Exhibit 99.1
 EYAK TECHNOLOGY, LLC AND SUBSIDIARY
A SUBSIDIARY OF EYAK CORPORATION
 AUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008, 2007, AND 2006




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PageReport of Independent Registered Public Accounting Firm
    
    
    1Audited Consolidated Financial StatementsConsolidated Balance Sheets
    
    
    2  3Consolidated Statements of Income
    
    
    4Consolidated Statements of Members Equity
    
    
    5Consolidated Statements of Cash Flows
    
    
    6  7Notes to Consolidated Financial Statements
    
    
    8  19




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Report of Independent Registered Public Accounting Firm
 Eyak Technology, LLC
 Eyak Technology, LLC and Subsidiary
  Eyak Technology, LLC and Subsidiary
 
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Eyak Technology, LLC and Subsidiary
 Consolidated Balance Sheets
 December 31,
    
    2008
    
    
    2007AssetsCurrent assetsCash and cash equivalents
    
    $
    4,781,811
    
    
    $
    387,707Accounts receivable
    
    
    66,540,663
    
    
    
    69,683,093Inventory
    
    
    1,678,758
    
    
    
    2,863,627Deferred contract costs
    
    
    29,731,144
    
    
    
    13,577,256Prepaid expenses and other current assets
    
    
    1,336,217
    
    
    
    2,839,129Total current assets
    
    
    104,068,593
    
    
    
    89,350,812Property and equipment, net
    
    
    248,388
    
    
    
    232,185Other assetsLoans receivable  related parties
    
    
    134,089
    
    
    
    142,991Intangible assets, net
    
    
    495,269
    
    
    
    627,340Long term lease receivables
    
    
    
    
    
    
    1,456,428Deposits
    
    
    124,844
    
    
    
    173,359Total other assets
    
    
    754,202
    
    
    
    2,400,118Total assets
    
    $
    105,071,183
    
    
    $
    91,983,115
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Eyak Technology, LLC and Subsidiary
 Consolidated Balance Sheets
 December 31,
    
    2008
    
    
    2007Liabilities and Members EquityCurrent liabilitiesBorrowings under credit facilities
    
    $
    1,532,272
    
    
    $
    25,476,781Accounts payable and accrued expenses
    
    
    52,549,929
    
    
    
    24,066,347Accounts payable  related party
    
    
    1,426,146
    
    
    
    12,855,118Financed lease debt
    
    
    1,456,428
    
    
    
    1,515,996Accrued salaries and related liabilities
    
    
    3,181,121
    
    
    
    1,581,674Deferred revenue
    
    
    32,946,379
    
    
    
    16,350,133Total current liabilities
    
    
    93,092,275
    
    
    
    81,846,049Long term liabilitiesLong term financed lease debt
    
    
    
    
    
    
    1,456,428Deferred rent
    
    
    77,445
    
    
    
    127,332Total liabilities
    
    
    93,169,720
    
    
    
    83,429,809Commitments and contingenciesMembers equity
    
    
    11,901,463
    
    
    
    8,553,306Total liabilities and members equity
    
    $
    105,071,183
    
    
    $
    91,983,115
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Eyak Technology, LLC and Subsidiary
 Consolidated Statements of Income
 Years Ended December 31,
    
    2008
    
    
    2007
    
    
    2006RevenueProduct revenue
    
    $
    111,180,182
    
    
    $
    128,950,838
    
    
    $
    45,940,596Services revenue
    
    
    162,294,424
    
    
    
    99,634,078
    
    
    
    46,044,333Total revenue
    
    
    273,474,606
    
    
    
    228,584,916
    
    
    
    91,984,929Direct costsProduct direct costs (related party purchases of
$25,840,647, $68,973,976, and $14,587,528 in
2008, 2007, and 2006 respectively; see
footnote 11)
    
    
    102,035,599
    
    
    
    121,247,302
    
    
    
    42,019,729Services direct costs
    
    
    140,147,335
    
    
    
    86,969,652
    
    
    
    37,863,144Total direct costs
    
    
    242,182,934
    
    
    
    208,216,954
    
    
    
    79,882,873Gross margin on revenueProduct gross margin
    
    
    9,144,583
    
    
    
    7,703,536
    
    
    
    3,920,867Services gross margin
    
    
    22,147,089
    
    
    
    12,664,426
    
    
    
    8,181,189Total gross margin on revenue
    
    
    31,291,672
    
    
    
    20,367,962
    
    
    
    12,102,056Selling, general and administrative costs
    
    
    18,411,950
    
    
    
    12,278,686
    
    
    
    9,644,550Income from operations
    
    
    12,879,722
    
    
    
    8,089,276
    
    
    
