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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-Q

|  |  |                                                                                        
|- |  | ---------------------------------------------------------------------------------------
|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2003

or

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Transition Period
Fromto



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Commission File Number 333-82540

IPC ACQUISITION CORP.

(Exact name of registrant as specified in its charter)


|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 74-3022102                       
|                                                               |  |                                  
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)

|                                                |  |           
|----------------------------------------------- |  | ----------
|88 Pine Street, Wall Street Plaza, New York, NY |  | 10005     
|                                                |  |           
|(Address of principal executive offices)        |  | (Zip Code)

Registrants telephone number, including area code: (212) 825-9060

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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    o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes    o   No    x



Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.

|                              |  |                              
|----------------------------- |  | -----------------------------
|Class                         |  | Outstanding at April 30, 2003
|                              |  |                              
|Common Stock, par value $0.01 |  | 14,724,380 shares            



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TABLE OF CONTENTS



|                                                     |                                                                                               |  |  |  |  |  |  | 
|---------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|CONDENSED CONSOLIDATED BALANCE SHEETS               
|CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
|CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                                                     | Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                     | Item 3. Quantitative and Qualitative Disclosure About Market Risk                            
|                                                     | Item 4. Controls and Procedures                                                              
|Part II  Other Information:                        
|                                                     | Item 1. Legal Proceedings                                                                    
|                                                     | Item 2. Changes in Securities and Use of Proceeds                                            
|                                                     | Item 3. Defaults Upon Senior Securities                                                      
|                                                     | Item 4. Submission of Matters to a Vote of Securities Holders                                
|                                                     | Item 5. Other Informations                                                                   
|                                                     | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                                           
|Certifications                                      
|EX-99.1: CERTIFICATION OF CHIEF EXECUTIVE OFFICER   
|EX-99.2: CERTIFICATION OF CHIEF FINANCIAL OFFICER   



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IPC ACQUISITION CORP.

INDEX

|                                |         |                                                                                       |                                                                          |                                                                                                                                                                                                                                                                                         |    |     
|------------------------------- | ------- | ------------------------------------------------------------------------------------- | ------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -- | ----
|                                |         |                                                                                       |                                                                          |                                                                                                                                                                                                                                                                                         |    | Page
|                                |         |                                                                                       |                                                                          |                                                                                                                                                                                                                                                                                         |    |     
|Part I. 
Financial Information: |         |                                                                                      
|                                | Item 1. | Financial Statements                                                                  |                                                                          |                                                                                                                                                                                                                                                                                        
|                                |         |                                                                                       | A)                                                                       | Condensed Consolidated Balance Sheets as of September 30, 2002 and March 31, 2003                                                                                                                                                                                                       |    | 1   
|                                |         |                                                                                       | B)                                                                       | Condensed Consolidated Statements of Operations for the Three Months Ended March
31, 2002 and 2003, the period from October 1, 2001 to December 20, 2001, the
period from November 15, 2001 (date of initial capitalization) to March 31,
2002, and the Six Months ended March 31, 2003 |    | 2   
|                                |         |                                                                                       | C)                                                                       | Condensed Consolidated Statements of Cash Flows for the period from October 1,
2001 to December 20, 2001, the period from November 15, 2001 (date of initial
capitalization) to March 31, 2002, and the Six Months ended March 31, 2003                                                 |    | 3   
|                                |         |                                                                                       | D)                                                                       | Notes to Condensed Consolidated Financial Statements                                                                                                                                                                                                                                    |    | 4   
|                                | Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                                          | 22                                                                                                                                                                                                                                                                                     
|                                | Item 3. | Quantitative and Qualitative Disclosure About Market Risk                             |                                                                          | 37                                                                                                                                                                                                                                                                                     
|                                | Item 4. | Controls and Procedures                                                               |                                                                          | 37                                                                                                                                                                                                                                                                                     
|Part II. Other Information:     |        
|                                | Item 1. | Legal Proceedings                                                                     |                                                                          | 38                                                                                                                                                                                                                                                                                     
|                                | Item 2. | Changes in Securities and Use of Proceeds                                             |                                                                          | 38                                                                                                                                                                                                                                                                                     
|                                | Item 3. | Defaults Upon Senior
Securities                                                       |                                                                          | 38                                                                                                                                                                                                                                                                                     
|                                | Item 4. | Submission of Matters to a Vote of Security Holders                                   |                                                                          | 38                                                                                                                                                                                                                                                                                     
|                                | Item 5. | Other Information                                                                     |                                                                          | 38                                                                                                                                                                                                                                                                                     
|                                | Item 6. | Exhibits and Reports on Form 8-K                                                      |                                                                          | 38                                                                                                                                                                                                                                                                                     
|                                |         |                                                                                       | Signature                                                                |                                                                                                                                                                                                                                                                                         | 39
|                                |         |                                                                                       | Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |                                                                                                                                                                                                                                                                                         | 40





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##### Table of Contents



Part I  Financial Information:

Item 1. Financial Statements




IPC ACQUISITION CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Amounts)
(Unaudited)

|                                     |                                                                                                                                                |                                            |   |         |         |               |   |           |         |  |  | 
|------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | - | ------- | ------- | ------------- | - | --------- | ------- |  |  | 
|                                     |                                                                                                                                                |                                            |   |         |         | September 30, |   | March 31,
|                                     |                                                                                                                                                |                                            |   |         |         | 2002          |   | 2003     
|                                     |                                                                                                                                                |                                            |   |         |         |               |   |          
|Assets                               |                                                                                                                                                |                                            |   |         |         |               |   |          
|Assets:                              |                                                                                                                                                |                                            |   |         |         |               |   |          
|                                     | Cash                                                                                                                                           |                                            | $ | 25,294  |         |               | $ | 22,409    |        
|                                     | Restricted cash                                                                                                                                |                                            |   | 7,272   |         |               |   |          |        
|                                     | Accounts receivable, net of allowance of $1,245 and $1,072, respectively                                                                       |                                            |   | 52,468  |         |               |   | 47,598    |        
|                                     | Inventories, net                                                                                                                               |                                            |   | 22,218  |         |               |   | 35,844    |        
|                                     | Prepaid and other current assets                                                                                                               |                                            |   | 4,614   |         |               |   | 5,198     |        
|                                     |                                                                                                                                                |                                            |   |         |         |               |   |           |        
|                                     |                                                                                                                                                | Total current assets                       |   |         | 111,866 |               |   |           | 111,049 | 
|                                     | Property, plant and equipment, net                                                                                                             |                                            |   | 21,004  |         |               |   | 20,313    |        
|                                     | Goodwill                                                                                                                                       |                                            |   | 72,279  |         |               |   | 70,213    |        
|                                     | Intangible assets, net                                                                                                                         |                                            |   | 209,132 |         |               |   | 202,503   |        
|                                     | Deferred financing costs, net                                                                                                                  |                                            |   | 15,116  |         |               |   | 13,963    |        
|                                     | Other assets                                                                                                                                   |                                            |   | 835     |         |               |   | 834       |        
|                                     |                                                                                                                                                |                                            |   |         |         |               |   |           |        
|                                     |                                                                                                                                                | Total assets                               |   | $       | 430,232 |               |   | $         | 418,875 | 
|                                     |                                                                                                                                                |                                            |   |         |         |               |   |           |        
|Liabilities and Stockholders Equity |                                                                                                                                                |                                            |   |         |         |               |   |          
|Liabilities:                         |                                                                                                                                                |                                            |   |         |         |               |   |          
|                                     | Current portion of long term debt                                                                                                              |                                            | $ | 6,460   |         |               | $ | 5,827     |        
|                                     | Accounts payable                                                                                                                               |                                            |   | 4,530   |         |               |   | 5,420     |        
|                                     | Accrued expenses and other current liabilities                                                                                                 |                                            |   | 23,562  |         |               |   | 16,196    |        
|                                     | Current portion of deferred compensation                                                                                                       |                                            |   | 633     |         |               |   | 633       |        
|                                     | Income taxes payable                                                                                                                           |                                            |   | 2,373   |         |               |   | 3,535     |        
|                                     | Customer advances on installation contracts                                                                                                    |                                            |   | 11,232  |         |               |   | 25,249    |        
|                                     | Deferred revenue on maintenance contracts                                                                                                      |                                            |   | 12,261  |         |               |   | 15,440    |        
|                                     | Current portion of guarantees on former parent obligations                                                                                     |                                            |   |        |         |               |   | 1,353     |        
|                                     | Deferred purchase price obligation                                                                                                             |                                            |   | 7,272   |         |               |   |          |        
|                                     |                                                                                                                                                |                                            |   |         |         |               |   |           |        
|                                     |                                                                                                                                                | Total current liabilities                  |   |         | 68,323  |               |   |           | 73,653  | 
|                                     | Term loan                                                                                                                                      |                                            |   | 64,602  |         |               |   | 48,075    |        
|                                     | Senior subordinated notes                                                                                                                      |                                            |   | 150,000 |         |               |   | 150,000   |        
|                                     | Deferred taxes, net                                                                                                                            |                                            |   | 7,190   |         |               |   | 5,743     |        
|                                     | Deferred compensation                                                                                                                          |                                            |   | 3,119   |         |               |   | 3,073     |        
|                                     | Guarantees on former parent obligations                                                                                                        |                                            |   |        |         |               |   | 1,899     |        
|                                     |                                                                                                                                                |                                            |   |         |         |               |   |           |        
|                                     |                                                                                                                                                | Total liabilities                          |   |         | 293,234 |               |   |           | 282,443 | 
|                                     |                                                                                                                                                |                                            |   |         |         |               |   |           |        
|Commitments and Contingencies        |                                                                                                                                                |                                            |   |         |         |               |   |          
|Stockholders equity:                |                                                                                                                                                |                                            |   |         |         |               |   |          
|                                     | Common stock, $0.01 par value, authorized 25,000,000 shares; 14,060,000
shares issued and outstanding at September 30, 2002 and March 31, 2003 |                                            |   | 141     |         |               |   | 141       |        
|                                     | Paid in capital                                                                                                                                |                                            |   | 140,159 |         |               |   | 140,159   |        
|                                     | Notes receivable for purchases of common stock                                                                                                 |                                            |   | (383    | )       |               |   | (383      | )      
|                                     | Accumulated deficit                                                                                                                            |                                            |   | (9,200  | )       |               |   | (10,013   | )      
|                                     | Accumulated other comprehensive income                                                                                                         |                                            |   | 6,281   |         |               |   | 6,528     |        
|                                     |                                                                                                                                                |                                            |   |         |         |               |   |           |        
|                                     |                                                                                                                                                | Total stockholders equity                 |   |         | 136,998 |               |   |           | 136,432 | 
|                                     |                                                                                                                                                |                                            |   |         |         |               |   |           |        
|                                     |                                                                                                                                                | Total liabilities and stockholders equity |   | $       | 430,232 |               |   | $         | 418,875 | 
|                                     |                                                                                                                                                |                                            |   |         |         |               |   |           |        

The accompanying notes are an integral part of the condensed consolidated financial statements.

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IPC ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands)
(Unaudited)

|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |        |        |        |   |         |         |        | 
|--------------------------------------------------- | ------------------------------- | --------------------------------- | ------ | ------------ | ------ | ------------ | ------ | ------------ | ------ | ------------ | ------- | ----------- | ------- | ----------- | ------ | ------ | ------ | - | ------- | ------- | ------ | 
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         | Predecessor |         |             |        |        |        |   |         |        
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |        |        |        |   |         |        
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         | Period from |         | Period from |        |        |        |  
|                                                    |                                 |                                   |        | Three Months |        | Three Months |        | October 1,   |        | November 15, |         | Six Months 
|                                                    |                                 |                                   |        | Ended        |        | Ended        |        | 2001 to      |        | 2001 to      |         | Ended      
|                                                    |                                 |                                   |        | March 31,    |        | March 31,    |        | December 20, |        | March 31,    |         | March 31,  
|                                                    |                                 |                                   |        | 2002         |        | 2003         |        | 2001         |        | 2002         |         | 2003       
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |            
|Revenue:                                            |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |        |        |        |   |         |        
|                                                    | Product sales and installations |                                   | $      | 54,854       |        |              | $      | 32,819       |        |              | $       | 35,691      |         |             | $      | 67,329 |        |   | $       | 56,570  |       
|                                                    | Service                         |                                   |        | 23,351       |        |              |        | 23,486       |        |              |         | 23,089      |         |             |        | 25,205 |        |   |         | 48,118  |       
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |        |        |        |   |         |         |       
|                                                    |                                 |                                   | 78,205 |              |        |              | 56,305 |              |        |              | 58,780  |             |         |             | 92,534 |        |        |   | 104,688 |        
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |        |        |        |   |         |         |       
|Cost of goods sold (depreciation shown
separately): |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |        |        |        |   |         |        
|                                                    | Product sales and installations |                                   |        | 46,779       |        |              |        | 19,680       |        |              |         | 18,869      |         |             |        | 59,452 |        |   |         | 31,934  |       
|                                                    | Service                         |                                   |        | 13,791       |        |              |        | 11,894       |        |              |         | 13,953      |         |             |        | 15,058 |        |   |         | 24,929  |       
|                                                    | Depreciation and amortization   |                                   |        | 260          |        |              |        | 299          |        |              |         | 216         |         |             |        | 287    |        |   |         | 596     |       
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |        |        |        |   |         |         |       
|                                                    |                                 |                                   | 60,830 |              |        |              | 31,873 |              |        |              | 33,038  |             |         |             | 74,797 |        |        |   | 57,459  |        
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |        |        |        |   |         |         |       
|                                                    |                                 | Gross profit                      |        |              | 17,375 |              |        |              | 24,432 |              |         |             | 25,742  |             |        |        | 17,737 |   |         |         | 47,229 | 
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |        |        |        |   |         |         |        | 
|Research and development                            |                                 |                                   | 3,809  |              |        |              | 2,928  |              |        |              | 3,519   |             |         |             | 4,115  |        |        |   | 5,663   |        
|Selling, general and administrative expense         |                                 |                                   | 9,836  |              |        |              | 10,742 |              |        |              | 17,110  |             |         |             | 10,895 |        |        |   | 19,472  |        
|Depreciation and amortization                       |                                 |                                   | 4,351  |              |        |              | 4,798  |              |        |              | 10,521  |             |         |             | 4,879  |        |        |   | 9,529   |        
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |        |        |        |   |         |         |       
|                                                    |                                 | Income (loss) from operations     |        |              | (621   | )            |        |              | 5,964  |              |         |             | (5,408  | )           |        |        | (2,152 | ) |         |         | 12,565 | 
|Other income (expense):                             |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |        |        |        |   |         |        
|                                                    | Interest expense, net           |                                   |        | (6,935       | )      |              |        | (6,477       | )      |              |         | (5,987      | )       |             |        | (7,784 | )      |   |         | (12,682 | )     
|                                                    | Other income (expense), net     |                                   |        | (1           | )      |              |        | 802          |        |              |         | 49          |         |             |        | 28     |        |   |         | 1,327   |       
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |        |        |        |   |         |         |       
|                                                    |                                 | Income (loss) before income taxes |        |              | (7,557 | )            |        |              | 289    |              |         |             | (11,346 | )           |        |        | (9,908 | ) |         |         | 1,210  | 
|Income tax expense (benefit)                        |                                 |                                   | (2,247 | )            |        |              | 900    |              |        |              | (318    | )           |         |             | (3,216 | )      |        |   | 2,023   |        
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |        |        |        |   |         |         |       
|Net loss                                            |                                 | $                                 | (5,310 | )            |        | $            | (611   | )            |        | $            | (11,028 | )           |         | $           | (6,692 | )      |        | $ | (813    | )      
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |        |        |        |   |         |         |       

The accompanying notes are an integral part of the condensed consolidated financial statements.

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IPC ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)

|                                                   |                                                                                 |                                                                                                       |                                                     |   |              |         |              |   |            |          |        |   |         |         |  
|-------------------------------------------------- | ------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | --------------------------------------------------- | - | ------------ | ------- | ------------ | - | ---------- | -------- | ------ | - | ------- | ------- | -
|                                                   |                                                                                 |                                                                                                       |                                                     |   | Predecessor  |         |              |   |            |          |        |   |        
|                                                   |                                                                                 |                                                                                                       |                                                     |   |              |         |              |   |            |          |        |   |        
|                                                   |                                                                                 |                                                                                                       |                                                     |   | Period from  |         | Period from  |   |            |          |       
|                                                   |                                                                                 |                                                                                                       |                                                     |   | October 1,   |         | November 15, |   | Six Months
|                                                   |                                                                                 |                                                                                                       |                                                     |   | 2001 to      |         | 2001 to      |   | Ended     
|                                                   |                                                                                 |                                                                                                       |                                                     |   | December 20, |         | March 31,    |   | March 31, 
|                                                   |                                                                                 |                                                                                                       |                                                     |   | 2001         |         | 2002         |   | 2003      
|                                                   |                                                                                 |                                                                                                       |                                                     |   |              |         |              |   |           
|Cash flows from operating activities:              |                                                                                 |                                                                                                       |                                                     |   |              |         |              |   |            |          |        |  
|Net loss                                           |                                                                                 | $                                                                                                     | (11,028                                             | ) |              | $       | (6,692       | ) |            | $        | (813   | )
|                                                   | Adjustments to reconcile net loss to net cash provided by operating activities: |                                                                                                       |                                                     |   |              |         |              |   |            |          |        |   |        
|                                                   |                                                                                 | Depreciation and amortization                                                                         |                                                     |   | 1,393        |         |              |   | 1,225      |          |        |   | 2,975   |        
|                                                   |                                                                                 | Amortization of intangibles                                                                           |                                                     |   | 9,344        |         |              |   | 3,941      |          |        |   | 7,150   |        
|                                                   |                                                                                 | Amortization of deferred financing costs                                                              |                                                     |   |             |         |              |   | 826        |          |        |   | 1,463   |        
|                                                   |                                                                                 | Provision for doubtful accounts                                                                       |                                                     |   | 1,018        |         |              |   | 303        |          |        |   | (54     | )      
|                                                   |                                                                                 | Deferred income taxes                                                                                 |                                                     |   | (4,761       | )       |              |   | (5,324     | )        |        |   | (1,447  | )      
|                                                   |                                                                                 | Employee deferred compensation charge                                                                 |                                                     |   | (19          | )       |              |   | (30        | )        |        |   | (46     | )      
|                                                   | Changes in operating assets and liabilities:                                    |                                                                                                       |                                                     |   |              |         |              |   |            |          |        |   |        
|                                                   |                                                                                 | Accounts receivables                                                                                  |                                                     |   | 4,702        |         |              |   | 6,945      |          |        |   | 5,292   |        
|                                                   |                                                                                 | Inventories                                                                                           |                                                     |   | 1,823        |         |              |   | 33,695     |          |        |   | (13,626 | )      
|                                                   |                                                                                 | Prepaids and other current assets                                                                     |                                                     |   | (281         | )       |              |   | (80        | )        |        |   | (1,296  | )      
|                                                   |                                                                                 | Other assets                                                                                          |                                                     |   | 322          |         |              |   | 89         |          |        |   | 1       |        
|                                                   |                                                                                 | Accounts payable and accrued expenses                                                                 |                                                     |   | 7,019        |         |              |   | (4,307     | )        |        |   | (4,656  | )      
|                                                   |                                                                                 | Income taxes payable                                                                                  |                                                     |   | (988         | )       |              |   | 2,001      |          |        |   | 1,162   |        
|                                                   |                                                                                 | Customer advances and deferred revenue                                                                |                                                     |   | 9,326        |         |              |   | (19,454    | )        |        |   | 17,196  |        
|                                                   |                                                                                 | Other liabilities                                                                                     |                                                     |   | (2,623       | )       |              |   |           |          |        |   |        |        
|                                                   |                                                                                 |                                                                                                       |                                                     |   |              |         |              |   |            |          |        |  
|                                                   |                                                                                 |                                                                                                       | Net cash provided by operating activities           |   |              | 15,247  |              |   |            | 13,138   |        |   |         | 13,301  |  
|                                                   |                                                                                 |                                                                                                       |                                                     |   |              |         |              |   |            |          |        |  
|Cash flows from investing activities:              |                                                                                 |                                                                                                       |                                                     |   |              |         |              |   |            |          |        |  
|                                                   |                                                                                 | Capital expenditures                                                                                  |                                                     |   | (1,902       | )       |              |   | (982       | )        |        |   | (2,284  | )      
|                                                   |                                                                                 | Proceeds from restricted cash account and other amounts in connection
with Global Crossing settlement |                                                     |   |             |         |              |   |           |          |        |   | 9,419   |        
|                                                   |                                                                                 | Cash payments in connection with Global Crossing settlement                                           |                                                     |   |             |         |              |   |           |          |        |   | (5,200  | )      
|                                                   |                                                                                 | Payment for acquisitions, net of cash acquired (net of restricted cash)                               |                                                     |   |             |         |              |   | (346,441   | )        |        |   |        |        
|                                                   |                                                                                 |                                                                                                       |                                                     |   |              |         |              |   |            |          |        |  
|                                                   |                                                                                 |                                                                                                       | Net cash provided by (used in) investing activities |   |              | (1,902  | )            |   |            | (347,423 | )      |   |         | 1,935   |  
|                                                   |                                                                                 |                                                                                                       |                                                     |   |              |         |              |   |            |          |        |  
|Cash flows from financing activities:              |                                                                                 |                                                                                                       |                                                     |   |              |         |              |   |            |          |        |  
|                                                   |                                                                                 | Repayments of intercompany borrowings                                                                 |                                                     |   | (15,134      | )       |              |   |           |          |        |   |        |        
|                                                   |                                                                                 | Principal payments on term loan                                                                       |                                                     |   |             |         |              |   |           |          |        |   | (17,160 | )      
|                                                   |                                                                                 | Debt issue costs for term loan amendment                                                              |                                                     |   |             |         |              |   |           |          |        |   | (310    | )      
|                                                   |                                                                                 | Proceeds from term loan, net of issuance costs                                                        |                                                     |   |             |         |              |   | 98,600     |          |        |   |        |        
|                                                   |                                                                                 | Proceeds from senior subordinated notes, net of issuance costs                                        |                                                     |   |             |         |              |   | 136,600    |          |        |   |        |        
|                                                   |                                                                                 | Proceeds from equity issuance, net                                                                    |                                                     |   |             |         |              |   | 139,700    |          |        |   |        |        
|                                                   |                                                                                 |                                                                                                       |                                                     |   |              |         |              |   |            |          |        |  
|                                                   |                                                                                 |                                                                                                       | Net cash provided by (used in) financing activities |   |              | (15,134 | )            |   |            | 374,900  |        |   |         | (17,470 | )
|                                                   |                                                                                 |                                                                                                       |                                                     |   |              |         |              |   |            |          |        |  
|Effect of exchange rate changes on cash            |                                                                                 |                                                                                                       | (1,996                                              | ) |              |         | (1,034       | ) |            |          | (651   | )
|                                                   |                                                                                 |                                                                                                       |                                                     |   |              |         |              |   |            |          |        |  
|                                                   |                                                                                 |                                                                                                       | Net increase (decrease) in cash                     |   |              | (3,785  | )            |   |            | 39,581   |        |   |         | (2,885  | )
|Cash, beginning of period                          |                                                                                 |                                                                                                       | 4,536                                               |   |              |         |             |   |            |          | 25,294 |  
|                                                   |                                                                                 |                                                                                                       |                                                     |   |              |         |              |   |            |          |        |  
|Cash, end of period                                |                                                                                 | $                                                                                                     | 751                                                 |   |              | $       | 39,581       |   |            | $        | 22,409 |  
|                                                   |                                                                                 |                                                                                                       |                                                     |   |              |         |              |   |            |          |        |  
|Supplemental disclosures of cash flow information: |                                                                                 |                                                                                                       |                                                     |   |              |         |              |   |            |          |        |  
|                                                   |                                                                                 | Cash paid during the periods for:                                                                     |                                                     |   |              |         |              |   |            |          |        |   |         |        
|                                                   |                                                                                 |                                                                                                       | Income taxes                                        |   | $            | 1,338   |              |   | $          | 108      |        |   | $       | 2,524   |  
|                                                   |                                                                                 |                                                                                                       |                                                     |   |              |         |              |   |            |          |        |  
|                                                   |                                                                                 |                                                                                                       | Interest                                            |   | $            | 66      |              |   | $          | 2,096    |        |   | $       | 11,575  |  
|                                                   |                                                                                 |                                                                                                       |                                                     |   |              |         |              |   |            |          |        |  

