and other complex accounting
                  issues
  Our
        efforts to strengthen financial and internal controls continue. Based on
        this
        evaluation, other than the item described above, our CEO and CFO have concluded
        these controls are effective. There have been no significant changes in internal
        controls, or in other factors, which would significantly affect these controls
        subsequent to the date of evaluation.




32





**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:***




**Name**
            **Age**
            **Position**Marc
                Sherman
            41
            Chairman,
                President and Chief Executive Officer, DirectorR.
                Keith Elliott
            62
            DirectorSeth
                A. Grossman
            39
            Chief
                Operating Officer, DirectorEdward
                L. Cummings
            56
            Vice
                President, Chief Financial Officer, Treasurer, DirectorRobert
                W. VanHellemont
            58
            DirectorDavid
                Harris
            42
            Vice
                President, Information Technology and
                Systems




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






33




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 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






34


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:




·
            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;




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




·
            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




·
            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.




35




**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.




*Summary
                Compensation Table*Long-Term
                CompensationAnnual
                Compensation
            
            Awards
            
            PayoutsName
                and Principal Position
                (1)
            Year
            Salary
                ($)
            Bonus
                ($)
            Other
                Annual Compensation ($)
            
            Restricted
                Stock Awards ($)
            Securities
                Underlying Options/SAR's (#)
            
            LTIP
                Payouts
            
            All
                Other
              Compensation
              ($)Marc
                Sherman
            2004
            $
                265,385
            -
            $
                5,500
            
            -
            1,000,000
            
            $
                -
            
            $
                -Chairman,
                CEO and
            2003
            $
                163,384
            -
            $
                6,000
            
            -
            1,000,000
            
            $
                -
            
            $
                -PresidentEdward
                L. Cummings
            2004
            $
                141,346
            -
            $
                5,500
            
            -
            500,000
            
            $
                -
            
            $
                -Vice
                President, Treasurer
            2003
            $
                120,115
            -
            $
                6,000
            
            -
            250,000
            
            $
                -
            
            $
                -and
                CFODavid
                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
            
            $
                -
            
            $
                -SecretaryCarl
                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
            
            $
                -
            
            $
                -





(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:




Individual
                  GrantsMarc
                  Sherman
              
              
              500,000
              
              
              38.5%
              
              $
              1.44
              
              
              May
                  -14
              
              $
              535,000
              
              
              (1
              )Marc
                  Sherman
              
              
              500,000
              
              
              -
              
              $
              1.90
              
              
              Nov
                  - 14
              
              $
              735,000
              
              
              (2
              )
   36
  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
              )




(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:




**Aggregate
                    Option Exercises in Last Fiscal Year and Fiscal Year-End Option
                    Values**
 
 Exercised
                    in 2004
                  
                  Number of Securities Underlying Unexercised
                    Options at Year End 2004 (#)
                  Value
                    of Unexercised In - The - Money Options at Year End
                    2004 ($)
  Name
                    
                    Shares
                        Acquired Upon
                      Exercise
                        (#)
                    
                    Value
                        Realized ($)
                    
                    Exercisable
                    
                    Unexercisable
                    
                    Exercisable
                    
                    UnexercisableMarc
                        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
                    
                    
                    --






***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.






37




***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






38




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, 2004:




**Title
                  of Class**
              **Name
                  and Address of Beneficial Owner**
              **Amount
                  and Nature of****Beneficial Owner****(1)**
              **Percent
                  of Class**Common
              Edward
                  L. Cummings
                c/o
                  70 Lake Drive
                Hightstown,
                  NJ 08520****
              3,216,200
              9.7%Common
              R.
                  Keith Elliott
                c/o
                  70 Lake Drive
                Hightstown,
                  NJ 08520
              425,000
              1.3%Common
              Seth
                  A. Grossman
                c/o
                  70 Lake Drive
                Hightstown,
                  NJ 08520
              425,000
              1.3%Common
              David
                  A. Harris
                c/o
                  70 Lake Drive
                Hightstown,
                  NJ 08520
              425,000
              1.3%Common
              Joel
                  L. Owens
                c/o
                  70 Lake Drive
                Hightstown,
                  NJ 08520****
              1,993,331
              6.0%Common
              Carl
                  C. Saracino
                c/o
                  70 Lake Drive
                Hightstown,
                  NJ 08520****
              1,815,000
              5.5%Common
              Michael
                  P. Sheerr
                c/o
                  70 Lake Drive
                Hightstown,
                  NJ
              1,844,000
              5.6%Common
              Marc
                  Sherman(2)
                c/o
                  70 Lake Drive
                Hightstown,
                  NJ 08520
              5,016,300
              15.1%
   39
  Common
              Robert
                  W. VanHellemont
                c/o
                  70 Lake Drive
                Hightstown,
                  NJ 08520
              198,500
              *Common
              All
                  Directors and Executive Officers as a Group (9 Persons)
              15,358,331
              46.4%