    2,457,506Other income (expense)Interest income
    
    
    388,924
    
    
    
    153,942
    
    
    
    70,578Interest expense
    
    
    (224,655
    )
    
    
    (360,837
    )
    
    
    (15,034
    )Total
    
    
    164,269
    
    
    
    (206,895
    )
    
    
    55,544Income before minority interest
    
    
    13,043,991
    
    
    
    7,882,381
    
    
    
    2,513,050Minority interest
    
    
    
    
    
    
    877,843
    
    
    
    Net income
    
    $
    13,043,991
    
    
    $
    7,004,538
    
    
    $
    2,513,050
  
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Eyak Technology, LLC and Subsidiary
 Consolidated Statements of Members Equity
 Years Ended December 31, 2008, 2007, and 2006Balance, January 1, 2006
    
    $
    1,595,993Distributions
    
    
    (300,000
    )Net income
    
    
    2,513,050Balance, December 31, 2006
    
    $
    3,809,043Distributions
    
    
    (2,260,275
    )Net income
    
    
    7,004,538Balance, December 31, 2007
    
    $
    8,553,306Distributions
    
    
    (9,695,834
    )Net income
    
    
    13,043,991Balance, December 31, 2008
    
    $
    11,901,463
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Eyak Technology, LLC and Subsidiary
 Consolidated Statements of Cash Flows
 Years Ended December 31,
    
    2008
    
    
    2007
    
    
    2006Cash flows from operating activitiesNet income
    
    $
    13,043,991
    
    
    $
    7,004,538
    
    
    $
    2,513,050Adjustments to reconcile net income to net cash
provided (used) by operating activitiesDepreciation
    
    
    139,543
    
    
    
    135,769
    
    
    
    117,346Amortization
    
    
    132,071
    
    
    
    33,018
    
    
    
    Bad debt expense
    
    
    120,250
    
    
    
    64,605
    
    
    
    178,861Minority interest
    
    
    
    
    
    
    877,843
    
    
    
    Distribution of profits to minority interest
    
    
    
    
    
    
    (877,843
    )
    
    
    (Increase) decrease inAccounts receivable
    
    
    2,962,612
    
    
    
    (48,044,252
    )
    
    
    (10,991,407
    )Inventory
    
    
    1,184,869
    
    
    
    (2,008,180
    )
    
    
    (855,448
    )Deferred contract costs
    
    
    (16,153,888
    )
    
    
    8,204,574
    
    
    
    (18,466,390
    )Prepaid expenses and other assets
    
    
    1,502,912
    
    
    
    (1,284,632
    )
    
    
    (532,341
    )Deposits
    
    
    48,515
    
    
    
    (103,777
    )
    
    
    40Increase (decrease) inAccounts payable and accrued expenses
    
    
    25,029,017
    
    
    
    7,632,879
    
    
    
    934,961Accounts payable  related party
    
    
    (11,428,972
    )
    
    
    6,828,980
    
    
    
    1,717,811Accrued salaries and related liabilities
    
    
    1,599,447
    
    
    
    652,635
    
    
    
    757,929Deferred revenue
    
    
    16,596,246
    
    
    
    (5,857,585
    )
    
    
    18,605,094Deferred rent
    
    
    (49,887
    )
    
    
    13,159
    
    
    
    (15,607
    )Net cash provided (used) by operating activities
    
    
    34,726,726
    
    
    
    (26,728,269
    )
    
    
    (6,036,101
    )Cash flows from investing activitiesPurchases of property and equipment
    
    
    (155,746
    )
    
    
    (160,395
    )
    
    
    (88,323
    )Purchase of minority interest of subsidiary from
related party
    
    
    
    
    
    
    (660,358
    )
    
    
    Net repayments from related party
    
    
    8,902
    
    
    
    2,566
    
    
    
    12,087Net cash used by investing activities
    
    
    (146,844
    )
    
    
    (818,187
    )
    
    
    (76,236
    )
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Eyak
Technology, LLC and Subsidiary
 Consolidated Statements of Cash Flows (Continued)
 Years Ended December 31,
    
    2008
    
    
    2007
    
    
    2006Cash flows from financing activities(Payments to) proceeds from credit facilities, net
    
    
    (23,944,509
    )
    
    
    19,662,502
    
    
    
    5,814,279Proceeds from financed lease debt
    
    
    
    
    
    
    6,625,066
    
    
    
    Distributions
    
    
    (6,241,269
    )
    
    
    (2,260,275
    )
    
    
    (300,000
    )Net cash (used) provided by financing activities
    
    
    (30,185,778
    )
    
    
    24,027,293
    
    
    
    5,514,279Net change in cash and cash equivalents
    
    
    4,394,104
    
    
    
    (3,519,163
    )
    
    
    (598,058
    )Cash and cash equivalents at beginning of year
    
    
    387,707
    
    
    
    3,906,870
    
    
    
    4,504,928Cash and cash equivalents at end of year
    
    $
    4,781,811
    
    
    $
    387,707
    
    
    $
    3,906,870Supplemental cash flow informationInterest paid
    
    $
    324,727
    
    
    $
    256,046
    
    
    $
    15,034Accrued distribution payable
    
    $
    3,454,565
    
    
    $
    
    
    
    $
    
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Eyak Technology, LLC and Subsidiary
 Notes to Consolidated Financial Statements
 1.
    