The accompanying notes are an integral part of the condensed consolidated financial statements.

3



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##### Table of Contents






IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
March 31, 2003



|1. |  | Basis of Presentation
|-- |  | ---------------------

The accompanying unaudited condensed consolidated financial statements
include the accounts of IPC Acquisition Corp. (the Company) and its wholly
owned subsidiaries. The unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States for interim financial reporting and the requirements of
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
certain information and footnote disclosures required by accounting principles
generally accepted in the United States for annual financial reporting and
should be read in conjunction with the audited consolidated financial
statements included in the Companys Form 10-K/A for the fiscal year ended
September 30, 2002.

These unaudited condensed consolidated financial statements reflect all
adjustments, consisting only of normal recurring adjustments, that are, in the
opinion of management, necessary for a fair presentation of the results of
operations for the interim periods presented. Interim period operating results
may not be indicative of the operating results to be expected for the full year
or any other interim period.

The combined financial statements for the period from October 1, 2001 to
December 20, 2001 include the accounts of IPC Information Systems, Inc. (the
Predecessor), including the Trading Systems division and Information
Transport Systems division, operating divisions of a wholly owned subsidiary of
Global Crossing Ltd. (Global Crossing), and Asia Global Crossing IPC Trading
Systems Australia Pty. Ltd., an operating division of a wholly owned subsidiary
of Asia Global Crossing Ltd. Intercompany balances and transactions have been
eliminated.

The condensed consolidated financial statements for the period from
November 15, 2001 (date of initial capitalization) to March 31, 2002 and the
three and six months ended March 31, 2003 include the accounts of the Company
and its wholly owned subsidiaries. The principal activity of the Company
consists of the December 20, 2001 acquisition of the Predecessor (the IPC
Information Systems Acquisition), and the results of operations of the
acquired business from such date through March 31, 2003. Intercompany balances
and transactions have been eliminated.

Revenue Recognition

Revenue from product sales and installation is recognized upon completion
of the installation except for revenue from sales to distributors, which is
recognized upon shipment. Under contract provisions, customers are
progress-billed prior to the completion of the installations. The revenue
related to these advance payments is deferred until the system installations
are completed. All costs incurred on uncompleted contracts are accumulated and
recorded as inventory awaiting installation. In addition, contracts for annual
recurring turret and I.T.S. services are generally billed in advance, and are
recorded as revenue ratably (on a monthly basis) over the contractual periods.
Revenue from moves, additions and changes, commonly known as MACs, to turret
systems is recognized upon completion, which generally occurs in the same month
or the month following the order for services.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the cost over the net of the fair value
of the identifiable tangible and intangible assets acquired and the fair value
of liabilities assumed in acquisitions. For the period from October 1, 2001 to
December 20, 2001 the costs allocated to goodwill were amortized on a
straight-line basis over the periods benefited, principally 10 years, and
resulted in amortization of $4.7 million.

The Company adopted Statement of Financial Accounting Standards No. 142
(SFAS 142) Goodwill and Other Intangible Assets effective upon the IPC
Information Systems Acquisition and, in
accordance with SFAS 142, there is no amortization of goodwill and
intangible assets that have indefinite useful lives for the period from
November 15, 2001 to March 31, 2002 and the three and six months ended March
31, 2003. However, such assets are tested for impairment at least annually
using the two-step process specifically provided in the statement. Other
intangible assets are carried at cost. Technology and customer
relationships are
amortized over the estimated useful lives of 7 and 20 years, respectively.
Tradenames have been deemed to have an indefinite life and will not be subject
to amortization expense, but instead are subject to annual impairment tests in
accordance with the provisions of SFAS 142.

The Company completed the required initial impairment test within the
first six months of adoption as well as the annual impairment test as of July
1, 2002 (the first day of the fourth quarter of the 2002 fiscal year), and
concluded that there was no impairment to its recorded goodwill or indefinite
lived intangible assets. The Company believes the recorded values of goodwill
and tradenames at March 31, 2003 in the amounts of $70.2 million and $18.5
million, respectively, are fully recoverable.

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##### Table of Contents



IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
March 31, 2003

StockBased Compensation

As permitted by FASB Statement No. 123, Accounting for Stock-Based
Compensation (SFAS 123), the Company has elected to follow Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees
(APB 25) and related interpretations in accounting for its employee option
plans. Under APB 25, no compensation expense is recognized at the time of an
option grant if the exercise price of the employee stock option is fixed and
equals or exceeds the fair market value of the underlying common stock on the
date of the grant and the number of shares to be issued pursuant to the
exercise of such options are and fixed on at the date of the grant.

Pro forma information regarding net income (loss) and earnings (loss) per
share is required by SFAS 123, and has been determined as if the Company had
been accounting for its employee stock options under the fair value method of
that Statement. The fair value of these options was estimated at the date of
the grant using a Black-Scholes option pricing model with the following
assumptions: weighted-average risk-free interest rate of 3.5%; no dividends;
volatility factor of the expected market price of the Companys common stock of
74.2%, and a weighted-average expected life of the options of 5 years (all
such grants were during the period ended September 30, 2002; no grants were
made during the six months ended March 31, 2003).

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Companys employee stock options have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
managements opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of options
granted is amortized to expense over their vesting periods. The
weighted-average grant date fair value of options granted during the period
ended September 30, 2002 was $6.28. The Companys pro forma net loss for all
periods are shown below. These amounts may not necessarily be indicative of the
pro forma effect of SFAS 123 for future periods in which options may be
granted.

The Company recorded no compensation expense under APB 25 for the periods
presented. If the Company elected to recognize compensation expense based on
the fair value of the options granted at grant date, as prescribed by SFAS 123,
net loss would have been adjusted to the proforma amounts indicated in the
table below:

|                                                                                                                           |  |              |        |              |  |              |      |              |  |             |         |             |  |   |        |   |  |   |      |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------ | ------------ |  | ------------ | ---- | ------------ |  | ----------- | ------- | ----------- |  | - | ------ | - |  | - | ---- | -
|                                                                                                                           |  |              |        |              |  |              |      |              |  | Predecessor |         |             |  |   |        |   |  |  
|                                                                                                                           |  |              |        |              |  |              |      |              |  |             |         |             |  |   |        |   |  |  
|                                                                                                                           |  |              |        |              |  |              |      |              |  | Period from |         | Period from |  |   |        |  
|                                                                                                                           |  | Three Months |        | Three Months |  | October 1,   |      | November 15, |  | Six Months 
|                                                                                                                           |  | Ended        |        | Ended        |  | 2001 to      |      | 2001 to      |  | Ended      
|                                                                                                                           |  | March 31,    |        | March 31,    |  | December 20, |      | March 31,    |  | March 31,  
|(dollars in thousands)                                                                                                     |  | 2002         |        | 2003         |  | 2001         |      | 2002         |  | 2003       
|                                                                                                                           |  |              |        |              |  |              |      |              |  |            
|Reported net loss                                                                                                          |  | $            | (5,310 | )            |  | $            | (611 | )            |  | $           | (11,028 | )           |  | $ | (6,692 | ) |  | $ | (813 | )
|Add back total
stock-based employees
compensation
determined under APB
25 intrinsic value
method, net of tax               |  |              |       |              |  |              |     |              |  |             |        |             |  |   |       |   |  |   |     |  
|Deduct total
stock-based employee
compensation expense
determined under fair
value based method
for all awards, net
of tax |  |              |       |              |  |              | (46  | )            |  |             |        |             |  |   |       |   |  |   | (93  | )
|                                                                                                                           |  |              |        |              |  |              |      |              |  |             |         |             |  |   |        |   |  |   |      |  
|Net loss, pro forma                                                                                                        |  | $            | (5,310 | )            |  | $            | (657 | )            |  | $           | (11,028 | )           |  | $ | (6,692 | ) |  | $ | (906 | )
|                                                                                                                           |  |              |        |              |  |              |      |              |  |             |         |             |  |   |        |   |  |   |      |  

Effects of Recently Issued Accounting Standards

In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 143, Accounting for Asset
Retirement Obligations (SFAS 143), which requires entities to record the
fair value of the estimated liability for an asset retirement obligation in the
period in which it is incurred. When the liability is initially recorded, the
entity capitalizes an amount equal to the present value of the estimated
liability by increasing the carrying amount of the related long-lived asset.
Over time, the liability is accreted to its present value each period, and the
capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, an entity either settles the obligation for its
recorded amount or incurs a gain or loss upon settlement. SFAS 143 is effective
for fiscal years beginning after June 15, 2002, with earlier application
encouraged. The Company adopted SFAS 143 on October 1, 2002. The adoption of
this standard did not have a material impact on the Companys condensed
consolidated financial statements.

5



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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
March 31, 2003

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets (SFAS 144). SFAS 144 addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets. This statement supersedes SFAS 121, Accounting for Impairment of
Long-Lived Assets and the accounting and reporting provisions of APB Opinion
No. 30, Reporting the Results of Operations  Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary and Unusual and
Infrequently Occurring Events and Transactions, for the disposal of a segment
of a business (as previously defined in that Opinion). SFAS 144 was adopted by
the Company on October 1, 2002. The adoption of this standard did not have a
material impact on the Companys condensed consolidated financial statements.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical
Corrections (SFAS 145). SFAS 145 eliminates the requirement under SFAS No.
4, Reporting Gains and Losses from Extinguishment of Debt, to report gains
and losses from extinguishments of debt as extraordinary items in the income
statement. Accordingly, gains or losses from extinguishments of debt for fiscal
years beginning after May 15, 2002 shall not be reported as extraordinary items
unless the extinguishment qualifies as an extraordinary item under the
provisions of APB Opinion No. 30, Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions
(Opinion 30). Upon adoption of this pronouncement, any gain or loss on
extinguishment of debt previously classified as an extraordinary item in prior
periods that does not meet the criteria of Opinion 30 for such classification
should be reclassified to conform with the provisions of SFAS 145. The Company
adopted SFAS 145 on October 1, 2002. The adoption of this standard did not have
a material impact on the Companys condensed consolidated financial statements.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities (SFAS 146) which nullified EITF
Issue No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring) (EITF No. 94-3). SFAS 146 requires that a liability for
a cost associated with an exit or disposal activity be recognized when the
liability is incurred, whereas EITF No. 94-3 had recognized the liability at
the commitment date to an exit plan. The Company is required to adopt the
provisions of SFAS 146 effective for exit or disposal activities initiated
after December 31, 2002. The Company adopted SFAS 146 on December 31, 2002. The
adoption of this standard did not have a material impact on the Companys
condensed consolidated financial statements.

In November 2002, the EITF reached a consensus on Issue 00-21,
Multiple-Deliverable Revenue Arrangements (EITF 00-21). EITF 00-21
addresses how to account for arrangements that may involve the delivery or
performance of multiple products, services, and/or rights to use assets. The
consensus mandates how to identify whether goods or services or both which are
to be delivered separately in a bundled sales arrangement should be accounted
for separately because they are separate units of accounting. The guidance
can affect the timing of revenue recognition for such arrangements, even though
it does not change rules governing the timing or pattern of revenue recognition
of individual items accounted for separately. The final consensus will be
applicable to agreements entered into in fiscal years beginning after June 15,
2003 with early adoption permitted. Additionally, companies will be permitted
to apply the consensus guidance to all existing arrangements as the cumulative
effect of a change in accounting principle in accordance with APB Opinion No.
20, Accounting Changes. The Company is assessing the impact that the adoption
of EITF 00-21 will have on its condensed consolidated financial statements.

In November 2002, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN
45). This interpretation elaborates on disclosures to be made by a guarantor
in its interim and annual financial statements with regard to 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
disclosure requirements of FIN 45 are effective for interim and annual periods
ending after December 15, 2002, and the Company has adopted those requirements
for its financial statements included in this Form 10-Q. The initial
recognition and initial measurement requirements of FIN 45 are effective
prospectively for guarantees issued or modified after December 31, 2002. The
Company applied FIN 45 in connection with the March 13, 2003 settlement and
rejection agreement with Global Crossing (see Note 2). The Company has
reflected the fair value of guarantees on behalf of Global Crossing in its
March 31, 2003 condensed consolidated financial statements.

In December 2002, the FASB issued Statement of Financial Accounting
Standards No. 148, Accounting for Stock-Based Compensation-Transition and
Disclosure (SFAS 148). SFAS 148 amends Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123), and
provides alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. SFAS
148 also amends the disclosure requirements of SFAS 123 to require more
prominent and frequent disclosures in financial statements about the effects

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
March 31, 2003

of stock-based compensation. The transition guidance and annual disclosure
provisions of SFAS 148 are effective for financial statements issued for fiscal
years ending after December 15, 2002. The interim disclosure provisions are
effective for financial reports containing financial statements for interim
periods
beginning after December 15, 2002 and have been reflected in the
accompanying notes to the Companys condensed consolidated
financial statements.

Comprehensive Loss

The balance sheets and statements of operations of the Companys foreign
operations are measured using the local currency as the functional currency.
Assets and liabilities of these foreign operations are translated at the
period-end exchange rate and revenue and expense amounts are translated at the
average rates of exchange prevailing during the period. The resulting foreign
currency translation adjustments are accumulated as a component of other
comprehensive loss.

|                                   |  |              |        |              |  |              |        |              |  |             |         |             |  |   |        |   |  |   |      |  
|---------------------------------- |  | ------------ | ------ | ------------ |  | ------------ | ------ | ------------ |  | ----------- | ------- | ----------- |  | - | ------ | - |  | - | ---- | -
|                                   |  |              |        |              |  |              |        |              |  | Predecessor |         |             |  |   |        |   |  |  
|                                   |  |              |        |              |  |              |        |              |  |             |         |             |  |   |        |   |  |  
|                                   |  |              |        |              |  |              |        |              |  | Period from |         | Period from |  |   |        |  
|                                   |  | Three Months |        | Three Months |  | October 1,   |        | November 15, |  | Six Months 
|                                   |  | Ended        |        | Ended        |  | 2001 to      |        | 2001 to      |  | Ended      
|                                   |  | March 31,    |        | March 31,    |  | December 20, |        | March 31,    |  | March 31,  
|(dollars in thousands)             |  | 2002         |        | 2003         |  | 2001         |        | 2002         |  | 2003       
|                                   |  |              |        |              |  |              |        |              |  |            
|Reported net loss                  |  | $            | (5,310 | )            |  | $            | (611   | )            |  | $           | (11,028 | )           |  | $ | (6,692 | ) |  | $ | (813 | )
|Translation adjustment, net of tax |  |              | (831   | )            |  |              | (920   | )            |  |             | (1,238  | )           |  |   | (651   | ) |  |   | 156  |  
|                                   |  |              |        |              |  |              |        |              |  |             |         |             |  |   |        |   |  |   |      |  
|Total comprehensive loss           |  | $            | (6,141 | )            |  | $            | (1,531 | )            |  | $           | (12,266 | )           |  | $ | (7,343 | ) |  | $ | (657 | )
|                                   |  |              |        |              |  |              |        |              |  |             |         |             |  |   |        |   |  |   |      |  



|2. |  | The IPC Information Systems Acquisition
|-- |  | ---------------------------------------

The
Company was formed in November 2001 to acquire IPC Information
Systems, Inc. On December 20, 2001, the Company purchased 100% of the common stock
of IPC Information Systems, Inc. and 100% of the ordinary shares of Asia Global
Crossing IPC Trading Systems Australia Pty. Ltd. from Global Crossing Ltd. and
Asia Global Crossing, Ltd. and various of their affiliates. In addition, the
Company acquired various assets owned by affiliates of Global Crossing and Asia
Global crossing related to the operation of these businesses. Under the
purchase agreement, the total purchase price for the shares and assets was
$360.0 million, subject to various adjustments for working capital and customer
advances. As a result of the IPC Information Systems Acquisition, the
Company owns the leader in the turret industry, based on its base of
approximately 110,000 turrets installed in trading positions
worldwide.