*
      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 Beneficially Owned**
            
            **Percent
                Of Class**Barron
                Partners
              730
                Fifth Avenue
              New
                York, NY 10019
            
            4,833,333
            
            17.4%




***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:






40




**Name**
            
            **Amount
                of 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
            %




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. Sheerr






41




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***




Principal
                  Stockholder /
                Executive
                  Officer
              **Date
                  Issued**
              **Note**
              **Issued
                  For**
              **Number
                  of**
                **Common**
                **Shares**Edward
                  L. Cummings
              Oct
                  - 2001
              A
              Capital
                  Contribution
              5,000,000Jan
                  - 2002
              B
              Merger
                  Consideration
              1,800,000Dec
                  - 2002
              C
              Compensation
              500,000David
                  A. Loppert
              Oct
                  - 2001
              A
              Capital
                  Contribution
              5,000,000Jan
                  - 2002
              B
              Merger
                  Consideration
              1,800,000Dec
                  - 2002
              C
              Compensation
              500,000Carl
                  C. Saracino
              Oct
                  - 2001
              A
              Capital
                  Contribution
              5,000,000Jan
                  - 2002
              B
              Merger
                  Consideration
              1,800,000Dec
                  - 2002
              C
              Compensation
              500,000Michael
                  P. Sheerr
              Oct
                  - 2001
              A
              Capital
                  Contribution
              5,000,000Jan
                  - 2002
              B
              Merger
                  Consideration
              1,800,000Dec
                  - 2002
              C
              Compensation
              500,000Marc
                  Sherman
              Oct
                  - 2001
              A
              Capital
                  Contribution
              5,000,000
   42
  Jan
                  - 2002
              B
              Merger
                  Consideration
              1,800,000Dec
                  - 2002
              C
              Compensation
              500,000




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**




ExhibitsSee
                List of Exhibits filed as part of this Report on Form
                10-KSB/A.The
                financial statements listed below appear immediately after page
                42.Report
                of Independent Registered Public Accounting Firm
            F-1Financial
                StatementsBalance
                Sheet
            F-2Statement
                Of Operations
            F-3Statement
                Of Stockholders’ Equity
            F-4Statement
                Of Cash Flows
            F-5Notes
                To Financial Statements
            F-6
                - F-30




**Item
      14.**  **Principal
      accountant fees and services**




During
      2004 and 2003, we paid the following fees, including out of pocket expense
      reimbursements, to RubinBrown LLP:









43




2004
              
              2003Audit
                  Fees
              
              $
              108,358
              
              $
              55,265Audit-Related
                  Fees (1)
              
              
              24,450
              
              
              7,000Tax
                  Fees (2)
              
              
              9,250
              
              
              6,200All
                  Other Fees (3)
              
              
              --
              
              
              20,600Total
              
              $
              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 RubinBrown LLP required by Independence Standards Board Standard
      No.
      1, as currently in effect, and has discussed with RubinBrown 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:November
                14, 2005
            By:/s/Marc ShermanMarc
              ShermanChief
              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.




**Signature**
              **Title**
              **Date**/s/Marc
                  Sherman
                (Marc
                  Sherman)
              Chairman
                  of the Board, Chief Executive Officer and President
              November
                  14, 2005/s/Edward
                  L. Cummings
                Edward
                  L. Cummings
              Vice
                  President, Treasurer and Chief Financial Officer (Principal Financial
                  Officer and Principal Accounting Officer)
              November
                  14, 2005
   44
  /s/Seth
                  A. Grossman
                Seth
                  A. Grossman
              Director
              November
                  14, 2005/s/
                  R. Keith Elliott
                R.
                  Keith Elliott
              Director
              November
                  14, 2005/s/
                  Robert W. VanHellemont
                Robert
                  W. VanHellemont
              Director
              November
                  14, 2005




46
 45




**List
      Of Exhibits**




Exhibit
                  Number
              Description2.1
              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 Corporation4.1
              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,
                  20044.6
              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)).
   46
  Exhibit
                  Number
              Description
 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. Owens10.13***
              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 RubinBrown LLP31.1***
              CEO
                  Certification31.2***
              CFO
                  Certification32.1***
              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/A 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.