    Organization and significant
accounting policies
    
    Organization: Eyak Technology, LLC (the Company and
Eyaktek), a subsidiary of The Eyak Corporation, was
incorporated on January 2, 2002, under the laws of the
State of Delaware. The Company provides communication
solutions, information technology solutions, health care
services, and architecture and engineering services to
government and civilian federal agencies.The Company is an Alaskan Native owned 8(a) certified
contractor under a program administered by the U.S. Small
Business Administration (SBA) and will graduate from the
8(a) program in May 2011. GTSI Corporation (GTSI) is a 37%
member in the Company.EG Solutions, LLC (EGS) was formed on January 24, 2006
under the laws of the State of Delaware and provides
hardware and software sales and maintenance to the federal
government and federal government contractors. EGS
operations began during 2007. The Company owned a 51%
membership interest and GTSI Corporation was a 49% member
in EGS. On September 30, 2007 the Company purchased GTSIs
membership interest in the joint venture for $660,358.
This acquisition of the noncontrolling interest in EGS was
accounted for under the purchase method. The excess of
the purchase price over the net book value of the assets
acquired resulted in intangible assets of $660,358 (See
Note 6). Under the terms of the purchase agreement, the
Company signed a subcontract agreement with GTSI to
continue providing services under the First Source
Contract for which the joint venture was formed. At
September 30, 2007, EGS was a wholly owned subsidiary of
Eyaktek.Principles of consolidation: The accompanying
consolidated financial statements include the accounts of
Eyak Technology, LLC and its subsidiary, EG Solutions, LLC
(collectively, the Company). All contract activity in the
subsidiary is presented at full value with the minority
interest in the subsidiary presented on the accompanying
consolidated statement of income for the year ended
December 31, 2007. All significant intercompany balances
and transactions have been eliminated in consolidation.Revenue:The Company recognizes revenue when persuasive
evidence of a sale arrangement exists, delivery has
occurred or services have been rendered, the sales price
is fixed or determinable, and collectibility is reasonably
assured. The Company recognizes revenue from product sales
when title passes to the customer, typically upon
delivery. When a customer order contains multiple items
such as hardware, software and services which are
delivered at varying times, the Company determines whether
the delivered items can be considered separate units of
accounting as prescribed under Emerging Issues Task Force
(EITF) Issue No. 00-21, Revenue Arrangements with
Multiple Deliverables(EITF 00-21). EITF 00-21 states
that delivered items should be considered separate units
of accounting if delivered items have value to the
customer on a standalone basis, there is objective and
reliable evidence of the fair value of undelivered items,
and if delivery of undelivered items is probable and
substantially in Eyak Teks control.
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Eyak Technology, LLC and Subsidiary
 Notes to Consolidated Financial Statements
 Generally, the Company is able to establish fair value for
all elements of the arrangement. In these instances,
revenue is recognized on each element separately. However,
if fair value cannot be established or if the delivered
items do not have standalone value to the customer without
additional services being provided, the Company recognizes
revenue on the contract as a single unit of accounting.In most cases, revenue from hardware and software product
sales is recognized when title passes to the customer.
Based upon the Companys standard shipping terms, FOB
destination, title passes upon delivery of the products to
the customer. However, occasionally Eyak Teks customers
will request bill-and-hold transactions in situations
where the customer does not have space available to
receive products or is not able to immediately take
possession of products for other reasons, in which case
Eyak Tek will store the purchased equipment in its
distribution center. Under Staff Accounting Bulletin 104,
the Company only recognizes revenue for bill-and-hold
transactions when the goods are complete and ready for
shipment, title and risk of loss have passed to the
customer, management receives a written request from the
customer for bill-and-hold treatment, and the ordered
goods are physically segregated in Eyak Teks warehouse
from other inventory and cannot be used to fulfill other
customer orders.In accordance with EITF Issue No. 00-10, Accounting for
Shipping and Handling Fees and Costs,the Company records
freight billed to customers as sales and the related
shipping costs as cost of sales.The Company sells products to certain customers under
sales-type lease arrangements for terms typically ranging
from two to four years. The Company accounts for its
sales-type leases according to the provisions of Financial
Accounting Standards Board (FASB) Statement of Financial
Accounting Standards (FAS) No. 13, Accounting for Leases, (FAS 13) and, accordingly, recognizes current and
long-term lease receivables, net of unearned income, on
the accompanying balance sheets. The present value of all
payments is recorded as sales and the related cost of the