The following table summarizes the fair values of the assets acquired and
the liabilities assumed at the date of the IPC Information Systems Acquisition.
The purchase price on the date of the IPC Information Systems Acquisition
exceeded the fair value of the net assets acquired by approximately
$77.3 million and was recorded as goodwill on the consolidated balance sheet.

|                                               |                           |   |         |         | 
|---------------------------------------------- | ------------------------- | - | ------- | ------- | 
|Condensed Balance Sheet (dollars in thousands) |                           |   |         |        
|Current assets                                 |                           | $ | 153,732 |        
|Property, plant and equipment, net             |                           |   | 21,163  |        
|Intangible assets, net                         |                           |   | 216,000 |        
|Goodwill                                       |                           |   | 77,310  |        
|Other long-term assets                         |                           |   | 549     |        
|                                               |                           |   |         |        
|                                               | Total assets acquired     |   |         | 468,754 | 
|                                               |                           |   |         |        
|Current liabilities                            |                           |   | 102,666 |        
|Deferred taxes                                 |                           |   | 12,430  |        
|Other long-term liabilities                    |                           |   | 3,358   |        
|                                               |                           |   |         |        
|                                               | Total liabilities assumed |   |         | 118,454 | 
|                                               |                           |   |         |        
|                                               | Net assets acquired       |   | $       | 350,300 | 
|                                               |                           |   |         |        

The IPC Information Systems Acquisition was accounted for as a purchase.
The following represents the allocation of the excess of the
purchase price over the historical cost of the net tangible assets acquired at
the date of the purchase:

7



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##### Table of Contents



IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
March 31, 2003

|                                                           |                                 |                                       |  |   |         |   |         |         |   | 
|---------------------------------------------------------- | ------------------------------- | ------------------------------------- |  | - | ------- | - | ------- | ------- | - | 
|(dollars in thousands)                                     |                                 |                                       |  |  
|Purchase price                                             |                                 |                                       |  |   |         | $ | 350,300 |        
|Estimated transaction costs                                |                                 |                                       |  |   |         |   | 7,900   |        
|                                                           |                                 |                                       |  |   |         |   |         |        
|Total consideration                                        |                                 |                                       |  |   |         |   | 358,200 |        
|Historical cost of net tangible assets acquired            |                                 |                                       |  |   |         |   | (43,020 | )      
|                                                           |                                 |                                       |  |   |         |   |         |        
|Excess of purchase price over net tangible assets acquired |                                 |                                       |  |   |         | $ | 315,180 |        
|                                                           |                                 |                                       |  |   |         |   |         |        
|Allocation of excess purchase price:                       |                                 |                                       |  |  
|                                                           | Step-up inventory to fair value |                                       |  |   |         |   | $       | 34,300  |  
|                                                           | Deferred taxes                  |                                       |  |   |         |   |         | (12,430 | )
|                                                           | Residual goodwill               |                                       |  |   |         |   |         | 77,310  |  
|                                                           | Identifiable intangibles:       |                                       |  |   |        
|                                                           |                                 | Technology (7 year life)              |  | $ | 45,000  |   |         |         |   | 
|                                                           |                                 | Trade names (indefinite life)         |  |   | 18,000  |   |         |         |   | 
|                                                           |                                 | Customer
relationships (20 year life) |  |   | 153,000 |   |         |         |   | 
|                                                           |                                 |                                       |  |  
|                                                           | Total identifiable intangibles  |                                       |  |   |         |   |         | 216,000 |  
|                                                           |                                 |                                       |  |   |         |   |         |        
|Total allocation of excess purchase price                  |                                 |                                       |  |   |         | $ | 315,180 |        
|                                                           |                                 |                                       |  |   |         |   |         |        

At the
closing, the purchase price was reduced by approximately $9.7 million to $350.3 million for estimated working capital and customer advance
adjustments. On January 16, 2002, Global Crossing and its affiliates paid the
Company $3.0 million based upon a revised estimate of the working capital and
customer advances adjustments. On January 28, 2002, Global Crossing and 54 of
its subsidiaries filed petitions for relief under Chapter 11 of Title 11 of the
United States Code. On January 31, 2002, the Company delivered to Global
Crossing and its affiliates its determination of the amount of working capital
and customer advances as of the closing. Based on the Companys calculation and
under the purchase agreement related to the IPC Information Systems
Acquisition, Global Crossing or various of its affiliates were obligated to pay
the Company an additional amount of $4.8 million. However, in connection with a
settlement and rejection agreement entered into by the Company and Global
Crossing, dated as of March 13, 2003, Global Crossing was relieved of its
obligation to pay the additional working capital amount.

In connection with the settlement and rejection agreement with Global
Crossing, the goodwill account has been reduced by $2.1 million from the amount
recorded at September 30, 2002. This reduction to the goodwill account reflects
the transfer of $7.3 million of restricted cash to cash and tax refunds in the
amount of $2.2 million received from Global Crossing pursuant to the settlement
and rejection agreement aggregating $9.5 million and $0.9 million of other net
items and are partially offset by the payment of $5.2 million cash to a new
escrow account pursuant to the settlement and rejection agreement and the
assumption of $3.2 million of liabilities associated with
guarantees that pre-dated the closing of the IPC Information Systems
Acquisition of real estate obligations that the Company may be
required to pay if Global Crossing fails to do so. The September 30, 2002 goodwill
balance of $72.3 million decreased
$5.0 million from the amount initially recorded at December 20, 2001 of $77.3
million, primarily due to working capital adjustments to the purchase price and
a reduction of certain estimated assumed liabilities.

The IPC Information Systems Acquisition was accounted for by the purchase
method and acquired intangible assets are recognized apart from goodwill in
accordance with SFAS No. 141, Business
Combinations (SFAS 141). The purchase price, as adjusted for the
working capital adjustments and the March 13, 2003 settlement and rejection
agreement, exceeded the fair value of the net assets acquired by approximately
$67.0 million. This excess has been recorded in the accompanying consolidated
balance sheet as goodwill and has not been amortized in accordance with SFAS 142. SFAS 142
eliminates the requirement to amortize goodwill and
intangible assets that have indefinite useful lives. However, it requires that
such assets be tested for impairment at least annually using the guidance
specifically provided in the statement. Accordingly, the Companys consolidated
financial statements for periods subsequent to the IPC Information Systems
Acquisition are not comparable to any Predecessor period.

The IPC Information Systems Acquisition was financed with the net proceeds
from the issuance of the outstanding senior subordinated notes, borrowings
under the senior secured credit facilities and a common equity contribution of
$140.0 million by a group led by Goldman Sachs Capital Partners, or GSCP 2000,
and its affiliates. Under the terms of the purchase agreement,

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
March 31, 2003

approximately $20.8 million of the purchase price was not paid to Global
Crossing at the closing. A portion of these deferred amounts was used to offset
the Companys payment of contingent equipment lease liabilities of former
affiliates that the Company guaranteed. Through March 13, 2003, the Company had
paid approximately $13.5 million of these contingent liabilities. On March 13,
2003, in connection with the settlement and rejection agreement that the
Company entered into with Global Crossing, the Company was relieved of any
obligation to make deferred purchase price payments to Global Crossing.

Prior to the completion of the IPC Information Systems Acquisition, the
Company leased six floors at 67-73 Worship Street, London, England at an annual
rate of approximately £565,000, or $890,000, assuming an exchange rate of £1 to
$1.5749. Of these six floors, the Company uses one floor for office space and
an affiliate of Global Crossing uses five floors for telecommunications and
networking equipment. Under the lease, which expires in 2010, the Company
remains liable to the landlord for all six floors. Pursuant to the purchase
agreement with Global Crossing, the Company entered into a sublease for a
portion of these premises with an affiliate of Global Crossing and the landlord
has consented to that sublease. Through March 31, 2003, Global Crossings affiliate
has made all of its required sublease payments.

At the closing of the IPC Information Systems Acquisition, the Company and
various of its subsidiaries entered into a network services, channel sales and
transition services agreement with Global Crossing and various other parties.
Following the commencement of Global Crossings bankruptcy case, Global
Crossing failed to perform various obligations under the network services,
channel sales and transition services agreement. On March 11, 2002, the Company
filed a motion with the United States Bankruptcy Court for the Southern
District of New York to compel Global Crossing to assume or reject this
agreement. Thereafter, the Company negotiated with Global Crossing to resolve
the issues raised in the motion and subsequently reached an agreement.

On July 11, 2002, the bankruptcy court entered an order authorizing Global
Crossing and its related subsidiaries to assume the network services, channel
sales and transition services agreement, as amended. Under the amendment,
certain of IPC Information Systems Inc.s obligations under the agreement,
including the non-compete restrictions, have been suspended until the effective
date of a plan of reorganization under applicable bankruptcy laws of Global
Crossing and its related subsidiaries. Following the emergence of Global
Crossing and its related subsidiaries from its bankruptcy reorganization, under
the terms of the agreement, as amended, IPC Information Systems, Inc. will be
permitted to continue to perform any activity or provide any service that would
be prohibited by the non-compete restriction so long as that activity or
service was commenced while the non-compete restriction was suspended or that
activity or service is performed pursuant to a definitive agreement entered
into while the non-compete was suspended.

On October 17, 2002, Global Crossing filed a Joint Plan of Reorganization,
or the Plan, with the bankruptcy court. Global Crossings Plan provides that
Global Crossing will assume various executory contracts and leases. The Plan
further provides that any executory contract or lease not specifically
identified by Global Crossing for assumption will be rejected as of the
effective date of the Plan. The purchase agreement was not included among the
contracts Global Crossing assumed under its Plan. As a result, the Company
filed an objection to Global Crossings proposed rejection of the purchase
agreement.

On March 13, 2003, the Company entered into a settlement and rejection
agreement with Global Crossing. Pursuant to the settlement and rejection
agreement, all of the remaining obligations under the purchase agreement
relating to the IPC Information Systems Acquisition were terminated, including
the Companys obligation to pay any portion of the deferred
purchase price and Global Crossings obligation to indemnify the Company for specific tax
liabilities. In addition, the Company and Global Crossing mutually released
each other for all prior claims. The bankruptcy court entered an order on March
14, 2003 approving the settlement and rejection agreement.

Under the terms of the settlement and rejection agreement, the Company has
deposited $5.2 million in a new escrow account. Global Crossing received $3.2
million from the escrow account upon the filing of certain tax returns. Global
Crossing will receive the remaining $2.0 million from the escrow account after
a $2.0 million irrevocable letter of credit is issued on behalf of the Company.
The Company will have the right to draw on that letter of credit in the event
Global Crossings affiliate fails to make any payments due to the Company
pursuant to the sublease for office space at 67-73 Worship Street in London,
England. Through March 31, 2003, Global Crossings affiliate has
made all of its required sublease payments.

The Company believes that all tax returns required to be filed in respect
of IPC Information Systems, Inc. and its subsidiaries for periods prior to and
including the date of the IPC Information Systems Acquisition, have now been
filed. These returns consist of consolidated tax returns with Global Crossing,
and, where required by law, separate tax returns for IPC Information Systems,
Inc. and/or its subsidiaries.

9



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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
March 31, 2003

As a result of the termination of the purchase agreement, Global Crossing
has been relieved of all of its obligations under the purchase agreement,
including, among other things, indemnifying the Company for tax liabilities
that may be imposed upon IPC Information Systems, Inc. and its subsidiaries for
periods prior to and including the date of the IPC Information Systems
Acquisition. Therefore, in the event that any tax liabilities are imposed, as a
result of an audit or otherwise, on IPC Information Systems, Inc. and/or its
subsidiaries for periods prior to and including the date of the IPC Information
Systems Acquisition, the Company may be required to pay those taxes and is no
longer able to seek indemnification from Global Crossing. As of the date of
this filing, the aggregate amount of taxes for which the Company has received
notices of taxes due from various jurisdictions and recognized as tax
liabilities under purchase accounting is approximately $6.5 million. The
Company estimates that the range of its exposure for additional tax liabilities
is from $0 to $36 million. In computing its estimated range of potential tax
liabilities, the Company took into account tax returns in certain jurisdictions
where the statutes of limitations have not yet expired. Under those tax returns
as filed, the remaining liability is zero. Although the Company believes that
all those tax returns have been filed correctly, such returns may be audited
and additional taxes may be assessed (or refunds may be granted). Payment by
the Company of a significant amount of these potential tax liabilities could
have a material adverse effect on the Companys financial condition and results
of operations, requiring the Company to seek additional financing. In that
event, the Company cannot assure you it will be able to obtain additional
financing on commercially reasonable terms, or at all.

Pursuant to the settlement and rejection agreement, Global Crossing has
also paid over to the Company approximately $2.2 million for payroll and
federal tax refunds received by it for periods prior to and including the date
of the IPC Information Systems Acquisition. Global Crossing is also required to
pay the Company any future tax refunds or credits it receives that are
applicable to IPC Information Systems, Inc. and its subsidiaries for these
periods.

As part of the settlement and rejection agreement, the Company also
entered into a second amendment to the network services, channel sales and
transition services agreement. Under the second amendment, the Company no
longer has any obligation to market or resell Global Crossings channel network
services to its customers. In addition, the restrictions on the Companys
ability to compete with Global Crossing will terminate on June 20, 2004
(instead of December 20, 2004), or, on June 20, 2003 (instead of December 20,
2003) in connection with a business combination transaction with an unrelated
third party that is or becomes a competitor of Global Crossing. Finally,
pursuant to the settlement and rejection agreement, the Company will be
permitted to use any other provider of network services for its own internal
purposes provided its aggregate annual payments to Global Crossing and their
subsidiaries is at least $48,000. Neither this second amendment nor the first
amendment to the network services, channel sales and transition services
agreement was signed by Asia Global Crossing Asia Pacific Commercial, Ltd., a
former Global Crossing affiliate that was an original signatory to this
agreement. Accordingly, with respect to Asia Global Crossing Asia Pacific
Commercial, Ltd., the non-compete restrictions contained in the original
network services, channel sales and transition services agreement have not been
suspended and the Companys ability to engage in certain new lines of business
activities in Asia may be restricted.

Set forth below is the unaudited pro forma combined results of operations
of the Company for the period October 1, 2001 to December 20, 2001, assuming
the IPC Information Systems Acquisition and the related financings occurred as
of the beginning of the period.

The unaudited pro forma combined financial information is presented for
informational purposes only and does not purport to represent the results of
operations of the Company for the period described above had the IPC
Information Systems Acquisition and the related financings occurred as of the
beginning of the period, or to project the results for any future period.

The unaudited pro forma combined financial information gives effect to (a)
the IPC Information Systems Acquisition (b) the offering of the outstanding
senior subordinated notes, (c) term loan borrowings under the Companys senior
secured credit facilities, (d) the purchase accounting adjustments associated
with the IPC Information Systems Acquisition, (e) the common equity
contribution and (f) the related fees and expenses. The unaudited pro forma
financial information assumes that no post-closing working capital adjustments
have been made in connection with the IPC Information Systems Acquisition. The
unaudited pro forma financial information of the Company does not include
various one-time costs for operating expenses and capital expenditures
associated with establishing the Company as a stand-alone entity.

|                       |  |                   |        |  
|---------------------- |  | ----------------- | ------ | -
|                       |  | Predecessor      
|                       |  |                  
|                       |  | Period from      
|                       |  | October 1, 2001  
|                       |  | to               
|(dollars in thousands) |  | December 20, 2001
|                       |  |                  
|Revenue                |  | $                 | 58,780 |  
|Net loss               |  | $                 | (3,870 | )

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
March 31, 2003



|3. |  | Inventories
|-- |  | -----------

|                                                  |  |               |        |           |  |   |        | 
|------------------------------------------------- |  | ------------- | ------ | --------- |  | - | ------ | 
|                                                  |  | September 30, |        | March 31,
|(dollars in thousands)                            |  | 2002          |        | 2003     
|                                                  |  |               |        |          
|Components and manufacturing work in process      |  | $             | 6,091  |           |  | $ | 9,391  | 
|Inventory on customer sites awaiting installation |  |               | 8,025  |           |  |   | 20,382 | 
|Parts and maintenance supplies                    |  |               | 8,102  |           |  |   | 6,071  | 
|                                                  |  |               |        |           |  |   |        | 
|                                                  |  | $             | 22,218 |           |  | $ | 35,844 | 
|                                                  |  |               |        |           |  |   |        | 



|4. |  | Goodwill and Intangible Assets
|-- |  | ------------------------------

The Company adopted SFAS 142, effective December 20, 2001 (the date of
the IPC Information Systems Acquisition). Under SFAS 142, goodwill and
intangible assets that have indefinite useful lives are no longer amortized.
Rather, they are reviewed for impairment annually or more frequently if certain
indicators arise. Had the Company been accounting for its goodwill and
indefinite lived intangible assets under SFAS 142 for all periods presented,
the Companys net loss would have been as follows:

|                                                                     |  |              |        |              |  |              |      |              |  |             |         |             |  |   |        |   |  |   |      |  
|-------------------------------------------------------------------- |  | ------------ | ------ | ------------ |  | ------------ | ---- | ------------ |  | ----------- | ------- | ----------- |  | - | ------ | - |  | - | ---- | -
|                                                                     |  |              |        |              |  |              |      |              |  | Predecessor |         |             |  |   |        |   |  |  
|                                                                     |  |              |        |              |  |              |      |              |  |             |         |             |  |   |        |   |  |  
|                                                                     |  |              |        |              |  |              |      |              |  | Period from |         | Period from |  |   |        |  
|                                                                     |  | Three Months |        | Three Months |  | October 1,   |      | November 15, |  | Six Months 
|                                                                     |  | Ended        |        | Ended        |  | 2001 to      |      | 2001 to      |  | Ended      
|                                                                     |  | March 31,    |        | March 31,    |  | December 20, |      | March 31,    |  | March 31,  
|(dollars in thousands)                                               |  | 2002         |        | 2003         |  | 2001         |      | 2002         |  | 2003       
|                                                                     |  |              |        |              |  |              |      |              |  |            
|Reported net loss                                                    |  | $            | (5,310 | )            |  | $            | (611 | )            |  | $           | (11,028 | )           |  | $ | (6,692 | ) |  | $ | (813 | )
|Add back goodwill amortization, net of tax                           |  |              |       |              |  |              |     |              |  |             | 2,978   |             |  |   |       |   |  |   |     |  
|Add back indefinite lived intangible
assets amortization, net of tax |  |              |       |              |  |              |     |              |  |             | 950     |             |  |   |       |   |  |   |     |  
|                                                                     |  |              |        |              |  |              |      |              |  |             |         |             |  |   |        |   |  |   |      |  
|Adjusted net loss                                                    |  | $            | (5,310 | )            |  | $            | (611 | )            |  | $           | (7,100  | )           |  | $ | (6,692 | ) |  | $ | (813 | )
|                                                                     |  |              |        |              |  |              |      |              |  |             |         |             |  |   |        |   |  |   |      |  

The following table reflects the gross carrying amount and accumulated
amortization of the Companys goodwill and intangible assets included in the
condensed consolidated balance sheets as of the dates indicated:

|                       |                                  |                                            |                     |      |               |         |           |   |         |         | 
|---------------------- | -------------------------------- | ------------------------------------------ | ------------------- | ---- | ------------- | ------- | --------- | - | ------- | ------- | 
|                       |                                  |                                            |                     |      | September 30, |         | March 31,
|(dollars in thousands) |                                  | 2002                                       |                     | 2003
|                       |                                  |                                            |                     |      |               |         |          
|Intangible assets:     |                                  |                                            |                     |      |               |         |           |  
|                       | Amortized intangible assets:     |                                            |                     |      |               |         |           |   |        
|                       |                                  | Technology                                 |                     | $    | 45,000        |         |           | $ | 45,000  |        
|                       |                                  | Customer
relationships                     |                     |      | 154,030       |         |           |   | 154,030 |        
|                       |                                  | Effect of currency translation adjustments |                     |      | 2,754         |         |           |   | 3,195   |        
|                       |                                  | Accumulated amortization-technology        |                     |      | (5,014        | )       |           |   | (8,228  | )      
|                       |                                  | Accumulated amortization-customer lists    |                     |      | (6,100        | )       |           |   | (10,036 | )      
|                       |                                  |                                            |                     |      |               |         |           |  
|                       |                                  |                                            | Net carrying amount |      | $             | 190,670 |           |   | $       | 183,961 | 
|                       |                                  |                                            |                     |      |               |         |           |  
|                       | Non-amortized intangible assets: |                                            |                     |      |               |         |           |   |        
|                       |                                  | Goodwill                                   |                     | $    | 70,636        |         |           | $ | 68,193  |        
|                       |                                  | Tradenames                                 |                     |      | 18,000        |         |           |   | 18,000  |        
|                       |                                  | Effect of currency translation adjustments |                     |      | 2,105         |         |           |   | 2,562   |        
|                       |                                  |                                            |                     |      |               |         |           |  
|                       |                                  |                                            | Net carrying amount |      | $             | 90,741  |           |   | $       | 88,755  | 
|                       |                                  |                                            |                     |      |               |         |           |  

Amortization expense for those intangible assets required to be amortized
under SFAS 142 was $3.5 million, $3.6 million, $3.9 million, and $7.2
million for the three months ended March 31, 2002 and 2003, the period from
November 15, 2001 to March 31, 2002 and the six months ended March 31, 2003,
respectively.

Amortization expense prior to the adoption of SFAS 142 was $9.3 million
for the period from October 1, 2001 to December 20, 2001.

Estimated annual amortization expense for fiscal year 2003 and each of the
four succeeding fiscal years for identifiable intangible assets is as follows:

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Unaudited)
March 31, 2003

|                        |  |  |   |       
|----------------------- |  |  | - | ------
|(dollars in thousands): |  |  |   |       
|                        |  |  |   |       
|2003                    |  |  | $ | 14,000
|2004                    |  |  |   | 14,000
|2005                    |  |  |   | 14,000
|2006                    |  |  |   | 14,000
|2007                    |  |  |   | 14,000

5. Accrued Expenses and Other Current Liabilities

|                                  |  |               |        |           |  |   |        | 
|--------------------------------- |  | ------------- | ------ | --------- |  | - | ------ | 
|                                  |  | September 30, |        | March 31,
|(dollars in thousands)            |  | 2002          |        | 2003     
|                                  |  |               |        |          
|Accrued compensation and benefits |  | $             | 7,719  |           |  | $ | 3,975  | 
|Warranty reserves                 |  |               | 2,159  |           |  |   | 1,429  | 
|Sales taxes payable               |  |               | 1,267  |           |  |   | 925    | 
|Job accruals                      |  |               | 1,867  |           |  |   | 1,441  | 
|Accrued transaction costs         |  |               | 651    |           |  |   |       | 
|Accrued interest                  |  |               | 5,072  |           |  |   | 5,073  | 
|Other accruals                    |  |               | 4,827  |           |  |   | 3,353  | 
|                                  |  |               |        |           |  |   |        | 
|                                  |  | $             | 23,562 |           |  | $ | 16,196 | 
|                                  |  |               |        |           |  |   |        | 



|6. |  | Long Term Debt
|-- |  | --------------

Senior Secured Credit Facilities

On December 20, 2001, the Company entered into the senior secured credit
facilities with a group of lenders comprised of (i) a $105.0 million term loan
with a variable interest rate (7.5% at March 31, 2003) and (ii) a $15.0 million
revolving credit facility. The maturity date of the loans is December 31, 2006.
The senior secured credit facilities are guaranteed by the Companys domestic
subsidiaries. These subsidiary guarantees are both full and unconditional, as
well as joint and several. The Company had no outstanding borrowings under the
revolving credit facility at March 31, 2003. However, the amount available to
the Company at March 31, 2003 under the revolving credit facility is reduced by
outstanding letters of credit of $4.3 million, thereby reducing the amount
available for borrowing under the revolving credit facility to $10.7 million.