47


**Report
                  of Independent Registered Public****Accounting
                  Firm**
              F-1**Financial
                  Statements**Consolidated
                  Balance Sheets
              F-2Consolidated
                  Statements Of Operations
              F-3Consolidated
                  Statements Of Stockholders’ Equity
              F-4Consolidated
                  Statements Of Cash Flows
              F-5Notes
                  To Consolidated Financial Statements
              F-6
                  - F-31


48
 
  **Report
        Of Independent Registered Public**
 **Accounting
        Firm**
  Board
        of
        Directors and Stockholders
 Windsortech,
        Inc.
 Hightstown,
        New Jersey
  We
        have
        audited the accompanying c onsolidated
        b alance
        sheets of Windsortech, Inc. and subsidiaries as of December 31, 2004 and
        2003
        and the related c onsolidated 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 c onsolidated financial
        statements referred to above present fairly, in all material respects, the
        c onsolidated 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.
 
 As
        discussed in Note 1 to the consolidated financial statements, the consolidated
        financial statements as of December 31, 2004, and for the year then ended
        have
        been restated.
 
 
 St.
        Louis, Missouri
 
 January
        28, 2005, except as to the restatement discussed in Note 1 to the consolidated
        financial statements which is as of November 11, 2005
   49
 
 **WINDSORTECH,
        INC. AND SUBSIDIARIES**
  **CONSOLIDATED
        BALANCE SHEETS**
  **Assets****December
                    31,****2004****(Restated)**
                
                2003**Current
                    Assets**Cash and cash equivalents
                
                **$**
                **844,939**
                
                $
                270,155Accounts receivable, net of reserve of $50,000and $20,000 in 2004 and 2003, respectively
                
                
                **3,612,530**
                
                
                223,326Accounts receivable - related party
                
                
                **119,046**
                
                
                37,173Inventories
                
                
                **2,721,505**
                
                
                358,380Prepaid expenses and other assets
                
                
                **165,741**
                
                
                46,906Deferred income taxes
                
                
                **67,511**
                
                
                14,528**Total Current Assets**
                
                
                **7,531,272**
                
                
                950,468**Property
                    And Equipment, Net**
                
                
                **552,560**
                
                
                263,187**Goodwill**
                
                
                **3,125,794**
                
                
                —**Intangibles,
                    Net**
                
                
                **3,188,896**
                
                
                —**Deferred
                    Income Taxes**
                
                
                **—**
                
                
                112,492**Other
                    Assets**
                
                
                **89,843**
                
                
                64,851**$**
                **14,488,365**
                
                $
                1,390,998**Liabilities
                    And Stockholders' Equity****Current
                    Liabilities**Current maturities of notes payable
                
                **$**
                **603,376**
                
                $
                7,555Revolving lines of credit
                
                
                **1,155,500**
                
                
                7,192Accounts payable
                
                
                **1,590,928**
                
                
                268,958Accrued expenses
                
                
                **265,391**
                
                
                152,796Accrued payroll - principal stockholders
                
                
                **86,724**
                
                
                277,075Deferred revenue
                
                
                **346,031**
                
                
                —Other current liabilities
                
                
                **123,481**
                
                
                —**Total Current Liabilities**
                
                
                **4,171,431**
                
                
                713,576**Notes
                    Payable**
                
                
                **255,000**
                
                
                503,403**Deferred
                    Income Taxes**
                
                
                **1,115,870**
                
                
                —**Total Liabilities**
                
                
                **5,542,301**
                
                
                1,216,979**Commitments
                    And Contingencies (Note 12)****Stockholders'
                    Equity**Preferred shares: authorized 5,000,000 in 2004and 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 outstandingin 2004 and 16,468,754 issued and outstanding in 2003
                
                
                **255,500**
                
                
                164,688Additional paid-in capital
                
                
                **9,421,356**
                
                
                774,599Retained earnings (deficit)
                
                
                **(730,792**
                **)**
                
                (765,268
                )**Total Stockholders' Equity**
                
                
                **8,946,064**
                
                
                174,019**$**
                **14,488,365**
                
                $
                1,390,998
  Page
              F-2
 See
              the
              accompanying notes to consolidated financial statements.
   **WINDSORTECH,
          INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
  **For
                    The Years****Ended
                    December 31,****2004****(Restated)**
                