equipment is charged to cost of sales. The associated
interest is recorded over the term of the lease using the
effective interest method.Eyak Tek transfers these receivables to various financing
companies and accounts for the transfers in accordance
with FAS No. 140, Accounting for the Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilitiesa Replacement of FASB Statement 125(FAS
140). The transfer of receivables in which the Company
surrenders control is accounted for as a sale. To
surrender control, the assets must be isolated from the
Company, the transferee has the right to pledge or
exchange the receivables and the Company must not have an
agreement that entitles and obligates it to repurchase the
receivables or the ability to unilaterally cause the
holder to return specific assets. If the transfer of
receivables does not meet the criteria for a sale under
FAS 140, the transfer is accounted for as a secured
borrowing with a pledge of collateral. As a result, the
Company has recorded certain transferred receivables and
secured borrowings, within accounts receivable and
long-term lease receivables, and as financed lease debt on
the balance sheet.
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Eyak Technology, LLC and Subsidiary
 Notes to Consolidated Financial Statements
 Revenue from fixed-price type service contracts is
recognized under the proportional performance method of
accounting, with costs and estimated profits included in
contract revenue as work is performed. If actual and
estimated costs to complete a contract indicate a loss, a
provision is made currently for the loss anticipated on
the contract. Revenue from time and materials contracts is
recognized as costs are incurred at amounts represented by
the agreed-upon billing amounts. Occasionally the Company
hires third party contractors to carry out service
obligations. In this circumstance, revenue is recognized
over the performance period.Revenue recognized on contracts for which billings have
not been presented to customers at year end is included in
the accounts receivable classification on the accompanying
consolidated balance sheets.Payments received in advance of the performance of
services are included in the accompanying consolidated
balance sheet as deferred revenue.Cash and cash equivalents: For purposes of financial
statement presentation, the Company considers all highly
liquid debt instruments with initial maturities of ninety
days or less to be cash equivalents. The Company maintains
cash balances which may exceed federally insured limits.
Management does not believe that this results in any
significant credit risk.Accounts receivable: The Company provides for an
allowance for doubtful accounts based on managements best
estimate of possible losses determined principally on the
basis of historical experience and specific allowances for
known troubled accounts, if needed. All accounts or
portions thereof that are deemed to be uncollectible or
that require an excessive collection cost are written off
to the allowance for doubtful accounts. At December 31,
2008 and 2007 management recorded an allowance of $291,163
and $243,465, respectively, for estimated doubtful
accounts.Marketing assistance fees: The Company has entered into
agreements that provide for the payment of marketing
assistance funds from certain vendors based on the amount
of products sold. These fees are considered to be a
reduction of direct costs.Deferred contract costs:Deferred contract costs consist
primarily of amounts paid to third party vendors in
support of annual or periodic service agreements directly
related to amounts included in deferred revenue at the
period end. These annual or periodic service agreements
relate to contracts to provide satellite bandwidth;
computer and networking hardware maintenance; software
support and upgrade rights; and other service agreements.
Deferred contract costs are charged to direct costs in the
period in which the service is rendered to the customer.
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Eyak Technology, LLC and Subsidiary
 Notes to Consolidated Financial Statements
 Prepaid expenses: Direct cost payments made to vendors in
advance of shipments of products are charged to prepaid
expenses in the accompanying consolidated balance sheets.
Payments made to vendors in advance of performance of
services for indirect costs are charged to prepaid
expenses in the accompanying consolidated balance sheets.
Prepaid expenses are charged to direct and indirect costs
in the period in which the service or product is rendered
to the Company.Inventory: Inventory consists primarily of computer
equipment and is stated at the lower of cost or market
using the specific identification method. The majority of
the Companys inventory at any time is made up of
in-transit inventory. These are products that have been
drop shipped by a vendor but not received by the end user
prior to period end.Property and equipment: Property and equipment are
recorded at the original cost and are being depreciated on
a straight-line basis over estimated lives of three to
seven years. Leasehold improvements are amortized over the
life of the assets or the remaining period of the lease
whichever is shorter.Intangible assets:Intangible and other long-lived assets
are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. In reviewing for impairment, the Company