As required under the terms of the senior secured credit facilities, the
Company made mandatory excess free cash flow repayments of $30.0 million and
$0.8 million on September 30, 2002 and December 29, 2002, respectively, based
upon 75% of the Companys excess cash flow for the period ended September 30,
2002. Excess cash flow is defined in the Companys credit agreement, as
amended, as: 1) the sum of net income, interest expense, provisions for taxes,
depreciation expense, amortization expense, other non-cash items affecting net
income, and to the extent included in calculating net income, expenses incurred
by the Company in connection with the first amendment to the credit agreement,
plus 2) a working capital adjustment, less 3) repayments of debt, capital
expenditures, cash interest expense and provisions for taxes based on income.

In addition to customary affirmative covenants, the senior secured credit
facilities require the Company to enter into interest-rate hedging agreements
to the extent necessary for 50% of the total outstanding consolidated
indebtedness to be at a fixed rate. The senior secured credit facilities
include negative covenants that, among other things, restrict the Companys and
its subsidiaries ability to: incur additional indebtedness (including
guarantees of certain obligations); engage in mergers, consolidations,
liquidations and dissolutions; sell assets; enter into capital leases; pay
dividends or make other payments in respect of capital stock; make
acquisitions; make investments, loans and advances; make payments with respect
to or modify subordinated debt instruments; and enter into agreements with
negative pledge clauses or clauses restricting subsidiary distributions.

The senior secured credit facilities also contain minimum interest
coverage and fixed charge coverage ratios and maximum senior secured and total
leverage ratios. The senior secured credit facilities also contain a
restriction on the amount of capital expenditures.

On March 3, 2003, the Company voluntarily prepaid $14.0 million of its
term loan under the senior secured credit facilities. In addition, the Company
completed an amendment to its senior secured credit facilities that modifies
the senior secured

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
March 31, 2003

leverage, total leverage, interest coverage and capital expenditures
covenants in the credit agreement to less restrictive amounts and secures
consent from the Companys lenders for the acquisition of the shares of Gains
International (US) Inc. and Gains International (Europe) Limited (see Note 12).
Following the prepayment, the Company had $55.4 million outstanding under its
term loan.

As of March 31, 2003, annual principal payments required under the term
loan (excluding any future excess free cash flow amounts), by fiscal year, are
as follows (in thousands):

|     |  |   |        | 
|---- |  | - | ------ | 
|2003 |  | $ | 2,914  | 
|2004 |  |   | 5,827  | 
|2005 |  |   | 5,827  | 
|2006 |  |   | 29,865 | 
|2007 |  |   | 9,469  | 
|     |  |   |        | 
|     |  | $ | 53,902 | 
|     |  |   |        | 

Senior Subordinated Notes

The Company issued $150.0 million in aggregate principal amount of 11.50%
senior subordinated notes on December 20, 2001 to fund a portion of the
consideration for the IPC Information Systems Acquisition. Under the terms of
the indenture governing the senior subordinated notes, the Company may, subject
to certain restrictions, issue additional notes up to a maximum aggregate
principal amount of $250.0 million. The senior subordinated notes mature on
December 15, 2009. The senior subordinated notes are guaranteed by certain of
the Companys domestic restricted subsidiaries. These subsidiary guarantees are
both full and unconditional, as well as joint and several.

Interest on the senior subordinated notes accrue at the rate of 11.50% per
annum and is payable semi-annually in arrears on June 15 and December 15,
commencing on June 15, 2002. Pursuant to a registration rights agreement
entered into at the time the senior subordinated notes were issued, the Company
completed an exchange offer registered under the Securities Act of 1933, as
amended, in which all outstanding senior subordinated notes were exchanged for
a different series of senior subordinated notes having substantially identical
terms.

The indenture governing the senior subordinated notes contains covenants
that impose significant restrictions on the Company. These restrictions include
limitations on the ability of the Company and its restricted subsidiaries to:
incur indebtness or issue preferred shares; pay dividends, make distributions
in respect of capital stock or make other restricted payments; create liens;
agree to payment restrictions affecting restricted subsidiaries; consolidate,
merge, sell or otherwise dispose of all or substantially all of its assets;
enter into transactions with affiliates; and designate subsidiaries as
unrestricted subsidiaries.



|7. |  | Employee Benefit Plans
|-- |  | ----------------------

2002 Stock Option Plan

In February 2002, the Company adopted the 2002 Stock Option Plan. The
option plan provides for the grant of options to purchase shares of the
Companys common stock to selected employees, officers, consultants and
directors. The purpose of the option plan is to provide an incentive to
employees, officers, consultants and directors to devote their abilities and
industry to the Companys success. The maximum number of shares that may be
made the subject of options granted under the option plan is 900,000. The
Company had granted 769,550 stock options with an option price of $10 per
share, which was the fair value of the Companys common stock at the grant
date. The Company accounts for these options pursuant to APB Opinion No. 25
Accounting for Stock Options Issued to Employees. Accordingly, no
compensation expense was recognized for these grants.

The option plan is administered by the compensation committee of the Companys
board of directors, which determines the individuals to whom options are
awarded, the number of shares subject to each award, the exercise price of the
option and other terms and conditions of the awards. Unless otherwise provided
by the compensation committee, an option becomes exercisable for 25% of the
shares subject to the option on each of the first four anniversaries of the
date the compensation committee grants the option. Options granted under the
option plan are non-transferable and the shares acquired upon exercise of
options are subject to certain transfer restrictions. The terms and conditions
of each option are set forth in an option agreement.

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
March 31, 2003

The option plan provides that the effect, if any, on an option upon a
change in control or sale or the consummation of a merger, consolidation, or
reorganization which results in certain of the Companys current stockholders
no longer owning any interests in the Company or any successor corporation will
be set forth in the option agreement. Under the form option agreements that
have been approved by the Companys compensation committee for current use
under the plan, upon a change in control, 50% of the unvested portion of each
option will immediately become vested and exercisable. In the event an option
holders employment is terminated by the Company for any reason other than
cause or disability within one year following the change in control, the option
will immediately become fully vested and exercisable and remain exercisable for
180 days. The form agreements also provide that in the event of a sale or the
consummation of a merger, consolidation or reorganization which results in
certain of the Companys stockholders no longer having any ownership interest
in the Company or any successor corporation, the option will become fully
vested and exercisable.

Stock option transactions for the period from October 1, 2002 to March 31,
2003 are as follows:

|                                  |           |  |           |         |                  |   |       |       | 
|--------------------------------- | --------- |  | --------- | ------- | ---------------- | - | ----- | ----- | 
|                                  |           |  | Number of |         | Weighted Average
|                                  |           |  | Shares    |         | Exercise Price  
|                                  |           |  |           |         |                 
|Outstanding at September 30, 2002 |           |  | 751,025   |         |                  | $ | 10.00 |      
|                                  | Granted   |  |           |        |                  |   |       |      | 
|                                  | Exercised |  |           |        |                  |   |       |      | 
|                                  | Cancelled |  | (         | 30,000) |                  |   |       | 10.00 | 
|                                  |           |  |           |         |                  |   |       |      
|Outstanding at March 31, 2003     |           |  | 721,025   |         |                  |   | 10.00 |      
|                                  |           |  |           |         |                  |   |       |      

Of the total stock options outstanding, none were exercisable at March 31,
2003. The amount of additional options available to be granted pursuant to the
option plan was 178,975 at March 31, 2003.

Key Employee Equity Investment Plan

In February 2002, the Company adopted the Key Employee Equity Investment
Plan. Under the plan, certain key employees, officers and directors may be
given the opportunity to purchase shares of the Companys common stock at its
current fair market value. The plan is administered by the compensation
committee of the Companys board of directors, which determines the individuals
who may participate in the plan, the number of shares offered to each
participant and the terms and conditions of each offer. Up to 100,000 shares in
the aggregate may be sold under the plan. The shares are subject to certain
transfer restrictions. Prior to the adoption of the Sarbanes-Oxley Act in July
2002, all participants were permitted to pay for up to two-thirds of the
purchase price with a promissory note that is secured by the purchased shares.
Since the adoption of the Sarbanes-Oxley Act, certain participants may no
longer be permitted to purchase shares under the plan with such promissory
notes. Through September 30, 2002, 60,000 shares were purchased under the plan
by certain directors, officers and other key employees. To date, no shares have
been purchased by such directors, officers and other key employees in fiscal
year 2003. Promissory notes received by the Company for shares purchased by
directors, officers and other key employees of the Company prior to the
adoption of the Sarbanes-Oxley Act totaled $0.4 million.

8. Commitments and Contingencies

Warranties

The Company records a reserve for future warranty costs based on current
unit sales, historical experience and managements judgment regarding
anticipated rates of warranty claims and cost per claim. The adequacy of the
recorded warranty liabilities is assessed each quarter and adjustments are made
as necessary. The specific terms and conditions of the warranties vary
depending on the products sold and the countries in which the Company does
business. Changes in the warranty liability during the period are as follows:

|                              |                          |   |       |        |  
|----------------------------- | ------------------------ | - | ----- | ------ | -
|(dollars in thousands)        |                          |   |       |       
|                              |                          |   |       |       
|Balance at September 30, 2002 |                          | $ | 2,159 |       
|                              | Warranty accrual         |   |       | 647    |  
|                              | Material and labor usage |   |       | (1,377 | )
|                              |                          |   |       |       
|Balance at March 31, 2003     |                          | $ | 1,429 |       
|                              |                          |   |       |       

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Unaudited)
March 31, 2003

Guarantees

The Company, through its subsidiaries, guaranteed certain equipment lease,
real estate and other obligations of former affiliates. At the closing of the
IPC Information Systems Acquisition, the Company deferred payment to Global
Crossing of $20.8 million of the purchase price, which represented an amount
intended to reflect the majority of such guaranteed obligations as certified by
Global Crossing. There can be no assurance that the amounts certified by
Global Crossing included all of the amounts actually guaranteed. Through the
date of the settlement and rejection agreement with Global Crossing, the
Company had paid approximately $13.5 million with respect to the guaranteed
equipment lease obligations.

The Company remains a guarantor of certain real estate lease obligations
on behalf of Global Crossing, including the sublease for office space at 67-73
Worship Street in London, England. The terms of these guaranties will expire in
November 2004 and December 2005. These obligations were entered as a result of
Global Crossings ownership of the Company and the Company is responsible for
any payments if Global Crossing fails to make the required payments under the
lease agreements. However, under the settlement and rejection agreement, $2.0
million has been placed in an escrow account pending the issuance of an
irrevocable letter of credit from Global Crossing to the Company as beneficiary
in the event that Global Crossing fails to make the required payments under the
Worship Street sublease. The fair value of these guaranties is $5.3 million,
reduced by the $2.0 million escrow amount, and such amount has been recorded on
the Companys consolidated balance sheet. The maximum potential future payments
the Company could be required to make under these obligations is $5.8 million.
Through March 31, 2003, Global Crossings affiliate has made all of the
required Worship Street sublease payments.

Litigation

Except as described below, the Company is not a party to any pending legal
proceedings other than claims and lawsuits arising in the normal course of
business. Management believes these proceedings will not have a material
adverse effect on the Companys consolidated financial condition or results of
operations.

On June 27, 2000, an action was brought against several defendants,
including IPC Communications, Inc., in the United States District Court for the
Southern District of New York by two telecommunications cabling contractors
alleging that IPC Communications, Inc. violated federal antitrust and New York
state law by conspiring with the International Brotherhood of Electrical
Workers Local Union Number 3, AFL-CIO, and five electrical contractors, to
exclude plaintiffs from telecommunications wiring and systems installation jobs
in the New York City metropolitan area. Subsequently, the complaint was amended
to add an additional plaintiff and an additional defendant contractor. The
Company believes the suit is without merit. However, there can be no assurance
that the resolution of this lawsuit will ultimately be favorable. Plaintiffs
are seeking injunctive relief and damages from the defendants, jointly and
severally, in excess of an aggregate of $75 million.

9. Income Taxes

The Companys effective tax rates for the three and six month periods
ended March 31,2003 were 311.4% and 167.2%, respectively, compared to 29.7%
and 16.6% for the three and six month period ended March 31, 2002.

The Companys effective tax rate reflects the Companys foreign, federal
and state taxes, non-deductibility of foreign losses for federal tax purposes,
the non-deductibility of certain expenses and, for fiscal year 2003, taxable
income at several of the Companys foreign subsidiaries, which, combined with
the lower absolute amount of pre-tax income for the 2003 periods as compared to
the absolute amount of pre-tax loss for the 2002 periods, generates a more
significant impact on the Companys effective tax rate.

As of March 31, 2003, the Company has recognized deferred tax assets
related to its US federal and state net operating loss carryforwards of
approximately $9.0 million. In determining whether it is more likely than not
that the Company will realize the benefits of the net deferred tax assets from
US operations at September 30, 2002, we considered all available evidence, both positive and
negative. The principal factors that led the Company to recognize these
benefits were: (1) US results of operations for the period ended September 30,
2002 reported a loss before income taxes of $22.1 million, after reflecting
charges of $34.3 million resulting from the fair-value inventory adjustments under the purchase price allocation
(which, as a result of the Internal Revenue Code Section 338(h)(10) tax
election, jointly made by the Company and Global Crossing, also generate
deductions for income tax purposes); (2) US results of operations for fiscal
2003, 2004 and subsequent years are expected to generate sufficient taxable
income to fully utilize these tax loss carryforwards; and (3) the Companys
conclusion that the net US deferred tax assets were generated by an event (the
Companys purchase of IPC Information Systems, Inc.), rather than a
continuing condition. As of March 31, 2003, no circumstances
have arisen that would require the Company to change such conclusion.

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Unaudited)
March 31, 2003

As a result of the rejection of the purchase agreement, Global Crossing
has been relieved of all of its obligations under the purchase agreement,
including, among other things, indemnifying the Company for tax liabilities
that may be imposed upon IPC Information Systems, Inc. and its subsidiaries for
periods prior to and including the date of the IPC Information Systems
Acquisition. Therefore, in the event that any tax liabilities are imposed, as a
result of an audit or otherwise, on IPC Information Systems, Inc. and/or its
subsidiaries for these periods prior to and including the date of the IPC
Information Systems Acquisition, the Company may be required to pay those taxes
and is no longer able to seek indemnification from Global Crossing. As of the
date of this filing, the aggregate amount of taxes for which the Company has
received notices of taxes due from various jurisdictions and recognized as tax
liabilities under purchase accounting is approximately $6.5 million. The
Company estimates that the range of its exposure for additional tax liabilities
is from $0 to $36 million. In computing its estimated range of potential tax
liabilities, the Company took into account tax returns in certain jurisdictions
where the statutes of limitations have not yet expired. Under those tax returns
as filed, the remaining liability is zero. Although the Company believes that
all those tax returns have been filed correctly, such returns may be audited
and additional taxes may be assessed (or refunds may be granted). Payment by
the Company of a significant amount of these potential tax liabilities could
have a material adverse effect on its financial condition and results of
operations, requiring the Company to seek additional financing. In that event
the Company cannot assure you it will be able to obtain additional financing on
commercially reasonable terms, or at all.

10. Business Segment Information

The Companys operations include the Trading Systems and Information
Transport Systems, or I.T.S. divisions. Trading Systems reports sales of turret
systems to distributors and direct sales and installations of turret systems as
Product sales and installations. It reports revenue from turret system
maintenance, including annual and multi-year service contracts, and from moves,
additions and changes to existing turret system installations as Service.
I.T.S. reports revenue from the design, integration and implementation of
cabling infrastructure projects including local and wide area networks, and
from the sales of intelligent network products, such as hubs, bridges and
routers as Product sales and installations. It reports revenue from on-site
maintenance of customer cable infrastructure, including annual and multi-year
contracts, and from the provision of outsourcing services for the support,
expansion and upgrading of existing customer networks, as Service. The
Companys primary measures to evaluate performance are direct margin and income
from operations.

Period from October 1, 2001 to December 20, 2001

|                                  |                                 |               |         |                        |        |        |        |              |        |   |         |        |        | 
|--------------------------------- | ------------------------------- | ------------- | ------- | ---------------------- | ------ | ------ | ------ | ------------ | ------ | - | ------- | ------ | ------ | 
|                                  |                                 |               |         | Predecessor           
|                                  |                                 |               |         |                       
|                                  |                                 |               |         | Trading                |        |        |        |              |        |   |         |       
|                                  |                                 |               |         | Systems                |        | I.T.S. |        | Consolidated
|                                  |                                 |               |         |                        |        |        |        |             
|                                  |                                 |               |         | (dollars in thousands)
|Revenue:                          |                                 |               |         |                        |        |        |        |              |        |   |         |       
|                                  | Product sales and installations |               | $       | 27,444                 |        |        | $      | 8,247        |        |   | $       | 35,691 |       
|                                  | Service                         |               |         | 18,795                 |        |        |        | 4,294        |        |   |         | 23,089 |       
|                                  |                                 |               |         |                        |        |        |        |              |        |   |         |       
|                                  |                                 | Total revenue |         |                        | 46,239 |        |        |              | 12,541 |   |         |        | 58,780 | 
|Direct margin                     |                                 |               | 28,690  |                        |        |        | 2,734  |              |        |   | 31,424  |       
|Depreciation and amortization     |                                 |               | 10,729  |                        |        |        | 8      |              |        |   | 10,737  |       
|Income (loss) from operations     |                                 |               | (6,498  | )                      |        |        | 1,090  |              |        |   | (5,408  | )     
|Interest expense, net             |                                 |               | (5,987  | )                      |        |        |       |              |        |   | (5,987  | )     
|Other income (expense), net       |                                 |               | 49      |                        |        |        |       |              |        |   | 49      |       
|Income (loss) before income taxes |                                 |               | (12,436 | )                      |        |        | 1,090  |              |        |   | (11,346 | )     
|Income tax benefit                |                                 |               | (318    | )                      |        |        |       |              |        |   | (318    | )     
|Goodwill, net                     |                                 |               | 180,328 |                        |        |        |       |              |        |   | 180,328 |       
|Total assets                      |                                 | $             | 350,787 |                        |        | $      | 29,179 |              |        | $ | 379,966 |       
|Capital expenditures              |                                 | $             | 1,897   |                        |        | $      | 5      |              |        | $ | 1,902   |       

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Unaudited)
March 31, 2003

Period from November 15, 2001 to March 31, 2002

|                                  |                                 |               |         |                        |        |        |        |              |        |   |         |        |        | 
|--------------------------------- | ------------------------------- | ------------- | ------- | ---------------------- | ------ | ------ | ------ | ------------ | ------ | - | ------- | ------ | ------ | 
|                                  |                                 |               |         | Trading                |        |        |        |              |        |   |         |       
|                                  |                                 |               |         | Systems                |        | I.T.S. |        | Consolidated
|                                  |                                 |               |         |                        |        |        |        |             
|                                  |                                 |               |         | (dollars in thousands)
|Revenue:                          |                                 |               |         |                        |        |        |        |              |        |   |         |       
|                                  | Product sales and installations |               | $       | 56,857                 |        |        | $      | 10,472       |        |   | $       | 67,329 |       
|                                  | Service                         |               |         | 21,998                 |        |        |        | 3,207        |        |   |         | 25,205 |       
|                                  |                                 |               |         |                        |        |        |        |              |        |   |         |        |       
|                                  |                                 | Total revenue |         |                        | 78,855 |        |        |              | 13,679 |   |         |        | 92,534 | 
|Direct margin                     |                                 |               | 23,382  |                        |        |        | 2,213  |              |        |   | 25,595  |       
|Depreciation and amortization     |                                 |               | 5,019   |                        |        |        | 147    |              |        |   | 5,166   |       
|Income (loss) from operations     |                                 |               | (2,428  | )                      |        |        | 276    |              |        |   | (2,152  | )     
|Interest expense, net             |                                 |               | (7,784  | )                      |        |        |       |              |        |   | (7,784  | )     
|Other income (expense), net       |                                 |               | 28      |                        |        |        |       |              |        |   | 28      |       
|Income (loss) before income taxes |                                 |               | (10,184 | )                      |        |        | 276    |              |        |   | (9,908  | )     
|Income tax benefit                |                                 |               | (3,216  | )                      |        |        |       |              |        |   | (3,216  | )     
|Goodwill                          |                                 |               | 57,682  |                        |        |        | 15,151 |              |        |   | 72,833  |       
|Total assets                      |                                 | $             | 443,401 |                        |        | $      | 43,629 |              |        | $ | 487,030 |       
|Capital expenditures              |                                 | $             | 974     |                        |        | $      | 8      |              |        | $ | 982     |       