                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 For Income Taxes**
                
                
                **117,869**
                
                
                (147,309
                )**Provision
                    For Income Taxes**
                
                
                **83,393**
                
                
                1,900**Net
                    Income (Loss)**
                
                **$**
                **34,476**
                
                $
                (149,209
                )**Net
                    Income (Loss) Per Common Share - Basic**
                
                **$**
                **—**
                
                $
                (0.01
                )**Net
                    Income (Loss) Per Common Share - Diluted**
                
                **$**
                **—**
                
                $
                (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
 
  See
              the
              accompanying notes to consolidated financial statements.
 Page
              F-3
  **WINDSORTECH,
        INC. AND SUBSIDIARIES**


**For
        The Years Ended December 31, 2004 And 2003**
  **Total****Additional**
                
                **Retained**
                
                **Stockholders'****Common
                    Stock**
                
                **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**
                
                
                —
                
                
                —
                
                
                —
                
                
                34,476
                
                
                34,476**Balance
                    - December 31, 2004 (Restated)**
                
                
                25,550,007
                
                $
                255,500
                
                $
                9,421,356
                
                $
                (730,792
                )
                $
                8,946,064
 
  
  See
              the
              accompanying notes to consolidated financial statements.
 Page
              F-4
 **WINDSORTECH,
        INC. AND SUBSIDIARIES**
  **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **For
                    The Years****Ended
                    December 31,****2004****Cash
                    Flows From Operating Activities**
                
                **(Restated)**
                
                2003Net
                    income (loss)
                
                **$**
                **34,476**
                
                $
                (149,209
                )Adjustments
                    to reconcile net income (loss) to net cashprovided
                    by (used in) operating activities:Depreciation
                    and amortization
                
                
                **391,672**
                
                
                71,973Stock
                    option compensation expense
                
                
                **289,666**
                
                
                —Deferred
                    income taxes
                
                
                **37,735**
                
                
                —Common
                    stock issued for services
                
                
                **209,200**
                
                
                —Stock
                    warrants issued for services
                
                
                **—**
                
                
                60,000Change
                    in assets and liabilities:Accounts
                    receivable
                
                
                **(2,177,369**
                **)**
                
                (235,502
                )Inventories
                
                
                **(1,538,500**
                **)**
                
                68,760Prepaid
                    expenses and other current assets
                
                
                **(104,125**
                **)**
                
                47,143Other
                    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**
                
                
                493,997Stock
                    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**
                
                
                114,980Supplemental
                    Cash Flow Information (Note 14)
 See
                the
                accompanying notes to consolidated financial statements.
 Page
                F-5
  WINDSORTECH, INC. AND
        SUBSIDIARIES
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
        31, 2004 And 2003**
  
 **1.** **Summary
        Of Significant Accounting Policies**
 
 **Restatement
        Of Previously Issued Financial Statements**
  Management
        has determined that the initial accounting for deferred income taxes related
        to
        the acquisition of QualTech International Corporation and QualTech Services
        Group, Inc. (collectively QualTech) needed correction. The audited consolidated
        financial statements as of December 31, 2004 and for the year then ended
        have
        been restated to reflect the proper accounting treatment.
 
 Deferred
        income taxes were not originally recorded for the book to tax basis differences
        of acquired intangible assets. The effect of this correction was to record
        a
        long-term deferred tax liability at the acquisition date of $1,326,000, with
        an
        offsetting increase to goodwill. This correction also caused a change in
        the
        deferred income tax provision for the year ended December 31, 2004, increasing
        the deferred tax benefit by $82,331.
 
 Additionally,
        in 2004, the Company reversed a deferred tax asset valuation allowance related
        to net operating losses of WindsorTech that were incurred in 2002 and 2003.
        This
        was based on the Company’s determination that the deferred tax assets were more
        likely than not realizable in future periods, based on the Company’s projection
        of future taxable income related to its acquisition of QualTech. The reversal
        of
        the valuation allowance was originally recorded as a deferred income tax
        benefit. However, because the reversal of the valuation allowance was a result
        of the acquisition of QualTech, the offsetting adjustment should have been
        recorded in the purchase price allocation of the QualTech acquisition. The
        effect of this correction was to decrease the deferred tax benefit and goodwill
        by $180,649.
 
 The
        restatements had no effect on pre-tax income or cash flow for the year ended
        December 31, 2004.
 