compares the carrying value of the relevant assets to the
estimated undiscounted future cash flows expected from the
use of the assets and their eventual disposition. When
the estimated undiscounted future cash flows are less than
their carrying amount, an impairment loss is recognized
equal to the difference between the assets fair value and
its carrying value.Deferred rent: The Company recognizes the minimum
non-contingent rents required under operating leases as
rent expense on a straight-line basis over the life of the
lease, with differences between amounts recognized as
expense and the amounts actually paid recorded as deferred
rent on the accompanying consolidated balance sheets.Income taxes: The Company is taxed as a partnership, and
therefore, does not pay Federal and state corporate income
taxes since the tax attributes of the Company are reported
on the members income tax returns. Consequently, no
provision for income taxes has been provided in the
accompanying consolidated financial statements. The
Company currently evaluates uncertain tax positions under
the provisions of Statement of Financial Accounting
Standards No. 5, Accounting for Contingencies. The effects
of tax positions are generally recognized in the financial
statements consistent with amounts reflected in returns
filed, or expected to be filed, with taxing authorities.
For tax positions that the Company considers to be
uncertain, current and deferred tax liability has been
incurred and the amount of the liability is reasonably
estimable.Use of accounting 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.
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Eyak Technology, LLC and Subsidiary
 Notes to Consolidated Financial Statements
 New Accounting Pronouncements:In February 2007, the FASB
issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities(SFAS 159). This
statement gives entities the option to report most
financial assets and liabilities at fair value, with
changes in fair value recorded in earnings. This
statement, which is effective for fiscal years beginning
after November 15, 2007, does not have a material impact
on the Companys consolidated financial position or
results of operations.In June 2006 the FASB issued Interpretation No. 48,
Accounting for Uncertainty in Income Taxes(FIN 48). FIN
48 clarifies the accounting for income taxes by
prescribing a minimum probability threshold that a tax
position must meet before a financial statement benefit is
recognized. This statement is effective for the Company on
January 1, 2009 and is not expected to have a material
impact on the Company.In December 2007, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards
No. 160, Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51
(SFAS 160). SFAS 160 establishes new accounting and
reporting standards for the noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary.
SFAS 160 also clarifies that changes in a parents
ownership interest in a subsidiary that do not result in
deconsolidation are equity transactions if the parent
retains its controlling financial interest and requires
that a parent recognize a gain or loss in net income when
a subsidiary is deconsolidated. The gain or loss will be
measured using the fair value of the noncontrolling equity
investment on the deconsolidation date. Moreover, SFAS 160
includes expanded disclosure requirements regarding the
interests of the parent and its noncontrolling interest.
This statement will be applied by the Company beginning
January 1, 2009, and earlier adoption is prohibited.In December 2007, the FASB issued SFAS No. 141R, Business
Combinations(SFAS No. 141R). SFAS No. 141R
significantly changes the accounting for business
combinations in a number of areas including the treatment
of contingent consideration, pre-acquisition
contingencies, transaction costs, restructuring costs and
income taxes. SFAS No. 141R applies prospectively to
business combinations for which the acquisition date is on
or after the beginning of the fiscal year beginning after
December 15, 2008.In March 2008, the FASB issued SFAS No. 161, Disclosures
about Derivative Instruments and Hedging Activities An
Amendment of FASB Statement No. 133(SFAS 161). This
statement amends and expands the disclosure requirements
for derivative instruments and for hedging activities.
SFAS 161 is effective for interim periods beginning after
November 15, 2008. The Company does not believe this
statement will impact future disclosures because the
Company does not engage in hedging activities nor invest
in derivative instruments.
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Eyak Technology, LLC and Subsidiary
 Notes to Consolidated Financial Statements
 In August 2008, the SEC announced that it will issue for
comment a proposed roadmap regarding potential use of
International Financial Reporting Standards (IFRS) for
the preparation of financial statements by U.S.
registrants. IFRS are standards and interpretations
adopted by the International Accounting Standards Board.
Under the proposed roadmap, the Company would be required
to prepare financial statements in accordance with IFRS in
fiscal year 2014, including comparative information also
prepared under IFRS for fiscal 2013 and fiscal 2012. The
Company is currently assessing the potential impact of
IFRS on its financial statements and will continue to
follow the proposed roadmap for future developments.2.
    