For the Six Months Ended March 31, 2003

|                                  |                                 |               |         |                        |        |        |        |              |        |   |         |        |         | 
|--------------------------------- | ------------------------------- | ------------- | ------- | ---------------------- | ------ | ------ | ------ | ------------ | ------ | - | ------- | ------ | ------- | 
|                                  |                                 |               |         | Trading                |        |        |        |              |        |   |         |       
|                                  |                                 |               |         | Systems                |        | I.T.S. |        | Consolidated
|                                  |                                 |               |         |                        |        |        |        |             
|                                  |                                 |               |         | (dollars in thousands)
|Revenue:                          |                                 |               |         |                        |        |        |        |              |        |   |         |       
|                                  | Product sales and installations |               | $       | 44,911                 |        |        | $      | 11,659       |        |   | $       | 56,570 |        
|                                  | Service                         |               |         | 42,707                 |        |        |        | 5,411        |        |   |         | 48,118 |        
|                                  |                                 |               |         |                        |        |        |        |              |        |   |         |       
|                                  |                                 | Total revenue |         |                        | 87,618 |        |        |              | 17,070 |   |         |        | 104,688 | 
|Direct margin                     |                                 |               | 55,809  |                        |        |        | 2,461  |              |        |   | 58,270  |       
|Depreciation and amortization     |                                 |               | 10,005  |                        |        |        | 120    |              |        |   | 10,125  |       
|Income (loss) from operations     |                                 |               | 13,311  |                        |        |        | (746   | )            |        |   | 12,565  |       
|Interest expense, net             |                                 |               | (12,682 | )                      |        |        |       |              |        |   | (12,682 | )     
|Other income (expense), net       |                                 |               | 1,327   |                        |        |        |       |              |        |   | 1,327   |       
|Income (loss) before income taxes |                                 |               | 1,956   |                        |        |        | (746   | )            |        |   | 1,210   |       
|Income tax provision              |                                 |               | 2,023   |                        |        |        |       |              |        |   | 2,023   |       
|Goodwill                          |                                 |               | 69,242  |                        |        |        | 971    |              |        |   | 70,213  |       
|Total assets                      |                                 | $             | 390,189 |                        |        | $      | 28,686 |              |        | $ | 418,875 |       
|Capital expenditures              |                                 | $             | 2,275   |                        |        | $      | 9      |              |        | $ | 2,284   |       

11. Guarantor Subsidiaries Financial Information

Certain of the Companys domestic restricted subsidiaries guarantee the
senior secured credit facilities and the senior subordinated notes. These
subsidiary guarantees are both full and unconditional, as well as joint and
several. Information regarding the guarantors is as follows (in thousands):

Condensed Combining Statement of Operations
For the Period October 1, 2001 to December 20, 2001

|                                |              |   |             |   |              |   |              |        |              |   |          |       |  |   |        |     |   |   |         |        | 
|------------------------------- | ------------ | - | ----------- | - | ------------ | - | ------------ | ------ | ------------ | - | -------- | ----- |  | - | ------ | --- | - | - | ------- | ------ | 
|                                |              |   |             |   |              |   |              |        |              |   | Non-     |       |  |   |        |     |   |   |        
|                                |              |   | IPC         |   | Guarantor    |   | Guarantor    |        |              |   |          |       |  |   |       
|                                |              |   | Acquisition |   | Subsidiaries |   | Subsidiaries |        | Eliminations |   | Combined
|                                |              |   |             |   |              |   |              |        |              |   |         
|Revenue                         |              | $ |            |   |              | $ | 52,098       |        |              | $ | 13,777   |       |  | $ | (7,095 | )   |   | $ | 58,780  |       
|Cost of goods sold              |              |   |            |   |              |   | 30,826       |        |              |   | 9,226    |       |  |   | (7,014 | )   |   |   | 33,038  |       
|                                |              |   |             |   |              |   |              |        |              |   |          |       |  |   |        |     |   |   |         |       
|                                | Gross profit |   |             |  |              |   |              | 21,272 |              |   |          | 4,551 |  |   |        | (81 | ) |   |         | 25,742 | 
|Other operating expenses        |              |   |            |   |              |   | 28,211       |        |              |   | 2,939    |       |  |   |       |     |   |   | 31,150  |       
|                                |              |   |             |   |              |   |              |        |              |   |          |       |  |   |        |     |   |   |         |       
|Income (loss) from operations   |              |   |            |   |              |   | (6,939       | )      |              |   | 1,612    |       |  |   | (81    | )   |   |   | (5,408  | )     
|Interest expense and other, net |              |   |            |   |              |   | (6,218       | )      |              |   | 280      |       |  |   |       |     |   |   | (5,938  | )     
|Income tax provision (benefit)  |              |   |            |   |              |   | 639          |        |              |   | (957     | )     |  |   |       |     |   |   | (318    | )     
|                                |              |   |             |   |              |   |              |        |              |   |          |       |  |   |        |     |   |   |         |       
|Net income (loss)               |              | $ |            |   |              | $ | (13,796      | )      |              | $ | 2,849    |       |  | $ | (81    | )   |   | $ | (11,028 | )     
|                                |              |   |             |   |              |   |              |        |              |   |          |       |  |   |        |     |   |   |         |       

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
March 31, 2003

Condensed Combining Statement of
Cash FlowsFor the Period October 1, 2001 to December 20, 2001

|                                                    |  |             |   |              |  |              |         |              |  |          |        |   |  |   |   |  |  |   |         |  
|--------------------------------------------------- |  | ----------- | - | ------------ |  | ------------ | ------- | ------------ |  | -------- | ------ | - |  | - | - |  |  | - | ------- | -
|                                                    |  |             |   |              |  |              |         |              |  | Non-     |        |   |  |   |   |  |  |  
|                                                    |  | IPC         |   | Guarantor    |  | Guarantor    |         |              |  |          |        |   |  |  
|                                                    |  | Acquisition |   | Subsidiaries |  | Subsidiaries |         | Eliminations |  | Combined
|                                                    |  |             |   |              |  |              |         |              |  |         
|Net cash provided by (used in) operating activities |  | $           |  |              |  | $            | 19,702  |              |  | $        | (4,455 | ) |  | $ |  |  |  | $ | 15,247  |  
|Capital expenditures                                |  |             |  |              |  |              | (1,875  | )            |  |          | (27    | ) |  |   |  |  |  |   | (1,902  | )
|                                                    |  |             |   |              |  |              |         |              |  |          |        |   |  |   |   |  |  |   |         |  
|Net cash used in investing activities               |  |             |  |              |  |              | (1,875  | )            |  |          | (27    | ) |  |   |  |  |  |   | (1,902  | )
|Repayment of intercompany borrowings                |  |             |  |              |  |              | (16,428 | )            |  |          | 1,294  |   |  |   |  |  |  |   | (15,134 | )
|                                                    |  |             |   |              |  |              |         |              |  |          |        |   |  |   |   |  |  |   |         |  
|Net cash (used in) provided by financing activities |  |             |  |              |  |              | (16,428 | )            |  |          | 1,294  |   |  |   |  |  |  |   | (15,134 | )
|Effect of exchange rate changes on cash             |  |             |  |              |  |              | (1,076  | )            |  |          | (920   | ) |  |   |  |  |  |   | (1,996  | )
|                                                    |  |             |   |              |  |              |         |              |  |          |        |   |  |   |   |  |  |   |         |  
|Net increase (decrease) in cash                     |  |             |  |              |  |              | 323     |              |  |          | (4,108 | ) |  |   |  |  |  |   | (3,785  | )
|Cash at beginning of period                         |  |             |  |              |  |              | (703    | )            |  |          | 5,239  |   |  |   |  |  |  |   | 4,536   |  
|                                                    |  |             |   |              |  |              |         |              |  |          |        |   |  |   |   |  |  |   |         |  
|Cash at end of period                               |  | $           |  |              |  | $            | (380    | )            |  | $        | 1,131  |   |  | $ |  |  |  | $ | 751     |  
|                                                    |  |             |   |              |  |              |         |              |  |          |        |   |  |   |   |  |  |   |         |  

Condensed Consolidated Statement of Operations
For the Period November 15, 2001 to March 31, 2002

|                                |  |             |        |              |  |              |        |              |  |              |        |  |  |   |        |   |  |   |        |  
|------------------------------- |  | ----------- | ------ | ------------ |  | ------------ | ------ | ------------ |  | ------------ | ------ |  |  | - | ------ | - |  | - | ------ | -
|                                |  |             |        |              |  |              |        |              |  | Non-         |        |  |  |   |        |   |  |  
|                                |  | IPC         |        | Guarantor    |  | Guarantor    |        |              |  |              |        |  |  |  
|                                |  | Acquisition |        | Subsidiaries |  | Subsidiaries |        | Eliminations |  | Consolidated
|                                |  |             |        |              |  |              |        |              |  |             
|Revenue                         |  | $           |       |              |  | $            | 83,221 |              |  | $            | 17,474 |  |  | $ | (8,161 | ) |  | $ | 92,534 |  
|Cost of goods sold              |  |             |       |              |  |              | 71,066 |              |  |              | 10,570 |  |  |   | (6,839 | ) |  |   | 74,797 |  
|                                |  |             |        |              |  |              |        |              |  |              |        |  |  |   |        |   |  |   |        |  
|Gross profit                    |  |             |       |              |  |              | 12,155 |              |  |              | 6,904  |  |  |   | (1,322 | ) |  |   | 17,737 |  
|Other operating expenses        |  |             |       |              |  |              | 16,570 |              |  |              | 3,319  |  |  |   |       |   |  |   | 19,889 |  
|                                |  |             |        |              |  |              |        |              |  |              |        |  |  |   |        |   |  |   |        |  
|Income (loss) from operations   |  |             |       |              |  |              | (4,415 | )            |  |              | 3,585  |  |  |   | (1,322 | ) |  |   | (2,152 | )
|Interest expense and other, net |  |             | (7,717 | )            |  |              | (59    | )            |  |              | 20     |  |  |   |       |   |  |   | (7,756 | )
|Income tax provision (benefit)  |  |             |       |              |  |              | (4,024 | )            |  |              | 808    |  |  |   |       |   |  |   | (3,216 | )
|                                |  |             |        |              |  |              |        |              |  |              |        |  |  |   |        |   |  |   |        |  
|Net income (loss)               |  | $           | (7,717 | )            |  | $            | (450   | )            |  | $            | 2,797  |  |  | $ | (1,322 | ) |  | $ | (6,692 | )
|                                |  |             |        |              |  |              |        |              |  |              |        |  |  |   |        |   |  |   |        |  

Condensed Consolidated Statement of Cash Flows
For the Period November 15, 2001 to March 31, 2002

|                                                                               |  |             |          |              |  |              |        |              |  |              |        |   |  |   |      |   |  |   |          |  
|------------------------------------------------------------------------------ |  | ----------- | -------- | ------------ |  | ------------ | ------ | ------------ |  | ------------ | ------ | - |  | - | ---- | - |  | - | -------- | -
|                                                                               |  |             |          |              |  |              |        |              |  | Non-         |        |   |  |   |      |   |  |  
|                                                                               |  | IPC         |          | Guarantor    |  | Guarantor    |        |              |  |              |        |   |  |  
|                                                                               |  | Acquisition |          | Subsidiaries |  | Subsidiaries |        | Eliminations |  | Consolidated
|                                                                               |  |             |          |              |  |              |        |              |  |             
|Net cash provided by (used in) operating activities                            |  | $           | (6,704   | )            |  | $            | 7,859  |              |  | $            | 11,983 |   |  | $ |     |   |  | $ | 13,138   |  
|Capital expenditures                                                           |  |             |         |              |  |              | (567   | )            |  |              | (415   | ) |  |   |     |   |  |   | (982     | )
|Payment for acquisitions, net of cash acquired and working
capital adjustments |  |             | (350,246 | )            |  |              | 3,054  |              |  |              |       |   |  |   | 751  |   |  |   | (346,441 | )
|                                                                               |  |             |          |              |  |              |        |              |  |              |        |   |  |   |      |   |  |   |          |  
|Net cash provided by (used in) investing activities                            |  |             | (350,246 | )            |  |              | 2,487  |              |  |              | (415   | ) |  |   | 751  |   |  |   | (347,423 | )
|Proceeds from debt, net of issuance costs                                      |  |             | 235,200  |              |  |              |       |              |  |              |       |   |  |   |     |   |  |   | 235,200  |  
|Proceeds from equity issuances, net                                            |  |             | 139,700  |              |  |              |       |              |  |              |       |   |  |   |     |   |  |   | 139,700  |  
|                                                                               |  |             |          |              |  |              |        |              |  |              |        |   |  |   |      |   |  |   |          |  
|Net cash provided by financing activities                                      |  |             | 374,900  |              |  |              |       |              |  |              |       |   |  |   |     |   |  |   | 374,900  |  
|Effect of exchange rate changes on cash                                        |  |             |         |              |  |              |       |              |  |              | (1,034 | ) |  |   |     |   |  |   | (1,034   | )
|                                                                               |  |             |          |              |  |              |        |              |  |              |        |   |  |   |      |   |  |   |          |  
|Net increase in cash                                                           |  |             | 17,950   |              |  |              | 10,346 |              |  |              | 10,534 |   |  |   | 751  |   |  |   | 39,581   |  
|Cash at beginning of period                                                    |  |             |         |              |  |              | (380   | )            |  |              | 1,131  |   |  |   | (751 | ) |  |   |         |  
|                                                                               |  |             |          |              |  |              |        |              |  |              |        |   |  |   |      |   |  |   |          |  
|Cash at end of period                                                          |  | $           | 17,950   |              |  | $            | 9,966  |              |  | $            | 11,665 |   |  | $ |     |   |  | $ | 39,581   |  
|                                                                               |  |             |          |              |  |              |        |              |  |              |        |   |  |   |      |   |  |   |          |  

18



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##### Table of Contents



IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
March 31, 2003

Condensed Consolidating Balance Sheet at September 30, 2002

|                                      |                                                                  |                   |   |             |         |              |   |              |         |              |   |              |        |  |   |          |          |   |   |         |         | 
|------------------------------------- | ---------------------------------------------------------------- | ----------------- | - | ----------- | ------- | ------------ | - | ------------ | ------- | ------------ | - | ------------ | ------ |  | - | -------- | -------- | - | - | ------- | ------- | 
|                                      |                                                                  |                   |   |             |         |              |   |              |         |              |   | Non-         |        |  |   |          |          |   |   |        
|                                      |                                                                  |                   |   | IPC         |         | Guarantor    |   | Guarantor    |         |              |   |              |        |  |   |         
|                                      |                                                                  |                   |   | Acquisition |         | Subsidiaries |   | Subsidiaries |         | Eliminations |   | Consolidated
|                                      |                                                                  |                   |   |             |         |              |   |              |         |              |   |             
|Assets:                               |                                                                  |                   |   |             |         |              |   |              |         |              |   |              |        |  |   |          |          |   |   |        
|                                      | Cash                                                             |                   | $ | 6,123       |         |              | $ | (1,610       | )       |              | $ | 20,781       |        |  | $ |         |          |   | $ | 25,294  |        
|                                      | Restricted cash                                                  |                   |   | 7,272       |         |              |   |             |         |              |   |             |        |  |   |         |          |   |   | 7,272   |        
|                                      | Accounts receivable, net                                         |                   |   |            |         |              |   | 32,900       |         |              |   | 19,568       |        |  |   |         |          |   |   | 52,468  |        
|                                      | Inventories, net                                                 |                   |   |            |         |              |   | 20,089       |         |              |   | 5,518        |        |  |   | (3,389   | )        |   |   | 22,218  |        
|                                      | Prepaid and other current assets                                 |                   |   |            |         |              |   | 1,658        |         |              |   | 2,956        |        |  |   |         |          |   |   | 4,614   |        
|                                      | Due from affiliate                                               |                   |   | (20,023     | )       |              |   | 67,819       |         |              |   | (47,796      | )      |  |   |         |          |   |   |        |        
|                                      |                                                                  |                   |   |             |         |              |   |              |         |              |   |              |        |  |   |          |          |   |   |         |        
|                                      | Total current assets                                             |                   |   | (6,628      | )       |              |   | 120,856      |         |              |   | 1,027        |        |  |   | (3,389   | )        |   |   | 111,866 |        
|                                      | Investment in subsidiaries                                       |                   |   | 369,106     |         |              |   |             |         |              |   |             |        |  |   | (369,106 | )        |   |   |        |        
|                                      | Property, plant and equipment, net                               |                   |   |            |         |              |   | 18,988       |         |              |   | 2,016        |        |  |   |         |          |   |   | 21,004  |        
|                                      | Goodwill and intangibles, net                                    |                   |   |            |         |              |   | 205,298      |         |              |   | 76,113       |        |  |   |         |          |   |   | 281,411 |        
|                                      | Deferred financing costs, net                                    |                   |   | 15,116      |         |              |   |             |         |              |   |             |        |  |   |         |          |   |   | 15,116  |        
|                                      | Other assets                                                     |                   |   |            |         |              |   | 662          |         |              |   | 173          |        |  |   |         |          |   |   | 835     |        
|                                      |                                                                  |                   |   |             |         |              |   |              |         |              |   |              |        |  |   |          |          |   |   |         |        
|                                      |                                                                  | Total assets      |   | $           | 377,594 |              |   | $            | 345,804 |              |   | $            | 79,329 |  |   | $        | (372,495 | ) |   | $       | 430,232 | 
|                                      |                                                                  |                   |   |             |         |              |   |              |         |              |   |              |        |  |   |          |          |   |   |         |        
|Liabilities and stockholders equity: |                                                                  |                   |   |             |         |              |   |              |         |              |   |              |        |  |   |          |          |   |   |        
|                                      | Current portion of long-term debt                                |                   | $ | 6,460       |         |              | $ |             |         |              | $ |             |        |  | $ |         |          |   | $ | 6,460   |        
|                                      | Accounts payable, accrued expenses and other current liabilities |                   |   | 5,072       |         |              |   | 15,196       |         |              |   | 10,830       |        |  |   |         |          |   |   | 31,098  |        
|                                      | Customer advances and deferred revenue                           |                   |   |            |         |              |   | 17,116       |         |              |   | 6,377        |        |  |   |         |          |   |   | 23,493  |        
|                                      | Deferred purchase price obligation                               |                   |   | 7,272       |         |              |   |             |         |              |   |             |        |  |   |         |          |   |   | 7,272   |        
|                                      |                                                                  |                   |   |             |         |              |   |              |         |              |   |              |        |  |   |          |          |   |   |         |        
|                                      | Total current liabilities                                        |                   |   | 18,804      |         |              |   | 32,312       |         |              |   | 17,207       |        |  |   |         |          |   |   | 68,323  |        
|                                      | Long-term debt                                                   |                   |   | 214,602     |         |              |   |             |         |              |   |             |        |  |   |         |          |   |   | 214,602 |        
|                                      | Other long-term liabilities                                      |                   |   | 7,190       |         |              |   | 3,119        |         |              |   |             |        |  |   |         |          |   |   | 10,309  |        
|                                      |                                                                  |                   |   |             |         |              |   |              |         |              |   |              |        |  |   |          |          |   |   |         |        
|                                      |                                                                  | Total liabilities |   |             | 240,596 |              |   |              | 35,431  |              |   |              | 17,207 |  |   |          |         |   |   |         | 293,234 | 
|                                      |                                                                  |                   |   |             |         |              |   |              |         |              |   |              |        |  |   |          |          |   |   |         |        
|                                      | Total stockholders equity                                       |                   |   | 136,998     |         |              |   | 310,373      |         |              |   | 62,122       |        |  |   | (372,495 | )        |   |   | 136,998 |        
|                                      |                                                                  |                   |   |             |         |              |   |              |         |              |   |              |        |  |   |          |          |   |   |         |        
|                                      | Total liabilities and stockholders equity                       |                   | $ | 377,594     |         |              | $ | 345,804      |         |              | $ | 79,329       |        |  | $ | (372,495 | )        |   | $ | 430,232 |        
|                                      |                                                                  |                   |   |             |         |              |   |              |         |              |   |              |        |  |   |          |          |   |   |         |        