 Portions
        of Notes 1, 4, 5, 9 and 15 have been restated to reflect the above described
        adjustments.
   F-6
 WINDSORTECH,
        INC. 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 Effects
        of the restatement are summarized as follows:
 
 As
                  of December 31, 2004 and for the year then endedAs
                  Previously
                Reported
              
              RestatedGoodwill
              
              $
              1,980,443
              
              $
              3,125,794Net
                  deferred tax asset (liability)
              
              
              195,310
              
              
              (1,048,359
              )Retained
                  earnings (deficit)
              
              
              (632,474
              )
              
              (730,792
              )Provision
                  (benefit) for income taxes
              
              
              (14,925
              )
              
              83,393Net
                  income
              
              
              132,794
              
              
              34,476
 
 As
                  of September 30, 2004 and for the quarter then ended
                  (unaudited)As
                  Previously
                Reported
              
              RestatedGoodwill
              
              $
              2,305,205
              
              $
              3,450,556Net
                  deferred tax asset (liability)
              
              
              82,792
              
              
              (1,243,208
              )Retained
                  earnings (deficit)
              
              
              (342,093
              )
              
              (522,742
              )Provision
                  for income taxes
              
              
              247,396
              
              
              247,396Net
                  income
              
              
              280,323
              
              
              280,323
 
 As
                  of June 30, 2004 and for the quarter then ended
                  (unaudited)As
                  Previously
                Reported
              
              RestatedGoodwill
              
              $
              2,198,772
              
              $
              3,344,123Net
                  deferred tax asset (liability)
              
              
              288,440
              
              
              (1,037,560
              )Retained
                  earnings (deficit)
              
              
              (622,417
              )
              
              (803,066
              )Provision
                  (benefit) for income taxes
              
              
              (180,649
              )
              
              —Net
                  income (loss)
              
              
              59,413
              
              
              (121,336
              )
 
 **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.
   F-7
  WINDSORTECH,
        INC. 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 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.
 
 **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.
   F-8
 WINDSORTECH,
        INC. 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **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.
 
 **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.
   F-9
 WINDSORTECH,
        INC. 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **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.
 
 **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.
   F-10
  WINDSORTECH,
        INC. 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **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.
 
 The
        following table presents the computation of basic and diluted net income
        (loss)
        per share:
 
 **2004**
              
              2003Net
                  income (loss)
              
              **$**
              **34,476**
              
              $
              (149,209
              )Determination
                  of basic and diluted shares:Basic
                  weighted average shares outstanding
              
              
              **24,659,853**
              
              
              15,661,593Effect
                  of dilutive securities:Stock
                  options
              
              
              **1,978,028**
              
              
              —Warrants
              
              
              **1,306,300**
              
              
              —Diluted
                  weighted average shares outstanding
              
              
              **27,944,181**
              
              
              15,661,593Net
                  Income (Loss) Per Common Share - Basic
              
              **$**
              **0.00**
              
              $
              (0.01
              )Net
                  Income (Loss) Per Common Share - Diluted
              
              **$**
              **0.00**
              
              $
              (0.01
              )
 
 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.
   F-11
 WINDSORTECH,
        INC. 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **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.
 
 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 **:**
 
 **2004**
              
              2003Net
                  income (loss), as reported
              
              **$**
              **34,476**
              
              $
              (149,209
              )Add:
                  Stock-based employee compensationexpense
                  included in reported net income,net
                  of related tax effects
              
              
              **176,696**
              
              
              —Deduct:
                  Total stock-based employeecompensation
                  expense determined underfair
                  value based method for all awards, netof
                  related tax effects
              
              
              **(6,567,287**
              **)**
              
              (379,426
              )Proforma
                  net loss
              
              **$**
              **(6,356,115**
              **)**
              $
              (528,635
              )Earnings
                  (loss) per share:Basic
                  - as reported
              
              **$**
              **0.00**
              
              $
              (0.01
              )Diluted
                  - as reported
              
              **$**
              **0.00**
              
              $
              (0.01
              )Basic
                  - Proforma
              
              **$**
              **(0.26**
              **)**
              $
              (0.03
              )Diluted
                  - Proforma
              
              **$**
              **(0.26**
              **)**
              $
              (0.03
              )
   
 F-12
 **WINDSORTECH,
        INC.** 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  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**
              
              2003Risk-free
                  interest rates
              
              
              **3.69**
              **%**
              
              3.15
              %Expected
                  option lives
              
              
              **5
                  years**
              
              
              5
                  yearsExpected
                  volatilities
              
              
              **101**
              **%**
              
              117
              %Expected
                  dividend yields
              
              
              **—**
              **%**
              
              —
              %
 
 **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.
   F-13
 
 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.
 