    Accounts receivable
    
    Accounts receivable at December 31, 2008 and 2007, consist
primarily of amounts collectible from US federal
government agencies and prime contractors to the
government. The components of accounts receivable are:
 2008
    
    
    2007Billed receivables
    
    $
    63,782,232
    
    
    $
    68,140,712Lease receivable, current
    
    
    1,456,428
    
    
    
    1,515,996Unbilled receivables
    
    
    1,593,166
    
    
    
    269,850Total
    
    
    66,831,826
    
    
    
    69,926,558Less: Allowance for doubtful accounts
    
    
    (291,163
    )
    
    
    (243,465
    )Total
    
    $
    66,540,663
    
    
    $
    69,683,093
 Of the total receivables outstanding as of December 31,
2008 and 2007 approximately 22% and 71%, respectively,
were outstanding with civilian agencies and approximately
75% and 28%, respectively, with The Department of Defense.
Of the receivables due from civilian agencies at December
31, 2008 and 2007, 15% and 66%, respectively were due from
one agency. At December 31, 2007 accounts receivables
totaling $16,670,689 were assigned as collateral pursuant
to the Companys credit facility (Note 8). There were no
receivables assigned as collateral as at December 31,
2008.
  - 13 -




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Eyak Technology, LLC and Subsidiary
 Notes to Consolidated Financial Statements
 3.
    
    Transferred receivables and
financed lease debt
    
    During 2008, the Company sold lease receivables to a
related party that met the sale criteria under FAS 140 in
the amount of $4.7M. This amount is included in cash flows
from operating activities in the Consolidated Statement of
Cash Flows. For the year ended December 31, 2008, the
Company derecognized the receivables and related
liabilities associated with their transfers and recognized
a net gain in the accompanying Consolidated Statement of
Income of $147,002 which is included in product revenue on
the accompanying Consolidated Statement of Income.During the year ended December 31, 2007, rights under a
leasing arrangement were transferred to a third party
financing company. Though the Company received cash for
the transfer of these rights, the transfer did not meet
the criteria for a sale under FAS 140. As a result,
receivables are reflected on the Companys consolidated
balance sheets. This amount is included in cash flows from
financing activities in the consolidated statement of cash
flows. As payments on these receivables are made by
customers directly to the third party financing companies,
the related reduction of these receivables and financed
lease debt will be a non-cash transaction and will be
excluded from the consolidated statement of cash flows.The financed lease debt has an interest rate of 4.09%. The
Company recognized $199,602, $46,304, and $0 of income
associated with the lease for the years ended December 31,
2008, 2007, and 2006, respectively.The remaining future minimum maturity of the financed
lease debt as of December 31, 2008 is $1,456,428 which
matures in full as of September 30, 2009.
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##### 



Eyak Technology, LLC and Subsidiary
 Notes to Consolidated Financial Statements
 4.
    
    Prepaid expenses
    
    Prepaid expenses and other current assets consisted of the following at December 31:and other current
assets
 2008
    
    
    2007Prepaid direct contract costs
    
    $
    461,789
    
    
    $
    2,449,105Prepaid indirect costs
    
    
    157,751
    
    
    
    144,674Other current assets
    
    
    716,677
    
    
    
    245,350Total
    
    $
    1,336,217
    
    
    $
    2,839,129
 5.
    
    Property and
equipment
    
    Property and equipment consisted of the following at December 31:
 2008
    
    
    2007Furniture, fixtures and
equipment
    
    $
    621,471
    
    
    $
    487,272Software
    
    
    106,871
    
    
    
    85,324Leasehold improvements
    
    
    30,528
    
    
    
    30,528Total
    
    
    758,870
    
    
    
    603,124Less: Accumulated depreciation
    
    
    (510,482
    )
    
    
    (370,939
    )Net
    
    $
    248,388
    
    
    $
    232,185
 6.
    
    Intangible assets
    
    Intangible assets resulted from the purchase of the minority interest in EG Solutions, LLC from GTSI Corporation during 2007. Intangible
assets consisted of the following at December 31, 2008 and 2007:
 2008
    
    
    2007Accumulated
    
    
    
    
    
    
    Accumulated
    
    
    WeightedCosts
    
    
    Amortization
    
    
    Costs
    
    
    Amortization
    
    
    Average LifeContract rights
    
    $
    557,330
    
    
    $
    (62,061
    )
    
    $
    557,330
    
    
    $
    (27,867
    )
    
    
    5Contract backlog
    
    
    103,028
    
    
    
    (103,028
    )
    
    
    103,028
    
    
    
    (5,151
    )
    
    
    1Total
    
    $
    660,358
    
    
    $
    (165,089
    )
    
    $
    660,358
    
    
    $
    (33,018
    )
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##### 



Eyak Technology, LLC and Subsidiary
 Notes to Consolidated Financial Statements
 The intangible assets have no residual value at the end of
their useful life. Amortization expense for the years ended December 31, 2008, 2007, and 2006 was $132,071, $33,018, and $0,
respectively. Estimated amortization expense for the next four years as of December 31, 2008 is as follows:
 Year Ending December 31,
    
    Amount2009
    
    $
    175,5352010
    
    
    143,7412011
    
    
    123,7652012
    
    
    52,228
 7.
    