Condensed Consolidating Balance Sheet at March 31, 2003

|        |                                    |                      |   |             |         |              |   |              |         |              |   |              |        |  |   |          |          |   |   |         |         | 
|------- | ---------------------------------- | -------------------- | - | ----------- | ------- | ------------ | - | ------------ | ------- | ------------ | - | ------------ | ------ |  | - | -------- | -------- | - | - | ------- | ------- | 
|        |                                    |                      |   |             |         |              |   |              |         |              |   | Non-         |        |  |   |          |          |   |   |        
|        |                                    |                      |   | IPC         |         | Guarantor    |   | Guarantor    |         |              |   |              |        |  |   |         
|        |                                    |                      |   | Acquisition |         | Subsidiaries |   | Subsidiaries |         | Eliminations |   | Consolidated
|        |                                    |                      |   |             |         |              |   |              |         |              |   |             
|Assets: |                                    |                      |   |             |         |              |   |              |         |              |   |              |        |  |   |          |          |   |   |        
|        | Cash                               |                      | $ | 7,467       |         |              | $ | 6,217        |         |              | $ | 8,725        |        |  | $ |         |          |   | $ | 22,409  |        
|        | Accounts receivable, net           |                      |   |            |         |              |   | 37,401       |         |              |   | 10,197       |        |  |   |         |          |   |   | 47,598  |        
|        | Inventories, net                   |                      |   |            |         |              |   | 33,371       |         |              |   | 6,076        |        |  |   | (3,603   | )        |   |   | 35,844  |        
|        | Prepaid and other current assets   |                      |   | 94          |         |              |   | 1,890        |         |              |   | 3,214        |        |  |   |         |          |   |   | 5,198   |        
|        | Due from affiliate                 |                      |   | (51,682     | )       |              |   | 74,839       |         |              |   | (23,157      | )      |  |   |         |          |   |   |        |        
|        |                                    |                      |   |             |         |              |   |              |         |              |   |              |        |  |   |          |          |   |   |         |        
|        |                                    | Total current assets |   |             | (44,121 | )            |   |              | 153,718 |              |   |              | 5,055  |  |   |          | (3,603   | ) |   |         | 111,049 | 
|        | Investment in subsidiaries         |                      |   | 381,308     |         |              |   |             |         |              |   |             |        |  |   | (381,308 | )        |   |   |        |        
|        | Property, plant and equipment, net |                      |   |            |         |              |   | 18,378       |         |              |   | 1,935        |        |  |   |         |          |   |   | 20,313  |        
|        | Goodwill and intangibles, net      |                      |   |            |         |              |   | 196,056      |         |              |   | 76,660       |        |  |   |         |          |   |   | 272,716 |        
|        | Deferred financing costs, net      |                      |   | 13,963      |         |              |   |             |         |              |   |             |        |  |   |         |          |   |   | 13,963  |        
|        | Other assets                       |                      |   |            |         |              |   | 662          |         |              |   | 172          |        |  |   |         |          |   |   | 834     |        
|        |                                    |                      |   |             |         |              |   |              |         |              |   |              |        |  |   |          |          |   |   |         |        
|        |                                    | Total assets         |   | $           | 351,150 |              |   | $            | 368,814 |              |   | $            | 83,822 |  |   | $        | (384,911 | ) |   | $       | 418,875 | 
|        |                                    |                      |   |             |         |              |   |              |         |              |   |              |        |  |   |          |          |   |   |         |        

19



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##### Table of Contents



IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
March 31, 2003

|                                      |                                                                  |                           |   |         |         |  |   |         |        |  |   |        |        |  |   |          |   |  |   |         |         |  | 
|------------------------------------- | ---------------------------------------------------------------- | ------------------------- | - | ------- | ------- |  | - | ------- | ------ |  | - | ------ | ------ |  | - | -------- | - |  | - | ------- | ------- |  | 
|Liabilities and stockholders equity: |                                                                  |                           |   |         |         |  |   |         |        |  |   |        |        |  |   |          |   |  |   |         |        
|                                      | Current portion of long-term debt                                |                           | $ | 5,827   |         |  | $ |        |        |  | $ |       |        |  | $ |         |   |  | $ | 5,827   |         | 
|                                      | Accounts
payable, accrued expenses and other current liabilities |                           |   | 5,073   |         |  |   | 12,041  |        |  |   | 10,023 |        |  |   |         |   |  |   | 27,137  |         | 
|                                      | Customer advances and deferred revenue                           |                           |   |        |         |  |   | 30,797  |        |  |   | 9,892  |        |  |   |         |   |  |   | 40,689  |         | 
|                                      |                                                                  |                           |   |         |         |  |   |         |        |  |   |        |        |  |   |          |   |  |   |         |         | 
|                                      |                                                                  | Total current liabilities |   |         | 10,900  |  |   |         | 42,838 |  |   |        | 19,915 |  |   |          |  |  |   |         | 73,653  |  | 
|                                      | Long-term debt                                                   |                           |   | 198,075 |         |  |   |        |        |  |   |       |        |  |   |         |   |  |   | 198,075 |         | 
|                                      | Other long-term liabilities                                      |                           |   | 5,743   |         |  |   | 4,972   |        |  |   |       |        |  |   |         |   |  |   | 10,715  |         | 
|                                      |                                                                  |                           |   |         |         |  |   |         |        |  |   |        |        |  |   |          |   |  |   |         |         | 
|                                      |                                                                  | Total liabilities         |   |         | 214,718 |  |   |         | 47,810 |  |   |        | 19,915 |  |   |          |  |  |   |         | 282,443 |  | 
|                                      |                                                                  |                           |   |         |         |  |   |         |        |  |   |        |        |  |   |          |   |  |   |         |         | 
|                                      | Total stockholders equity                                       |                           |   | 136,432 |         |  |   | 321,004 |        |  |   | 63,907 |        |  |   | (384,911 | ) |  |   | 136,432 |         | 
|                                      |                                                                  |                           |   |         |         |  |   |         |        |  |   |        |        |  |   |          |   |  |   |         |         | 
|                                      | Total liabilities and stockholders equity                       |                           | $ | 351,150 |         |  | $ | 368,814 |        |  | $ | 83,822 |        |  | $ | (384,911 | ) |  | $ | 418,875 |         | 
|                                      |                                                                  |                           |   |         |         |  |   |         |        |  |   |        |        |  |   |          |   |  |   |         |         | 
|                                      |                                                                  |                           |   |         |         |  |   |         |        |  |   |        |       

Condensed Consolidated Statement of Operations
For the Six Months Ended March 31, 2003


|                                |  |   |         |             |  |              |        |              |  |              |        |              |  |   |        |   |  |   |         |   |  |  | 
|------------------------------- |  | - | ------- | ----------- |  | ------------ | ------ | ------------ |  | ------------ | ------ | ------------ |  | - | ------ | - |  | - | ------- | - |  |  | 
|                                |  |   |         |             |  |              |        |              |  |              |        | Non-         |  |   |        |   |  |   |         |   | 
|                                |  |   |         | IPC         |  | Guarantor    |        | Guarantor    |  |              |        |              |  |   |        |   | 
|                                |  |   |         | Acquisition |  | Subsidiaries |        | Subsidiaries |  | Eliminations |        | Consolidated | 
|                                |  |   |         |             |  |              |        |              |  |              |        |              | 
|Revenue                         |  | $ |        |             |  | $            | 87,003 |              |  | $            | 24,470 |              |  | $ | (6,785 | ) |  | $ | 104,688 |   | 
|Cost of goods sold              |  |   |        |             |  |              | 49,694 |              |  |              | 14,336 |              |  |   | (6,571 | ) |  |   | 57,459  |   | 
|                                |  |   |         |             |  |              |        |              |  |              |        |              |  |   |        |   |  |   |         |   | 
|Gross profit                    |  |   |        |             |  |              | 37,309 |              |  |              | 10,134 |              |  |   | (214   | ) |  |   | 47,229  |   | 
|Other operating expenses        |  |   |        |             |  |              | 27,242 |              |  |              | 7,422  |              |  |   |       |   |  |   | 34,664  |   | 
|                                |  |   |         |             |  |              |        |              |  |              |        |              |  |   |        |   |  |   |         |   | 
|Income (loss) from operations   |  |   |        |             |  |              | 10,067 |              |  |              | 2,712  |              |  |   | (214   | ) |  |   | 12,565  |   | 
|Interest expense and other, net |  |   | (12,768 | )           |  |              | (142   | )            |  |              | 1,555  |              |  |   |       |   |  |   | (11,355 | ) | 
|Income tax provision (benefit)  |  |   |        |             |  |              | (459   | )            |  |              | 2,482  |              |  |   |       |   |  |   | 2,023   |   | 
|                                |  |   |         |             |  |              |        |              |  |              |        |              |  |   |        |   |  |   |         |   | 
|Net income (loss)               |  | $ | (12,768 | )           |  | $            | 10,384 |              |  | $            | 1,785  |              |  | $ | (214   | ) |  | $ | (813    | ) | 
|                                |  |   |         |             |  |              |        |              |  |              |        |              |  |   |        |   |  |   |         |   | 

Condensed Consolidated Statement of Cash Flows
For the Six Months Ended March 31, 2003

|                                                                                                      |  |   |         |             |  |              |        |              |  |              |         |              |  |   |   |  |  |   |         |   |  |  | 
|----------------------------------------------------------------------------------------------------- |  | - | ------- | ----------- |  | ------------ | ------ | ------------ |  | ------------ | ------- | ------------ |  | - | - |  |  | - | ------- | - |  |  | 
|                                                                                                      |  |   |         |             |  |              |        |              |  |              |         | Non-         |  |   |   |  |  |   |         |   | 
|                                                                                                      |  |   |         | IPC         |  | Guarantor    |        | Guarantor    |  |              |         |              |  |   |   |  | 
|                                                                                                      |  |   |         | Acquisition |  | Subsidiaries |        | Subsidiaries |  | Eliminations |         | Consolidated | 
|                                                                                                      |  |   |         |             |  |              |        |              |  |              |         |              | 
|Net cash provided by (used in) operating activities                                                   |  | $ | 18,814  |             |  | $            | 6,206  |              |  | $            | (11,719 | )            |  | $ |  |  |  | $ | 13,301  |   | 
|Capital expenditures                                                                                  |  |   |        |             |  |              | (1,947 | )            |  |              | (337    | )            |  |   |  |  |  |   | (2,284  | ) | 
|Proceeds from restricted cash account and other amounts in
connection with Global Crossing settlement |  |   |        |             |  |              | 9,419  |              |  |              |        |              |  |   |  |  |  |   | 9,419   |   | 
|Cash payments in connection with Global Crossing settlement                                           |  |   |        |             |  |              | (5,200 | )            |  |              |        |              |  |   |  |  |  |   | (5,200  | ) | 
|                                                                                                      |  |   |         |             |  |              |        |              |  |              |         |              |  |   |   |  |  |   |         |   | 
|Net cash provided by (used in) investing activities                                                   |  |   |        |             |  |              | 2,272  |              |  |              | (337    | )            |  |   |  |  |  |   | 1,935   |   | 
|Debt issue costs                                                                                      |  |   | (310    | )           |  |              |       |              |  |              |        |              |  |   |  |  |  |   | (310    | ) | 
|Principal payments on term loan                                                                       |  |   | (17,160 | )           |  |              |       |              |  |              |        |              |  |   |  |  |  |   | (17,160 | ) | 
|                                                                                                      |  |   |         |             |  |              |        |              |  |              |         |              |  |   |   |  |  |   |         |   | 
|Net cash used in financing activities                                                                 |  |   | (17,470 | )           |  |              |       |              |  |              |        |              |  |   |  |  |  |   | (17,470 | ) | 
|Effect of exchange rate changes on cash                                                               |  |   |        |             |  |              | (651   | )            |  |              |        |              |  |   |  |  |  |   | (651    | ) | 
|                                                                                                      |  |   |         |             |  |              |        |              |  |              |         |              |  |   |   |  |  |   |         |   | 
|Net increase (decrease) in cash                                                                       |  |   | 1,344   |             |  |              | 7,827  |              |  |              | (12,056 | )            |  |   |  |  |  |   | (2,885  | ) | 
|Cash at beginning of period                                                                           |  |   | 6,123   |             |  |              | (1,610 | )            |  |              | 20,781  |              |  |   |  |  |  |   | 25,294  |   | 
|                                                                                                      |  |   |         |             |  |              |        |              |  |              |         |              |  |   |   |  |  |   |         |   | 
|Cash at end of period                                                                                 |  | $ | 7,467   |             |  | $            | 6,217  |              |  | $            | 8,725   |              |  | $ |  |  |  | $ | 22,409  |   | 
|                                                                                                      |  |   |         |             |  |              |        |              |  |              |         |              |  |   |   |  |  |   |         |   | 

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
March 31, 2003

12. Subsequent Events

Gains Acquisition

On April 30, 2003, the Company exercised its option to purchase Gains
International (US) Inc. and Gains International (Europe) Limited from Goldman
Sachs Capital Partners 2000 and other private equity funds affiliated with
Goldman Sachs, which own substantially all of the Companys common stock, for
shares of the Companys common stock valued at approximately $6.6 million plus
the assumption of deferred consideration and earn-out commitments up to a
maximum of approximately $9.9 million dollars based on current exchange rates.
Gains International (US) Inc. and Gains International (Europe) Limited are
providers of voice and data services to the financial services community and
will form the core of IPC Information Systems service delivery infrastructure
as it grows its worldwide services business for institutional trading markets.
This transaction follows the simultaneous completion of a transaction involving
the sale of Gains International (US) Inc., Gains International (Europe)
Limited, and Gains International Asia Holdings Limited to entities formed by
Goldman Sachs Capital Partners 2000 and its affiliates.

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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and
results of operations with our condensed consolidated financial statements and
related notes included elsewhere in this quarterly report.

Some of the matters discussed in this filing include forward-looking
statements. Statements that are predictive in nature, that depend upon or refer
to future events or conditions or that include words such as expects,
anticipates, intends, plans, believes, estimates, thinks, and
similar expressions are forward-looking statements. These statements involve
known and unknown risks, uncertainties and other risk factors, including but
not limited to those described in our Registration Statements on Form S-4
(333-82540) and Form S-1 (333-103264), that may cause our actual results and
performance to be materially different from any future results or performance
expressed or implied by these forward-looking statements.

Although we believe that these statements are based upon reasonable
assumptions, we can give no assurance that our goals will be achieved. Given
these uncertainties, prospective investors are cautioned not to place undue
reliance on these forward-looking statements. These forward-looking statements
are made as of the date of this filing. We assume no obligation to update or
revise them or provide reasons why actual results may differ.

Overview

Our primary business is the design, manufacture, installation and service
of turret systems for the trading operations of the financial community, which
consists of investment and commercial banks, foreign exchange and commodity
brokers and dealers, market exchanges, mutual and hedge fund companies, asset
managers, and insurance companies. Turrets are specialized telephone systems
that are designed for high reliability and provide users instant access to
hundreds of dedicated telephone lines that are directly connected to other
trading partners and customers. Traders, brokers and salespersons occupy desks
known as trading positions from which they trade various financial instruments
including stocks, bonds, currencies and futures using turrets. We are the
leader in the turret industry, based on our base of approximately 110,000
turrets installed in trading positions worldwide. We also install and service
the cabling infrastructure and networks within buildings that connect voice and
data communications devices for traders and others in the global financial,
trading and exchange trading industries. As a result of our acquisition of
Gains US and Gains UK on April 30, 2003, we will have a third major operating unit
called Gains US and Gains UK and will record the sale of voice and data services as Service.

Our major operating units are Trading Systems, Information Transport
Systems, or I.T.S., and Gains US and Gains UK. Trading Systems reports (1) sales
of turret systems to distributors and direct sales and installations of turret
systems as Product sales and installation, and (2) revenue from turret system
maintenance, including annual and multi-year service contracts, and from moves,
additions and changes, commonly known as MACs, to existing turret system
installations as Service. I.T.S. reports (1) revenue from design,
integration and implementation of cabling infrastructure projects, including
local and wide area networks, and from sales of intelligent network products,
such as hubs, bridges and routers, as Product sales and installation and (2)
revenue from on-site maintenance of customer cable infrastructures and from the
provision of outsourcing services for the support, expansion and upgrading of
existing customer networks as Service.

Revenue from Trading Systems and I.T.S. sales and installation is
recognized upon completion of the installation, except for revenue from sales
of turret products to distributors, which is recognized upon shipment. Under
contract provisions, customers are progress-billed prior to the completion of
the installation. The revenue related to such advance payments is deferred
until system installation is completed. All costs incurred on uncompleted
contracts are accumulated and recorded as inventory on customer sites awaiting
installation. In addition, contracts for annual recurring Trading Systems and
I.T.S. services are generally billed in advance, and are recorded as revenue
ratably (on a monthly basis) over the contractual periods. Revenue from MACs to
turret systems is recognized upon completion, which generally occurs in the
same month or the month following the order for services. Gains US and Gains UK bills customers
in advance on a monthly basis and records revenue on a monthly basis over the
contractual period.

Cost of revenue for Trading Systems and I.T.S. includes material and labor
associated with the installation of a project or the service performed. Cost of
revenue for Gains US and Gains UK includes charges from carriers for bandwidth relating to
service revenue.

Our revenues and operating results could fluctuate significantly from
period to period. Given the relatively large sales price of our trading systems
and our recognition of revenue only upon completion of installations, a limited
number of system installations may account for a substantial portion of
revenues in any particular period. As a result of these and other factors, we
could experience significant fluctuations in revenues and operating results in
future periods. In addition, our customers are concentrated in the global
financial, trading and exchange trading industries and our revenues may decline
during periods of economic downturn that impact those sectors.

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Impact of the IPC Information Systems Acquisition

During the period that we were owned by Global Crossing, we provided
services to Global Crossing at cost and Global Crossing performed certain
administrative services on our behalf and allocated a charge for those services
to us. Since December 20, 2001, any services we provide to Global Crossing or
that Global Crossing provides to us have been on an arms-length basis. Since
the acquisition of IPC Information Systems was accounted for as an asset
purchase, the book value of our assets was adjusted to reflect the allocation
of the excess of the purchase price over the net book value of the assets
acquired. As a result, our historical results of operations and financial
condition are not necessarily indicative of our future results of operations or
financial condition. The amounts presented below for the six months ended March
31, 2002 represent the sum of the amounts separately reported for the
pre-acquisition period from October 1, 2001 to December 20, 2001 and the
post-acquisition period from December 21, 2001 to March 31, 2002.

Settlement and Rejection Agreement

On March 13, 2003, we entered into a settlement and rejection agreement
with Global Crossing. Pursuant to the settlement and rejection agreement, all
of the remaining obligations under the purchase agreement relating to the IPC
Information Systems Acquisition were terminated, including the
Companys obligation to pay any portion of the deferred purchase
price and Global Crossings obligation to indemnify us for
specific tax liabilities. In addition, we and Global
Crossing mutually released each other for all prior claims. The bankruptcy
court entered an order on March 14, 2003 approving the settlement and rejection
agreement.

Under the terms of the settlement and rejection agreement, we have
deposited $5.2 million in a new escrow account. Global Crossing received $3.2
million from the escrow account upon the filing of certain tax returns. Global
Crossing will receive the remaining $2.0 million from the escrow account after
a $2.0 million irrevocable letter of credit is issued on behalf of
us. We will have the right to draw on that letter of credit in the event Global
Crossings affiliate fails to make any payments due to us pursuant to the
sublease for office space at 67-73 Worship Street in London, England. Through
March 31, 2003, Global Crossings affiliate has made all of its required
sublease payments.

We
believe that all tax returns required to be filed in respect to IPC
Information Systems, Inc. and its subsidiaries for periods prior to and
including the date of the IPC Information Systems Acquisition, have now been
filed. These returns consist of consolidated tax returns with Global Crossing,
and, where required by law, separate tax returns for IPC Information Systems,
Inc. and/or its subsidiaries.

As a result of the termination of the purchase agreement, Global Crossing
has been relieved of all of its obligations under the purchase agreement,
including, among other things, indemnifying us for tax liabilities that may be
imposed upon IPC Information Systems, Inc. and its subsidiaries for periods
prior to and including the date of the IPC Information Systems Acquisition.
Therefore, in the event that any tax liabilities are imposed, as a result of an
audit or otherwise, on IPC Information Systems, Inc. and/or its subsidiaries
for periods prior to and including the date of the IPC Information Systems
Acquisition, we may be required to pay those taxes and are no longer able to
recover indemnification from Global Crossing. As of the date of this filing,
the aggregate amount of taxes for which we have received notices of taxes due
from various jurisdictions and recognized as tax liabilities under purchase
accounting is approximately $6.5 million. We estimate that the range of our
exposure for additional tax liabilities is from $0 to $36 million. In computing
its estimated range of potential tax liabilities, we took into account tax
returns in certain jurisdictions where the statutes of limitations have not yet
expired. Under those tax returns as filed, the remaining liability is zero.
Although we believe that all those tax returns have been filed correctly, such
returns may be audited and additional taxes may be assessed (or refunds may be
granted). Payment by us of a significant amount of these potential tax
liabilities could have a material adverse effect on our financial condition and
results of operations, requiring us to seek additional financing. In that
event, we cannot assure you it will be able to obtain additional financing on
commercially reasonable terms, or at all.