 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**
              
              2003Finished
                  goods
              
              **$**
              **2,546,733**
              
              $
              276,794Inventory
                  in transit
              
              
              **189,772**
              
              
              96,586Allowance
                  for excess and obsolescence
              
              
              **(15,000**
              **)**
              
              (15,000
              )**$**
              **2,721,505**
              
              $
              358,380
  
 F-14
 WINDSORTECH,
        INC.
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **3.** **Property
        And Equipment**
 
 **2004**
              
              2003Furniture
                  and fixtures
              
              **$**
              **89,786**
              
              $
              15,759Equipment
              
              
              **417,537**
              
              
              161,495Leasehold
                  improvements
              
              
              **31,859**
              
              
              7,427Computer
                  equipment and software
              
              
              **286,061**
              
              
              157,237**825,243**
              
              
              341,918Less:
                  Accumulated depreciation
              
              
              **(272,683**
              **)**
              
              (93,326
              )**552,560**
              
              
              248,592Construction
                  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.
 
 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. 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.
   F-15
 
 WINDSORTECH,
          INC.
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 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.
 
 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 $3,125,794. 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
              
              $
              345,281Accounts
                  receivable
              
              
              1,293,708Inventory
              
              
              824,625Fixed
                  assets
              
              
              262,617Other
                  assets
              
              
              35,393Intangible
                  assets
              
              
              3,400,000Goodwill
              
              
              3,125,794Accounts
                  payable
              
              
              (603,480
              )Accrued
                  expenses
              
              
              (129,927
              )Short-term
                  debt
              
              
              (510,000
              )Deferred
                  tax liability
              
              
              (1,179,647
              )Other
                  liabilities
              
              
              (264,364
              )$
              6,600,000
   F-16
 
 WINDSORTECH,
          INC.
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **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.
  **2004**
              
              2003Net
                  revenue
              
              **$**
              **30,890,968**
              
              $
              21,962,181Net
                  income (loss)
              
              
              **190,819**
              
              
              (94,465
              )Earnings
                  (loss) per share - basic
              
              **$**
              **0.01**
              
              $
              —Earnings
                  (loss) per share - diluted
              
              **$**
              **0.01**
              
              $
              —Weighted
                  average shares - basic
              
              
              **24,602,246**
              
              
              23,619,424Weighted
                  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
              
              $
              3,125,794Intangible
                  assets with indefinite lives
              
              
              910,000Intangibles
                  with definite lives
              
              
              2,278,896$
              6,314,690
   F-17
 WINDSORTECH,
          INC.
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 Intangibles
        with indefinite lives relate principally to trade names. Intangibles with
        definite lives relate principally to the following:
 
 **2004**
              
              **Accumulated**
              
              
              
              **Amortization
                  Life****Cost**
              
              **Amortization**
              
              **Amortization**
              
              **Net**
              
              **Life
                  (years)**Customer
                  Lists
              
              $
              1,640,000
              
              $
              121,472
              
              $
              121,472
              
              $
              1,518,528
              
              
              9.0Database
              
              
              400,000
              
              
              29,632
              
              
              29,632
              
              
              370,368
              
              
              9.0EmployeeNoncompetes
              
              
              450,000
              
              
              60,000
              
              
              60,000
              
              
              390,000
              
              
              5.0Total
              
              $
              2,490,000
              
              $
              211,104
              
              $
              211,104
              
              $
              2,278,896
 
 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.
  **6.** **Other
        Assets**
 
 **2004**
              
              2003Deposits
              
              **$**
              **63,341**
              
              $
              40,837Trademark
              
              
              **3,010**
              
              
              —Patent,
                  net of amortization of $1,413 in 2004
                and $202 in 2003
              
              
              **22,803**
              
              
              24,014Other
              
              
              **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.
    F-18
 WINDSORTECH,
          INC.
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **7.** **Financing
        Arrangements**
 
 Notes
        payable consist of the following:
 **2004**
              
              2003Notes
                  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**
              
              $
              500,000Notes
                  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**
              
              
              510,958Less:
                  Current maturities
              
              
              **603,376**
              
              
              7,555**$**
              **255,000**
              
              $
              503,403
 
 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.
   F-19
  WINDSORTECH,
          INC.
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **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.
 