    Accounts payable and accrued expenses
    
    Accounts payable and accrued expenses consisted of the following at December 31:
 2008
    
    
    2007Trade payables
    
    $
    44,666,965
    
    
    $
    20,573,325Accrued distribution payable
    
    
    3,454,565
    
    
    
    Other accrued expenses
    
    
    4,428,399
    
    
    
    3,493,022Total
    
    $
    52,549,929
    
    
    $
    24,066,347
 8.
    
    Credit facilities
    
    The Company has a financing arrangement with GE Commercial Distribution Finance
Corporation (CDF). The arrangement consists of two separate agreements: a Business
Financing Agreement (BFA) and an Inventory Financing Agreement (IFA). Under the terms of
the agreements, the Company may borrow, between the two facilities, up to a total of
$10,000,000 between January 1 and August 31, and $18,000,000 between September 1 and
December 31. Amounts are advanced at the discretion of GE. The arrangements are
secured by the assets of the Company, are guaranteed by The Eyak Corporation, a 51% owner
of the Company, and are due on demand.The IFA is to be used to purchase inventory from approved vendors. Interest on the IFA
portion of the facility varies depending on the terms that GE has with the specific
vendor. The Company can obtain advances under the BFA up to the lesser of 85% of eligible
receivables, or, the maximum amount of the facility. Interest on the BFA portion of the
facility is payable monthly at the London InterBank Offered Rate (LIBOR) plus 2.5%. The
weighted average interest rate on outstanding advances at December 31, 2008 and 2007 was
3.58% and 7.13%, respectively.The financing arrangements contain certain financial covenants that require the Company
to retain at least 35% of its net income on an annual basis and to maintain a ratio of
funded debt to EBITDA of not more than 4.5:1 as of September 30 and December 31, and
3.5:1 as of March 31, and June 30. As of December 31, 2008 the Company is in compliance
with all of the covenants of the credit facility.
  - 16 -




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##### 



Eyak Technology, LLC and Subsidiary
 Notes to Consolidated Financial Statements
 The Company has a Short Term Accounts Receivable Program (STAR Agreement) with a
finance company. Under the terms of the agreement, the Company may obtain advances on
approved customer purchase orders. Interest charges accrue at LIBOR plus 3.50% per annum
once the advance has been outstanding for 45 days. No interest accrues for advances
outstanding less than 45 days. The Company includes amounts advanced as borrowings under
the credit facility in the accompanying consolidated balance sheets. Advances under the
agreement are secured by specific accounts receivable of the Company and are due on
demand.As of December 31, 2008 and 2007 borrowings under the credit facilities were comprised of:
 2008
    
    
    2007Borrowings under BFA
    
    $
    
    
    
    $
    12,009,879Borrowings under IFA
    
    
    1,532,272
    
    
    
    1,024,496Borrowings under STAR agreement
    
    
    
    
    
    
    12,442,406Total borrowings under credit facilities
    
    $
    1,532,272
    
    
    $
    25,476,781
 9.
    
    Retirement plan
    
    The Company sponsors a 401(k) tax deferred retirement plan under the Internal Revenue
Code to provide retirement benefits for all eligible employees. Participating employees
may voluntarily contribute up to limits provided by Internal Revenue Service regulations.
Beginning January 1, 2007 the Board of Directors approved an employer match to the 401(k)
plan. The Company recorded $197,686, $111,541, and $0 in matching contributions for the
years ended December 31, 2008, 2007, and 2006, respectively.10.
    
    Operating leases
    
    The Company is obligated, as lessee, under non-cancelable operating leases for office
space in Alaska, Virginia and Seoul, South Korea. The minimum payments required under
the leases are expensed on a pro rata basis over the term of the leases. The difference
between the amounts expensed and the required lease payments is reflected as deferred
rent in the accompanying consolidated balance sheets.The following is a schedule by years of future minimum rental payments required under the
operating leases that have an initial or remaining non-cancelable lease term in excess of
one year as of December 31, 2008:
 Year Ending
    
    Office
    
    
    SubleaseDecember 31
    
    Space
    
    
    Income
    
    
    Total2009
    
    $
    894,160
    
    
    $
    (122,517
    )
    
    $
    771,6432010
    
    
    48,186
    
    
    
    
    
    
    
    48,186Total
    
    $
    942,346
    
    
    $
    (122,517
    )
    
    $
    819,829
  - 17 -




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##### 



Eyak Technology, LLC and Subsidiary
 Notes to Consolidated Financial Statements
 Total rent expense for the years ended December 31, 2008, 2007, and 2006 was $834,660,
$684,916, and $326,856, respectively, net of sublease income in 2008 of $57,240. Due to
the growth of the organization, the Company entered into a new office lease during 2007
moving its headquarters to Dulles, Virginia. Included in rent expense at December 31,
2007 is $149,840 representing the Companys remaining lease obligation for the old
headquarters office space, net of expected sublease recoveries and the write off of
leasehold improvements. This charge is included in selling, general and administrative
costs in the accompanying consolidated statements of income. The remaining liability at
December 31, 2008 and 2007 was $138,871 and $139,129, respectively.11.
    