Pursuant to the settlement and rejection agreement, Global Crossing has
also paid over to us approximately $2.2 million for payroll and federal tax
refunds received by it for periods prior to and including the date of the IPC
Information Systems Acquisition. Global Crossing is also required to pay us any
future tax refunds or credits it receives applicable to IPC Information
Systems, Inc. and its subsidiaries for these periods.

As part of the settlement and rejection agreement, we also entered into a
second amendment to the network services, channel sales and transition services
agreement. Under the second amendment, we no longer have any obligation to
market or resell Global Crossings channel network services to its customers.
In addition, the restrictions on our ability to compete with Global Crossing
will terminate on June 20, 2004 (instead of December 20, 2004), or, on June 20,
2003 (instead of December 20, 2003) in connection with a business combination
transaction with an unrelated third party that is or becomes a competitor of
Global Crossing. Finally, pursuant to the settlement and rejection agreement,
we will be permitted to use any other provider of network services for our own
internal purposes provided its aggregate annual payments to Global Crossing and
their subsidiaries is at least $48,000. Neither this second amendment nor the
first amendment to the network services, channel sales and transition

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services agreement was signed by Asia Global Crossing Asia Pacific Commercial, Ltd., a
former Global Crossing affiliate that was an original signatory to this agreement. Accordingly, with respect to
Asia Global Crossing Asia Pacific Commercial, Ltd., the non-compete
restrictions contained in the original network services, channel sales and
transition services agreement have not been suspended and our ability to engage
in certain new lines of business activities in Asia may be restricted.

Recent Events

Gains Acquisition

On April 30, 2003, we exercised our option to purchase Gains International
(US) Inc. and Gains International (Europe) Limited from Goldman Sachs Capital
Partners 2000 and other private equity funds affiliated with Goldman Sachs,
which own substantially all of our common stock, for shares of our common stock
valued at approximately $6.6 million plus the assumption of deferred
consideration and earn-out commitments up to a maximum of approximately $9.9
million dollars based on current exchange rates. Gains International (US) Inc.
and Gains International (Europe) Limited are providers of voice and data
services to the financial services community and will form the core of IPC
Information Systems service delivery infrastructure as it grows its worldwide
services business for institutional trading markets. This transaction follows
the simultaneous completion of a transaction involving the sale of Gains
International (US) Inc., Gains International (Europe) Limited, and Gains
International Asia Holdings Limited to entities formed by Goldman Sachs Capital
Partners 2000, and its affiliates.

Comparison of the Three Months (Q2 2003) and Six Months (YTD 2003) Ended
March 31, 2003 to the Three Months (Q2 2002) and Six Months (YTD 2002)
Ended March 31, 2002.

The following table sets forth, as a percentage of consolidated revenue,
our condensed consolidated statements of operations for the periods indicated.
The following table also presents, as a percentage of unit revenue, our
statements of operations for our two major operating units for the periods
indicated.



|                                                    |                                 |                                   |     |         |    |         |     |          |    |          |     |         |    |         |     |        |     |         |     |         |     |         |     |         |    |       |     |         |    |         |     |     |    |   |     |    |    |    |     |    |     |    |     |     |     |    |     |    |    |  
|--------------------------------------------------- | ------------------------------- | --------------------------------- | --- | ------- | -- | ------- | --- | -------- | -- | -------- | --- | ------- | -- | ------- | --- | ------ | --- | ------- | --- | ------- | --- | ------- | --- | ------- | -- | ----- | --- | ------- | -- | ------- | --- | --- | -- | - | --- | -- | -- | -- | --- | -- | --- | -- | --- | --- | --- | -- | --- | -- | -- | -
|                                                    |                                 |                                   |     | Q2 2003 |    | Q2 2002 |     | YTD 2003 |    | YTD 2002
|                                                    |                                 |                                   |     |         |    |         |     |          |    |         
|                                                    |                                 |                                   |     | Consol- |    | Trading |     |          |    |          |     | Consol- |    | Trading |     |        |     |         |     | Consol- |     | Trading |     |         |    |       |     | Consol- |    | Trading |     |     |    |  
|                                                    |                                 |                                   |     | idated  |    | Systems |     | I.T.S    |    | idated   |     | Systems |    | I.T.S   |     | idated |     | Systems |     | I.T.S   |     | idated  |     | Systems |    | I.T.S
|                                                    |                                 |                                   |     |         |    |         |     |          |    |          |     |         |    |         |     |        |     |         |     |         |     |         |     |         |    |      
|REVENUE:                                            |                                 |                                   |     |         |    |         |     |          |    |          |     |         |    |         |     |        |     |         |     |         |     |         |     |        
|                                                    | Product sales and installations |                                   |     | 58      | %  |         |     | 53       | %  |          |     | 79      | %  |         |     | 70     | %   |         |     | 70      | %   |         |     | 71      | %  |       |     | 54      | %  |         |     | 51  | %  |   |     | 68 | %  |    |     | 68 | %   |    |     | 67  | %   |    |     | 71 | % 
|                                                    | Service                         |                                   |     | 42      | %  |         |     | 47       | %  |          |     | 21      | %  |         |     | 30     | %   |         |     | 30      | %   |         |     | 29      | %  |       |     | 46      | %  |         |     | 49  | %  |   |     | 32 | %  |    |     | 32 | %   |    |     | 33  | %   |    |     | 29 | % 
|                                                    |                                 |                                   |     |         |    |         |     |          |    |          |     |         |    |         |     |        |     |         |     |         |     |         |     |         |    |       |     |         |    |         |     |     |    |   |     |    |    |    |     |    |     |    |     |     |     |    |     |   
|                                                    |                                 |                                   | 100 | %       |    |         | 100 | %        |    |          | 100 | %       |    |         | 100 | %      |     |         | 100 | %       |     |         | 100 | %       |    |       | 100 | %       |    |         | 100 | %   |    |   | 100 | %  |    |    | 100 | %  |     |    | 100 | %   |     |    | 100 | % 
|                                                    |                                 |                                   |     |         |    |         |     |          |    |          |     |         |    |         |     |        |     |         |     |         |     |         |     |         |    |       |     |         |    |         |     |     |    |   |     |    |    |    |     |    |     |    |     |     |     |    |     |   
|Cost of goods sold (depreciation shown
separately): |                                 |                                   |     |         |    |         |     |          |    |          |     |         |    |         |     |        |     |         |     |         |     |         |     |         |    |       |     |         |    |         |     |     |    |   |     |    |    |    |     |    |     |    |     |     |     |    |     |    |    |  
|                                                    | Product sales and installations |                                   |     | 35      | %  |         |     | 25       | %  |          |     | 76      | %  |         |     | 60     | %   |         |     | 60      | %   |         |     | 61      | %  |       |     | 31      | %  |         |     | 24  | %  |   |     | 65 | %  |    |     | 52 | %   |    |     | 50  | %   |    |     | 62 | % 
|                                                    | Service                         |                                   |     | 21      | %  |         |     | 21       | %  |          |     | 22      | %  |         |     | 18     | %   |         |     | 16      | %   |         |     | 27      | %  |       |     | 23      | %  |         |     | 22  | %  |   |     | 32 | %  |    |     | 19 | %   |    |     | 18  | %   |    |     | 26 | % 
|                                                    | Depreciation and amortization   |                                   |     | 1       | %  |         |     | 1        | %  |          |     | 0       | %  |         |     | 0      | %   |         |     | 0       | %   |         |     | 0       | %  |       |     | 1       | %  |         |     | 1   | %  |   |     | 0  | %  |    |     | 0  | %   |    |     | 0   | %   |    |     | 0  | % 
|                                                    |                                 |                                   |     |         |    |         |     |          |    |          |     |         |    |         |     |        |     |         |     |         |     |         |     |         |    |       |     |         |    |         |     |     |    |   |     |    |    |    |     |    |     |    |     |     |     |    |     |   
|                                                    |                                 |                                   | 57  | %       |    |         | 47  | %        |    |          | 98  | %       |    |         | 78  | %      |     |         | 76  | %       |     |         | 88  | %       |    |       | 55  | %       |    |         | 47  | %   |    |   | 97  | %  |    |    | 71  | %  |     |    | 68  | %   |     |    | 88  | % 
|                                                    |                                 |                                   |     |         |    |         |     |          |    |          |     |         |    |         |     |        |     |         |     |         |     |         |     |         |    |       |     |         |    |         |     |     |    |   |     |    |    |    |     |    |     |    |     |     |     |    |     |   
|                                                    |                                 | Gross profit                      |     |         | 43 | %       |     |          | 53 | %        |     |         | 2  | %       |     |        | 22  | %       |     |         | 24  | %       |     |         | 12 | %     |     |         | 45 | %       |     |     | 53 | % |     |    | 3  | %  |     |    | 29  | %  |     |     | 32  | %  |     |    | 12 | %
|Research and development                            |                                 |                                   | 5   | %       |    |         | 6   | %        |    |          | 0   | %       |    |         | 5   | %      |     |         | 6   | %       |     |         | 0   | %       |    |       | 5   | %       |    |         | 6   | %   |    |   | 0   | %  |    |    | 5   | %  |     |    | 6   | %   |     |    | 0   | % 
|Selling, general and administrative
expense         |                                 |                                   | 19  | %       |    |         | 23  | %        |    |          | 5   | %       |    |         | 12  | %      |     |         | 13  | %       |     |         | 7   | %       |    |       | 19  | %       |    |         | 21  | %   |    |   | 6   | %  |    |    | 19  | %  |     |    | 21  | %   |     |    | 6   | % 
|Depreciation and amortization                       |                                 |                                   | 8   | %       |    |         | 10  | %        |    |          | 1   | %       |    |         | 6   | %      |     |         | 6   | %       |     |         | 1   | %       |    |       | 9   | %       |    |         | 11  | %   |    |   | 1   | %  |    |    | 10  | %  |     |    | 12  | %   |     |    | 1   | % 
|                                                    |                                 |                                   |     |         |    |         |     |          |    |          |     |         |    |         |     |        |     |         |     |         |     |         |     |         |    |       |     |         |    |         |     |     |    |   |     |    |    |    |     |    |     |    |     |     |     |    |     |   
|                                                    |                                 | Income (loss) from operations     |     |         | 11 | %       |     |          | 14 | %        |     |         | (4 | %)      |     |        | (1  | %)      |     |         | (1  | %)      |     |         | 4  | %     |     |         | 12 | %       |     |     | 15 | % |     |    | (4 | %) |     |    | (5  | %) |     |     | (7  | %) |     |    | 5  | %
|Other income (expense):                             |                                 |                                   |     |         |    |         |     |          |    |          |     |         |    |         |     |        |     |         |     |         |     |         |     |        
|                                                    | Interest expense, net           |                                   |     | (11     | %) |         |     | (14      | %) |          |     | 0       | %  |         |     | (9     | %)  |         |     | (10     | %)  |         |     | 0       | %  |       |     | (12     | %) |         |     | (14 | %) |   |     | 0  | %  |    |     | (9 | %)  |    |     | (11 | %)  |    |     | 0  | % 
|                                                    | Other income (expense), net     |                                   |     | 1       | %  |         |     | 2        | %  |          |     | 0       | %  |         |     | 0      | %   |         |     | 0       | %   |         |     | 0       | %  |       |     | 1       | %  |         |     | 1   | %  |   |     | 0  | %  |    |     | 0  | %   |    |     | 0   | %   |    |     | 0  | % 
|                                                    |                                 |                                   |     |         |    |         |     |          |    |          |     |         |    |         |     |        |     |         |     |         |     |         |     |         |    |       |     |         |    |         |     |     |    |   |     |    |    |    |     |    |     |    |     |     |     |    |     |   
|                                                    |                                 | Income (loss) before income taxes |     |         | 1  | %       |     |          | 2  | %        |     |         | (4 | %)      |     |        | (10 | %)      |     |         | (11 | %)      |     |         | 4  | %     |     |         | 1  | %       |     |     | 2  | % |     |    | (4 | %) |     |    | (14 | %) |     |     | (18 | %) |     |    | 5  | %
|Income tax expense (benefit)                        |                                 |                                   | 2   | %       |    |         | 2   | %        |    |          | 0   | %       |    |         | (3  | %)     |     |         | (3  | %)      |     |         | 0   | %       |    |       | 2   | %       |    |         | 2   | %   |    |   | 0   | %  |    |    | (2  | %) |     |    | (3  | %)  |     |    | 0   | % 
|                                                    |                                 |                                   |     |         |    |         |     |          |    |          |     |         |    |         |     |        |     |         |     |         |     |         |     |         |    |       |     |         |    |         |     |     |    |   |     |    |    |    |     |    |     |    |     |     |     |    |     |   
|Net income (loss)                                   |                                 |                                   | (1  | %)      |    |         | 0   | %        |    |          | (4  | %)      |    |         | (7  | %)     |     |         | (8  | %)      |     |         | 4   | %       |    |       | (1  | %)      |    |         | 0   | %   |    |   | (4  | %) |    |    | (12 | %) |     |    | (15 | %)  |     |    | 5   | % 
|                                                    |                                 |                                   |     |         |    |         |     |          |    |          |     |         |    |         |     |        |     |         |     |         |     |         |     |         |    |       |     |         |    |         |     |     |    |   |     |    |    |    |     |    |     |    |     |     |     |    |     |   

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Revenue

The following table sets forth our consolidated revenue and revenue as
reported for our two major operating units.

|                                |       |              |        |        |      |   |        |        |        |   |         |         |      |  |        |     |        |   |        |         |  |   |         |         |  |   |         |         |   |  |     |     |   
|------------------------------- | ----- | ------------ | ------ | ------ | ---- | - | ------ | ------ | ------ | - | ------- | ------- | ---- |  | ------ | --- | ------ | - | ------ | ------- |  | - | ------- | ------- |  | - | ------- | ------- | - |  | --- | --- | --
|(dollars in thousands)          |       | Consolidated
|                                |       |             
|                                |       |              | Q2     |        | Q2   |   | $      |        | %      |   | YTD     |         | YTD  |  | $      |     | %     
|                                |       |              | 2003   |        | 2002 |   | Change |        | Change |   | 2003    |         | 2002 |  | Change |     | Change
|                                |       |              |        |        |      |   |        |        |        |   |         |         |      |  |        |     |       
|REVENUE:                        |       |              |        |        |      |   |        |        |        |   |         |         |      |  |        |     |        |   |        |         |  |   |         |         |  |   |         |         |   |  |     |    
|Product sales and installations |       | $            | 32,819 |        |      | $ | 54,854 |        |        | $ | (22,035 | )       |      |  | (40    | %)  |        | $ | 56,570 |         |  | $ | 103,020 |         |  | $ | (46,450 | )       |   |  | (45 | %) 
|Service                         |       |              | 23,486 |        |      |   | 23,351 |        |        |   | 135     |         |      |  | 1      | %   |        |   | 48,118 |         |  |   | 48,294  |         |  |   | (176    | )       |   |  | (0  | %) 
|                                |       |              |        |        |      |   |        |        |        |   |         |         |      |  |        |     |        |   |        |         |  |   |         |         |  |   |         |         |   |  |     |    
|                                | Total |              | $      | 56,305 |      |   | $      | 78,205 |        |   | $       | (21,900 | )    |  |        | (28 | %)     |   | $      | 104,688 |  |   | $       | 151,314 |  |   | $       | (46,626 | ) |  |     | (31 | %)
|                                |       |              |        |        |      |   |        |        |        |   |         |         |      |  |        |     |        |   |        |         |  |   |         |         |  |   |         |         |   |  |     |    

|                                |       |   |                          |        |      |   |          |        |        |   |         |         |      |  |          |     |        |   |        |        |   |   |        |         |  |   |         |         |   |  |     |     |   
|------------------------------- | ----- | - | ------------------------ | ------ | ---- | - | -------- | ------ | ------ | - | ------- | ------- | ---- |  | -------- | --- | ------ | - | ------ | ------ | - | - | ------ | ------- |  | - | ------- | ------- | - |  | --- | --- | --
|                                |       |   | Trading Systems Division
|                                |       |   |                         
|                                |       |   | Q2                       |        | Q2   |   |          |        |        |   | %       |         | YTD  |  | YTD      |     |        |   |        |        | %
|                                |       |   | 2003                     |        | 2002 |   | $ Change |        | Change |   | 2003    |         | 2002 |  | $ Change |     | Change
|                                |       |   |                          |        |      |   |          |        |        |   |         |         |      |  |          |     |       
|REVENUE:                        |       |   |                          |        |      |   |          |        |        |   |         |         |      |  |          |     |        |   |        |        |   |   |        |         |  |   |         |         |   |  |     |    
|Product sales and installations |       | $ | 23,902                   |        |      | $ | 47,234   |        |        | $ | (23,332 | )       |      |  | (49      | %)  |        | $ | 44,911 |        |   | $ | 84,301 |         |  | $ | (39,390 | )       |   |  | (47 | %) 
|Service                         |       |   | 21,191                   |        |      |   | 20,311   |        |        |   | 880     |         |      |  | 4        | %   |        |   | 42,707 |        |   |   | 40,793 |         |  |   | 1,914   |         |   |  | 5   | %  
|                                |       |   |                          |        |      |   |          |        |        |   |         |         |      |  |          |     |        |   |        |        |   |   |        |         |  |   |         |         |   |  |     |    
|                                | Total |   | $                        | 45,093 |      |   | $        | 67,545 |        |   | $       | (22,452 | )    |  |          | (33 | %)     |   | $      | 87,618 |   |   | $      | 125,094 |  |   | $       | (37,476 | ) |  |     | (30 | %)
|                                |       |   |                          |        |      |   |          |        |        |   |         |         |      |  |          |     |        |   |        |        |   |   |        |         |  |   |         |         |   |  |     |    

|                                |       |   |                 |        |      |   |          |        |        |   |       |     |      |  |          |    |        |   |        |        |   |   |        |        |  |   |        |        |   |  |     |     |   
|------------------------------- | ----- | - | --------------- | ------ | ---- | - | -------- | ------ | ------ | - | ----- | --- | ---- |  | -------- | -- | ------ | - | ------ | ------ | - | - | ------ | ------ |  | - | ------ | ------ | - |  | --- | --- | --
|                                |       |   | I.T.S. Division
|                                |       |   |                
|                                |       |   | Q2              |        | Q2   |   |          |        |        |   | %     |     | YTD  |  | YTD      |    |        |   |        |        | %
|                                |       |   | 2003            |        | 2002 |   | $ Change |        | Change |   | 2003  |     | 2002 |  | $ Change |    | Change
|                                |       |   |                 |        |      |   |          |        |        |   |       |     |      |  |          |    |       
|REVENUE:                        |       |   |                 |        |      |   |          |        |        |   |       |     |      |  |          |    |        |   |        |        |   |   |        |        |  |   |        |        |   |  |     |    
|Product sales and installations |       | $ | 8,917           |        |      | $ | 7,620    |        |        | $ | 1,297 |     |      |  | 17       | %  |        | $ | 11,659 |        |   | $ | 18,719 |        |  | $ | (7,060 | )      |   |  | (38 | %) 
|Service                         |       |   | 2,295           |        |      |   | 3,040    |        |        |   | (745  | )   |      |  | (25      | %) |        |   | 5,411  |        |   |   | 7,501  |        |  |   | (2,090 | )      |   |  | (28 | %) 
|                                |       |   |                 |        |      |   |          |        |        |   |       |     |      |  |          |    |        |   |        |        |   |   |        |        |  |   |        |        |   |  |     |    
|                                | Total |   | $               | 11,212 |      |   | $        | 10,660 |        |   | $     | 552 |      |  |          | 5  | %      |   | $      | 17,070 |   |   | $      | 26,220 |  |   | $      | (9,150 | ) |  |     | (35 | %)
|                                |       |   |                 |        |      |   |          |        |        |   |       |     |      |  |          |    |        |   |        |        |   |   |        |        |  |   |        |        |   |  |     |    

Comparison of Q2 2003 to Q2 2002

Consolidated

The overall decline in the global economy has caused our customers to
extend their planning and implementation cycles. While we expect this downward
trend to continue, there can be no certainty as to the degree or duration of
this downturn. We continue to expect our fiscal year 2003 Trading Systems and
I.T.S. consolidated product sales and installation and service revenues to be
down 15%-19% compared to fiscal year 2002; however, the actual decline could be
greater.

Product Sales and Installations

The decrease in product sales and installation revenue of $22.0 million in
Q2 2003 from Q2 2002 is primarily due to the completion of two large
installation projects totaling $26.0 million in Q2 2002 in our Trading Systems
unit which was partially offset by an installation project completed for $6.5
million by our I.T.S. unit in Q2 2003.

Service

The increase in service revenue of $0.1 million in Q2 2003 from Q2 2002 is
primarily due to an increase of $0.9 million from our Trading Systems unit
which was partially offset by a decrease of $0.7 million from our I.T.S. unit.