 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.
    F-20
 WINDSORTECH,
          INC.
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 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:
 
 **2004**
              
              2003**Weighted-**
              
              
              
              Weighted-**Average**
              
              
              
              Average**Exercise**
              
              
              
              Exercise**Shares**
              
              **Price**
              
              Shares
              
              PriceOutstanding
                  - Beginning of Period
              
              
              **5,525,000**
              
              **$**
              **0.999**
              
              
              2,560,000
              
              $
              0.026Granted
              
              
              **2,600,000**
              
              
              **1.684**
              
              
              2,965,000
              
              
              1.839Exercised
              
              
              **(500,000**
              **)**
              
              **(1.803**
              **)**
              
              —
              
              
              —Forfeited
              
              
              —
              
              
              —
              
              
              —
              
              
              —Outstanding
                  on December 31
              
              
              **7,625,000**
              
              **$**
              **1.180**
              
              
              5,525,000
              
              $
              0.999Exercisable
                  on December 31
              
              
              **7,175,000**
              
              **$**
              **1.148**
              
              
              2,935,000
              
              $
              0.116
 
 The
        following table summarizes information about the options outstanding at December
        31, 2004:
  **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
              
              $
              2.0087,625,000
              
              
              
              
              
              
              
              
              7,175,000
 
   F-21
 WINDSORTECH,
          INC.
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  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.
 
 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.
    F-22
 WINDSORTECH,
          INC.
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 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:
 
 **Number
                  Of**
              
              **Weighted
                  Average****Shares**
              
              **Exercise
                  Price**Outstanding
                  at December 31, 2002
              
              —
              
              —Warrants
                  granted
              
              
              600,000
              
              $
              0.667Outstanding
                  at December 31, 2003
              
              
              600,000
              
              
              0.667Warrants
                  granted
              
              
              6,350,000
              
              
              2.520Warrants
                  exercised
              
              
              (500,000
              )
              
              1.500Outstanding
                  at December 31, 2004
              
              
              6,450,000
              
              $
              2.426
 
 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
              
              $
              3.6006,450,000
              
              
              
              
              
              
              
              
              6,450,000
  
 F-23
 WINDSORTECH,
        INC.
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


**9.** **Income
        Taxes**
 
 The
        provision for income taxes consists of the following:
 
 **2004**
              
              2003Current
              
              **$**
              **45,658**
              
              $
              1,900Deferred
              
              
              **37,735**
              
              
              —**$**
              **83,393**
              
              $
              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**
              
              $
              14,528Net
                  operating loss carryforwards
              
              
              **228,273**
              
              
              331,387Stock
                  options
              
              
              **5,720**
              
              
              —Inventory
                  capitalization
              
              
              **29,250**
              
              
              —Gross
                  deferred tax assets
              
              
              **331,497**
              
              
              345,915Valuation
                  allowance
              
              
              —
              
              
              (180,648
              )**331,497**
              
              
              165,267**Deferred
                  Tax Liabilities**Intangible
                  assets
              
              
              **1,243,669**
              
              
              —Property
                  and equipment
              
              
              **93,576**
              
              
              28,881Prepaid
                  expenses
              
              
              **33,698**
              
              
              —Patent
                  and trademark
              
              
              **8,913**
              
              
              9,366**1,379,856**
              
              
              38,247**Net
                  Deferred Tax Asset (Liability)**
              
              **$**
              **(1,048,359**
              **)**
              $
              127,020
 
 The
        current and long-term components of the deferred tax asset (liability) are
        as
        follows:
 
 **2004**
              
              2003Current
                  deferred tax asset
              
              **$**
              **67,511**
              
              $
              14,528Long-term
                  deferred tax asset (liability)
              
              
              **(1,115,870**
              **)**
              
              112,492**$**
              **(1,048,359**
              **)**
              $
              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.
   F-24
 WINDSORTECH,
          INC.
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 The
        reconciliation of the effective tax rate with the statutory federal income
        tax
        rate is as follows:
 
 **2004**
              
              2003Statutory
                  rate
              
              
              **34**
              **%**
              
              34
              %State
                  income taxes, net of federal benefits
              
              
              **29**
              
              
              5Change
                  in deferred tax asset valuation allowance
              
              
              **—**
              
              
              (36
              )Meals
                  and entertainment
              
              
              **8**
              
              
              (3
              )Other
              
              
              **—**
              
              
              (1
              )**71**
              **%**
              
              (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, based on the Company’s projection of
        future taxable income related to its acquisition of QualTech. Because the
        reversal of the valuation allowance was a result of the acquisition of QualTech,
        the offsetting adjustment was recorded in the purchase price allocation of
        the
        QualTech acquisition.
  **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.
 