    Related party transactions
    
    The Company had an unsecured loan to The Eyak Corporation, a 51% member in the Company.
Interest was due annually at 3.75% and there were no stated repayment terms. The balance
at December 31, 2007 and 2006 was $9,352 and $12,981, respectively. During 2008, 2007,
and 2006, The Eyak Corporation made payments on the loan of $9,352, $3,629, and $1,276,
respectively.During the year ended December 31, 2006, the Company provided assistance to a
wholly-owned subsidiary of The Eyak Corporation, Eyak Environmental Sciences, LLC (EES),
in the form of managerial governance and project management. In the course of this
assistance, the Company paid on behalf of EES operating expenses in the amount of
$268,411, which is to be fully reimbursable to the Company by The Eyak Corporation.
Additional advances made by the Company during 2008 and 2007 related to EES were $450 and
$1,063, respectively. The receivable balance at December 31, 2008, 2007, and 2006 is
$134,089, $133,639, and $132,576, respectively.The Company executed a mentor-protege agreement with GTSI Corporation, a 37% member in
the Company. As part of the mentor-protégé relationship, the Company purchases products
offered for resale directly from GTSI. During the years ended December 31, 2008, 2007,
and 2006, the Company had $25.8 million, $69.0 million, and $14.6 million, respectively,
of related party transactions with GTSI, of which $23.2 million, $32.4 million, and $14.6
million were purchased directly from GTSI in the respective years. Sales commissions are
allocated between the Company and GTSI based on 7.5% and 15%, respectively, of gross
profit margin from transactions when the Company resells GTSIs products. The adjusted
gross profit margin for these transactions is then split between the Company and GTSI.
During 2008, the Company dissolved the mentor-protégé agreement with GTSI Corporation.At December 31, 2008 and 2007, the Company has outstanding accounts payable to GTSI of
$1.4 million and $12.9 million, respectively, for purchases of GTSIs products.During 2008, the Company sold $4.7 million of lease receivables to GTSI under a Master
Purchase Agreement between the two companies.During the years ended December 31, 2008, 2007, and 2006, the Company recorded $36,000 of
expenses to the Andrews Group, Inc., a Company owned by a member of the Companys board
of directors, for subcontractor services.During 2007 and 2006, the Company leased office space from the Andrews Group in
Anchorage, Alaska. Payments were due monthly in the amount of $1,200. During the years
ended December 31, 2007 and 2006 rent expense under this lease was $9,600 and $14,400,
respectively. During 2007, The Andrews Group sold the property being rented by the
Company and the Company was released from their lease.
  - 18 -




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##### 



Eyak Technology, LLC and Subsidiary
 Notes to Consolidated Financial Statements
 During 2007, the Company entered into a new lease for office space in Anchorage, Alaska
with Plaza 201 Properties, LLC. Plaza 201 Properties, LLC is owned by one of the partners
in Global Technology Group, a twelve percent owner in the Company. Rent expense paid to
Plaza 201 Properties, LLC during 2008 and 2007 was $20,124 and $4,193, respectively.During 2006, the Company formed a joint venture with GTSI called EG Solutions, LLC (EGS).
Under the operating agreement of EGS, the Company owned a fifty-one percent interest and
GTSI owned a forty-nine percent interest. During 2007, EGS was awarded its first major
contract. Shipments under the contract started in April of 2007. Due to operational
challenges, the two entities decided to change their relationship from a joint venture to
a more market driven prime  subcontractor relationship. Thus, EGS distributed to GTSI
their forty-nine percent share of earnings through September 30, 2007 activity and
purchased GTSIs forty-nine percent of EGS. Distributions made during 2007 to GTSI
related to EGS were $877,843. The Company paid GTSI $660,358 for the forty-nine percent
ownership and EGS is now a wholly-owned subsidiary of the Company.12.
    
    Commitments and contingencies
    
    The Company derives a substantial portion of its revenue under contracts with the Federal
government. These revenues are subject to adjustment upon audit. Management does not
expect such adjustments, if any, to have a material effect on the Companys financial
position or results of operations.The Company is occasionally involved in various lawsuits, claims, and administrative
proceedings arising in the normal course of business. The Company believes that any
liability or its loss associated with such matters, individually or in aggregate will not
have a material adverse effect on the Companys financial condition or its results of
operations.
  - 19 -