 **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.
    F-25
 WINDSORTECH,
          INC.
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **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.
 
 The
        approximate minimum payments required under these operating leases at December
        31, 2004 are:
 
 **Year**
              
              **Amount**2005
              
              $
              398,0002006
              
              
              380,0002007
              
              
              217,0002008
              
              
              178,0002009
              
              
              148,000$
              1,321,000
   F-26
 WINDSORTECH,
          INC.
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **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.
 
 
 **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.
   
 F-27
 WINDSORTECH,
          INC.
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **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 And 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.
 
 **Data
        Center Maintenance**
  This
        segment provides hardware maintenance services on enterprise-class hardware
        and
        associated peripheral products to companies in the United States.
   F-28
 WINDSORTECH,
          INC.
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 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.
 **2004**
              
              2003**Revenues**Data
                  Security and Compliance
              
              **$**
              **10,388,674**
              
              $
              7,484,472Data
                  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 and Compliance
              
              **$**
              **9,450,188**
              
              $
              7,454,235Data
                  Center Hardware
              
              
              **11,155,459**
              
              
              —Data
                  Center Maintenance
              
              
              **—**
              
              
              —**Consolidated
                  Total**
              
              **$**
              **20,605,647**
              
              $
              7,454,235
 
 **Service
                  Revenue**Data
                  Security and Compliance
              
              **$**
              **254,503**
              
              $
              30,237Data
                  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 and Compliance
              
              **$**
              **(983,059**
              **)**
              $
              (147,309
              )Data
                  Center Hardware
              
              
              **1,067,296**
              
              
              —Data
                  Center Maintenance
              
              
              **33,632**
              
              
              —**Consolidated
                  Total**
              
              **$**
              **117,869**
              
              $
              (147,309
              )
    F-29
 
 WINDSORTECH,
          INC.
 
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  
 **2004**
              
              2003**Depreciation
                  And Amortization**Data
                  Security and Compliance
              
              **$**
              **113,519**
              
              $
              71,973Data
                  Center Hardware
              
              
              **240,351**
              
              
              —Data
                  Center Maintenance
              
              
              **37,802**
              
              
              —**Consolidated
                  Total**
              
              **$**
              **391,672**
              
              $
              71,973
 
 
 **Interest
                  Expense, Net**Data
                  Security and Compliance
              
              **$**
              **67,172**
              
              $
              79,656Data
                  Center Hardware
              
              
              **16,135**
              
              
              —Data
                  Center Maintenance
              
              
              —
              
              
              —**Consolidated
                  Total**
              
              **$**
              **83,307**
              
              $
              79,656
 
 
 **Segment
                  Assets**Data
                  Security and Compliance
              
              **$**
              **4,428,937**
              
              $
              1,390,998Data
                  Center Hardware
              
              
              **9,090,494**
              
              
              —Data
                  Center Maintenance
              
              
              **968,934**
              
              
              —**Consolidated
                  Total**
              
              **$**
              **14,488,365**
              
              $
              1,390,998
 
 
 **Goodwill**Data
                  Security and Compliance
              
              **$**
              **—**
              
              $
              —Data
                  Center Hardware
              
              
              **2,877,544**
              
              
              —Data
                  Center Maintenance
              
              
              **248,250**
              
              
              —**Consolidated
                  Total**
              
              **$**
              **3,125,794**
              
              $
              —
 
 
 **Expenditures
                  For Property And**
                **Equipment**Data
                  Security and Compliance
              
              **$**
              **93,129**
              
              $
              88,142Data
                  Center Hardware
              
              
              **9,938**
              
              
              —Data
                  Center Maintenance
              
              
              **103,044**
              
              
              —**Consolidated
                  Total**
              
              **$**
              **206,111**
              
              $
              88,142
   
 F-30
 
 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**
              
              2003United
                  States
              
              **$**
              **18,094,977**
              
              $
              5,198,400Asia
              
              
              **983,921**
              
              
              817,707Europe
              
              
              **382,866**
              
              
              349,715Africa
              
              
              **604,686**
              
              
              703,073United
                  Kingdom
              
              
              **1,333,544**
              
              
              155,834Canada
              
              
              **506,262**
              
              
              223,458Australia
              
              
              **63,150**
              
              
              24,500South
                  America
              
              
              **110,390**
              
              
              11,785**$**
              **22,079,796**
              
              $
              7,484,472
 
 F-31