Trading Systems

Product Sales and Installations

The decrease in product sales and installation revenue of $23.3 million in
Q2 2003 from Q2 2002 is primarily due to the completion of two large
installation projects totaling $26.0 million during Q2 2002, while there were
no installations projects of comparable size completed in Q2 2003. The change
in our product sales and installation revenue in Q2 2003 from Q2 2002 was not
significantly affected by a change in the price of our products; instead, we
believe it was affected more by the number and size of turret systems purchased
by our customers. Large projects are not typical; however, their occurrence
causes fluctuations when comparing period to period as a result of revenue
recognized upon completion of the installation. We believe the demand for new
turret systems is primarily event driven, the result of physical facility moves
of trading positions and the addition of new trading positions due to customer
growth. Large facility moves and mergers can also result in large installation
projects, which cause uneven revenue streams period over period.

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Service

The increase in service revenue of $0.9 million in Q2 2003 from Q2 2002 is
primarily due to the growth in our existing customer base, the recovery of
revenue lost as a result of the events of September 11th, 2001, and the
purchase of the Hitachi, Ltd. trading system service base outside of Japan on
March 29, 2002.

I.T.S.

Product Sales and Installations

The increase in product sales and installation revenue of $1.3 million in
Q2 2003 from Q2 2002 is primarily due to one large installation project for
$6.5 million that was completed in Q2 2003. Product sales and installation
revenue for Q2 2002 resulted from one medium sized installation project and two
small installation projects totaling $5.5 million.

Service

The decrease in service revenue of $0.7 million in Q2 2003 from Q2 2002 is
primarily due to a decrease in service from one of our larger customers in Q2
2003 and a higher than average level of customer service required in Q2 2002 as
a result of the events of September 11th, 2001. We believe the decline in
service is caused by the general decline in the real estate and construction
activities within our customer base.

Comparison of YTD 2003 to YTD 2002

Consolidated

The overall decline in the global economy has caused our customers to
extend their planning and implementation cycles. While we expect this downward
trend to continue, there can be no certainty as to the degree or duration of
this downturn. We continue to expect our fiscal year 2003 Trading Systems and
I.T.S. consolidated product sales and installation and service revenues to be
down 15%-19% compared to fiscal year 2002; however, the actual decline could be
greater. We expect the Gains US and Gains UK entities to contribute between
$5.0 million to $10.0 million of additional network service revenue from the
date of close, April 30 through year end.

Product Sales and Installations

The decrease in product sales and installation revenue of $46.5 million in
YTD 2003 from YTD 2002 is primarily due to the completion of several large
installation projects totaling $36.9 million and a higher volume of
installation projects completed in YTD 2002 for disaster recovery projects
resulting from the events of September 11th, 2001. There were no installations
projects of comparable size or similar events occurring in YTD 2003. Projects
of this size are not typical; however, their occurrence causes fluctuations
when comparing period to period as a result of revenue recognized upon
completion of the installation. We expect product sales and installation
revenue to increase by approximately 50% to 60% in the second half of the 2003
fiscal year as compared to the first half of the 2003 fiscal year.

Service

The decrease in service revenue of $0.2 million in YTD 2003 from YTD 2002
is primarily due to a decrease of $2.1 million from our I.T.S. unit that was
partially offset by an increase of $1.9 million from our Trading Systems unit.
We expect service revenue to remain consistent in the second half of the 2003
fiscal year as compared to the first half of the 2003 fiscal year.

Trading Systems

Product Sales and Installations

The decrease in product sales and installation revenue of $39.4 million in
YTD 2003 from YTD 2002 is primarily due to three large installation projects
completed for $29.1 million and a higher volume of medium size and smaller size
installation projects primarily resulting from the events of
September 11th, 2001 completed in YTD 2002 as compared to one large installation
project completed for $3.7 million and a lower volume of medium size and
smaller size installation projects completed in YTD 2003. We believe the demand
for new turret systems was primarily event driven, the result of physical
facility moves of trading positions and the addition of new trading positions
due to customer growth. Large facility moves and mergers can also result in
large installation projects which cause uneven revenue streams period over
period. The change in our product

26



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##### Table of Contents



sales and installation revenue in YTD 2003
over YTD 2002 was not significantly affected by a change in the price of our
products; instead, it was affected principally by the number and size of turret
systems purchased by our customers.

Service

The increase in service revenue of $1.9 million in YTD 2003 from YTD 2002
is primarily due to growth in our existing service customer base, recovery of
revenue lost as a result of the events of September 11th, 2001, and the
purchase of the Hitachi, Ltd. trading system service base outside of Japan on
March 29, 2002.

I.T.S

Product Sales and Installations

The decrease in product sales and installation revenue of $7.1 million in
YTD 2003 from YTD 2002 is primarily due to the completion of several large and
mid-size projects totaling $12.3 million in YTD 2002 and a higher volume of
smaller projects (less than $500,000 ) in YTD 2002 as compared to the
completion of one large installation project totaling $6.5 million in YTD 2003.
We believe the decline in projects is caused by the general decline in the real
estate and construction activities within our customer base.

Service

The decrease in service revenue of $2.1 million in YTD 2003 from YTD 2002
is primarily due to a decrease in service from one of our larger customers in
YTD 2003 and additional customer service in YTD 2002 that was a result of the
events of September 11, 2001. We believe the decline in service is caused by
the general decline in the real estate and construction activities within our
customer base.

Cost of Revenue

The following table sets forth our consolidated cost of revenue and our
cost of revenue as reported for our two major operating units. Cost of revenue
includes costs of equipment sold, the costs of parts used for service of the
equipment, labor to install the equipment sold, labor to provide service,
warehouse and project management costs and the depreciation of the equipment in
our manufacturing and assembly facility. Cost of revenue for Q2 2002 and YTD
2002 includes a charge resulting from the amortization of the step-up in
inventory of $16.9 million and $23.9 million for Q2 2002
and YTD 2002, respectively, (relating to the IPC Information Systems Acquisition
in December 2001). This purchase
accounting inventory fair value step-up is a non-cash GAAP adjustment that is
recorded when a company is acquired as we were in December 2001. Since the
adjustment has been fully recognized in income as of September 30, 2002, the
cost of inventory in the 2003 fiscal year is not impacted by this adjustment.

Cost of Revenue

|                                |       |   |                        |        |      |  |      |    |      |   |        |        |      |  |      |    |      |  |      |     |        |   |        |        |  |  |    |    |   |   |        |         |  |  |    |    |   |  |     |     |   
|------------------------------- | ----- | - | ---------------------- | ------ | ---- |  | ---- | -- | ---- | - | ------ | ------ | ---- |  | ---- | -- | ---- |  | ---- | --- | ------ | - | ------ | ------ |  |  | -- | -- | - | - | ------ | ------- |  |  | -- | -- | - |  | --- | --- | --
|                                |       |   | Consolidated          
|                                |       |   |                       
|                                |       |   | (dollars in thousands)
|                                |       |   | Q2                     |        | % of |  | Q2   |    | % of |   | %      |        | YTD  |  | % of |    | YTD  |  | % of |     | %     
|                                |       |   | 2003                   |        | Rev. |  | 2002 |    | Rev. |   | Change |        | 2003 |  | Rev. |    | 2002 |  | Rev. |     | Change
|                                |       |   |                        |        |      |  |      |    |      |   |        |        |      |  |      |    |      |  |      |     |       
|Product sales and installations |       | $ | 19,680                 |        |      |  | 60   | %  |      | $ | 46,779 |        |      |  | 85   | %  |      |  | (25  | %)  |        | $ | 31,934 |        |  |  | 56 | %  |   | $ | 78,321 |         |  |  | 76 | %  |   |  | (20 | %) 
|Service                         |       |   | 11,894                 |        |      |  | 51   | %  |      |   | 13,791 |        |      |  | 59   | %  |      |  | (8   | %)  |        |   | 24,929 |        |  |  | 52 | %  |   |   | 29,011 |         |  |  | 60 | %  |   |  | (8  | %) 
|Depreciation and amortization   |       |   | 299                    |        |      |  | 1    | %  |      |   | 260    |        |      |  | 0    | %  |      |  | 1    | %   |        |   | 596    |        |  |  | 1  | %  |   |   | 503    |         |  |  | 0  | %  |   |  | 1   | %  
|                                |       |   |                        |        |      |  |      |    |      |   |        |        |      |  |      |    |      |  |      |     |        |   |        |        |  |  |    |    |   |   |        |         |  |  |    |    |   |  |     |    
|                                | Total |   | $                      | 31,873 |      |  |      | 57 | %    |   | $      | 60,830 |      |  |      | 78 | %    |  |      | (21 | %)     |   | $      | 57,459 |  |  |    | 55 | % |   | $      | 107,835 |  |  |    | 71 | % |  |     | (16 | %)
|                                |       |   |                        |        |      |  |      |    |      |   |        |        |      |  |      |    |      |  |      |     |        |   |        |        |  |  |    |    |   |   |        |         |  |  |    |    |   |  |     |    

Cost of Revenue

|                                |       |   |                          |        |      |  |      |    |      |   |        |        |      |  |      |    |      |  |      |     |        |   |        |        |  |  |    |    |   |   |        |        |  |  |    |    |   |  |     |     |   
|------------------------------- | ----- | - | ------------------------ | ------ | ---- |  | ---- | -- | ---- | - | ------ | ------ | ---- |  | ---- | -- | ---- |  | ---- | --- | ------ | - | ------ | ------ |  |  | -- | -- | - | - | ------ | ------ |  |  | -- | -- | - |  | --- | --- | --
|                                |       |   | Trading Systems Division
|                                |       |   |                         
|                                |       |   | (dollars in thousands)  
|                                |       |   | Q2                       |        | % of |  | Q2   |    | % of |   | %      |        | YTD  |  | % of |    | YTD  |  | % of |     | %     
|                                |       |   | 2003                     |        | Rev. |  | 2002 |    | Rev. |   | Change |        | 2003 |  | Rev. |    | 2002 |  | Rev. |     | Change
|                                |       |   |                          |        |      |  |      |    |      |   |        |        |      |  |      |    |      |  |      |     |       
|Product sales and installations |       | $ | 11,135                   |        |      |  | 47   | %  |      | $ | 40,307 |        |      |  | 85   | %  |      |  | (39  | %)  |        | $ | 20,814 |        |  |  | 46 | %  |   | $ | 62,019 |        |  |  | 74 | %  |   |  | (27 | %) 
|Service                         |       |   | 9,418                    |        |      |  | 44   | %  |      |   | 10,941 |        |      |  | 54   | %  |      |  | (9   | %)  |        |   | 19,483 |        |  |  | 46 | %  |   |   | 22,179 |        |  |  | 54 | %  |   |  | (9  | %) 
|Depreciation and amortization   |       |   | 299                      |        |      |  | 1    | %  |      |   | 260    |        |      |  | 0    | %  |      |  | 1    | %   |        |   | 596    |        |  |  | 1  | %  |   |   | 503    |        |  |  | 0  | %  |   |  | 1   | %  
|                                |       |   |                          |        |      |  |      |    |      |   |        |        |      |  |      |    |      |  |      |     |        |   |        |        |  |  |    |    |   |   |        |        |  |  |    |    |   |  |     |    
|                                | Total |   | $                        | 20,852 |      |  |      | 46 | %    |   | $      | 51,508 |      |  |      | 76 | %    |  |      | (30 | %)     |   | $      | 40,893 |  |  |    | 46 | % |   | $      | 84,701 |  |  |    | 68 | % |  |     | (21 | %)
|                                |       |   |                          |        |      |  |      |    |      |   |        |        |      |  |      |    |      |  |      |     |        |   |        |        |  |  |    |    |   |   |        |        |  |  |    |    |   |  |     |    

Cost of Revenue

|                                |       |   |                        |        |      |  |      |    |      |   |        |       |      |  |      |    |      |  |      |    |        |   |        |        |  |  |     |    |   |   |        |        |  |  |    |    |   |  |    |   |  
|------------------------------- | ----- | - | ---------------------- | ------ | ---- |  | ---- | -- | ---- | - | ------ | ----- | ---- |  | ---- | -- | ---- |  | ---- | -- | ------ | - | ------ | ------ |  |  | --- | -- | - | - | ------ | ------ |  |  | -- | -- | - |  | -- | - | -
|                                |       |   | I.T.S. Division       
|                                |       |   |                       
|                                |       |   | (dollars in thousands)
|                                |       |   | Q2                     |        | % of |  | Q2   |    | % of |   | %      |       | YTD  |  | % of |    | YTD  |  | % of |    | %     
|                                |       |   | 2003                   |        | Rev. |  | 2002 |    | Rev. |   | Change |       | 2003 |  | Rev. |    | 2002 |  | Rev. |    | Change
|                                |       |   |                        |        |      |  |      |    |      |   |        |       |      |  |      |    |      |  |      |    |       
|Product sales and installations |       | $ | 8,545                  |        |      |  | 96   | %  |      | $ | 6,472  |       |      |  | 85   | %  |      |  | 11   | %  |        | $ | 11,120 |        |  |  | 95  | %  |   | $ | 16,302 |        |  |  | 87 | %  |   |  | 8  | %
|Service                         |       |   | 2,476                  |        |      |  | 108  | %  |      |   | 2,850  |       |      |  | 94   | %  |      |  | 14   | %  |        |   | 5,446  |        |  |  | 101 | %  |   |   | 6,832  |        |  |  | 91 | %  |   |  | 10 | %
|Depreciation and amortization   |       |   |                       |        |      |  | 0    | %  |      |   |       |       |      |  | 0    | %  |      |  | 0    | %  |        |   |       |        |  |  | 0   | %  |   |   |       |        |  |  | 0  | %  |   |  | 0  | %
|                                |       |   |                        |        |      |  |      |    |      |   |        |       |      |  |      |    |      |  |      |    |        |   |        |        |  |  |     |    |   |   |        |        |  |  |    |    |   |  |    |  
|                                | Total |   | $                      | 11,021 |      |  |      | 98 | %    |   | $      | 9,322 |      |  |      | 87 | %    |  |      | 11 | %      |   | $      | 16,566 |  |  |     | 97 | % |   | $      | 23,134 |  |  |    | 88 | % |  |    | 9 | %
|                                |       |   |                        |        |      |  |      |    |      |   |        |       |      |  |      |    |      |  |      |    |        |   |        |        |  |  |     |    |   |   |        |        |  |  |    |    |   |  |    |  

27



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##### Table of Contents



Comparison of Q2 2003 to Q2 2002

Consolidated

Product Sales and Installations

Consolidated product sales and installation cost of revenue as a
percentage of revenue decreased by 25% in Q2 2003 as compared to Q2 2002
primarily due to the inclusion of $16.3 million of inventory fair value step-up
in Q2 2002 as well as a higher percentage of I.T.S. and third party products
sold compared to Trading System products sold in Q2 2003. I.T.S. and third
party products have a higher cost of revenues than Trading Systems manufactured
products.

Service

Consolidated service cost of revenue as a percentage of revenue decreased
by 8% in Q2 2003 from Q2 2002 primarily due to an increase in contract
maintenance services from our Trading Systems unit, which have a higher gross
profit margin than non-contract MAC services as well as the inclusion
of $0.6 million of inventory fair value step-up in Q2 2002. We anticipate having higher
contract maintenance services for our Trading Systems unit for the remainder of
fiscal year 2003 and expect service margins in the second half of fiscal year
2003 to be consistent with service margins in the first half of fiscal year
2003.

Trading Systems

Product Sales and Installations

Trading Systems product sales and installation cost of revenue as a
percentage of revenue decreased by 39% in Q2 2003 from Q2 2002 primarily due to
the inclusion of $16.1 million of inventory fair value step-up in Q2 2002 as
well as lower margins attained from the sale of the IQMX trading system in Q2
2002 to a global customer at a higher than normal discount. The margins
relating to our IQMX trading system have increased in Q2 2003 as a result of
the acceptance in the marketplace of the IQMX system and a more cost efficient
manufacturing process. We expect to continue to have consistent margins in our
IQMX trading system for the remainder of the 2003 fiscal year as compared to
the 2002 fiscal year.

Service

Trading Systems service cost of revenue as a percentage of revenue
decreased by 9% in Q2 2003 from Q2 2002 primarily due to an increase in
contract maintenance services, which have a higher gross profit margin than
non-contract services as well as the inclusion of $0.5 million of inventory
fair value step-up in Q2 2002.

I.T.S.

Product Sales and Installations

I.T.S. product sales and installation cost of revenue as a percentage of
revenue increased by 11% in Q2 2003 from Q2 2002 primarily due to one large
contract sold at a higher than normal discount offset by the inclusion of $0.2
million of inventory fair value step-up in Q2 2002. The general decline in real
estate and construction activities within our customer base has required
additional discounts to remain competitive. Additionally, indirect costs in Q2
2003 have increased compared to Q2 2002 due to increased manpower required to
meet certain project completion deadlines.

Service

I.T.S. service cost of revenue as a percentage of revenue increased by 14%
in Q2 2003 from Q2 2002 primarily due to the general decline in the real estate
and construction activities within our customer base. As a result of such
business decline, we have experienced a decrease in direct margins. The general
decline in real estate and construction activities within our customer base has
required additional discounts to remain competitive. Additionally, indirect
costs in Q2 2003 have increased compared to Q2 2002 due to increased manpower
required to meet certain project completion deadlines.

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Comparison of YTD 2003 to YTD 2002

Consolidated

Product Sales and Installations

Consolidated product sales and installation cost of revenue as a
percentage of revenue decreased by 20% in YTD 2003 as compared to YTD 2002
primarily due to lower margins attained in our I.T.S. unit in YTD 2003 offset
by the inclusion of $23.1 million of inventory fair value step-up in Q2 2002.
We expect our second half of fiscal year 2003 product sales and installation
margins to be 5% to 7% lower than the first half of the 2003 fiscal year as a
result of an increase in the percentage of I.T.S. product sales and
installation revenue. I.T.S. products have a higher cost of revenues resulting
in lower margins than Trading Systems manufactured products.

Service

Consolidated service cost of revenue as a percentage of revenue decreased
by 8% in YTD 2003 from YTD 2002 primarily due to an increase in contract
maintenance services for our Trading Systems unit, which have a higher gross
profit margin than non-contract services as well as the inclusion of $0.8
million of inventory fair value step-up in Q2 2002. We anticipate our second
half of fiscal year 2003 service margins to be consistent with the first half
of fiscal year 2003. We expect fiscal year 2003 cost of revenue for
Gains US and Gains UK to be 55%-60% of the total
revenue for that unit.

Trading Systems

Product Sales and Installations

Trading Systems product sales and installation cost of revenue as a
percentage of revenue decreased by 27% in YTD 2003 from YTD 2002 primarily due
to the inclusion of $22.2 million of inventory fair value step-up in Q2 2002 as
well as lower margins attained from the sale of the IQMX trading system in YTD
2002. The margins relating to our IQMX trading system have increased in YTD
2003 when compared to YTD 2002 as a result of the acceptance in the marketplace
of the IQMX and a more cost efficient manufacturing process.

Service

Trading Systems service cost of revenue as a percentage of revenue
decreased by 9% in YTD 2003 from YTD 2002 primarily due to an increase in
contract maintenance services which have a higher gross profit margin than
non-contract MAC services as well as the inclusion of $0.7 million of inventory
fair value step-up in YTD 2002.

I.T.S.

Product Sales and Installations

I.T.S. product sales and installation cost of revenue as a percentage of
revenue increased by 8% in YTD 2003 from YTD 2002 primarily due to one large
contract sold at a higher than normal discount offset by the inclusion of $0.9
million of inventory fair value step-up in Q2 2002. The general decline in real
estate and construction activities within our customer base has resulted in
more competitive pricing on installation project bids. Additionally, indirect
costs in YTD 2003 have increased compared to YTD 2002 due to increased manpower
required to meet certain project completion deadlines.

Service

I.T.S. service cost of revenue as a percentage of revenue increased by 10%
in YTD 2003 from YTD 2002 primarily due to the general decline in the real
estate and construction activities within our customer base. As a result of
such business decline and due to increased manpower required to meet certain
project completion deadlines, we have experienced a decrease in margins. The
general decline in real estate and construction activities within our customer
base has resulted in more competitive pricing on installation project bids.
Additionally, indirect costs in YTD 2003 have increased compared to
YTD 2002.

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Research and Development Expense

|                         |  |              |       |      |  |        |       |        |  |      |      |      |  |        |     |        |  |   |       |  |  |   |       |  |  |   |        |   |  |  |     |   
|------------------------ |  | ------------ | ----- | ---- |  | ------ | ----- | ------ |  | ---- | ---- | ---- |  | ------ | --- | ------ |  | - | ----- |  |  | - | ----- |  |  | - | ------ | - |  |  | --- | --
|(dollars in thousands)   |  | Consolidated
|                         |  |             
|                         |  | Q2           |       | Q2   |  | $      |       | %      |  | YTD  |      | YTD  |  | $      |     | %     
|                         |  | 2003         |       | 2002 |  | Change |       | Change |  | 2003 |      | 2002 |  | Change |     | Change
|                         |  |              |       |      |  |        |       |        |  |      |      |      |  |        |     |       
|Research and development |  | $            | 2,928 |      |  | $      | 3,809 |        |  | $    | (881 | )    |  |        | (23 | %)     |  | $ | 5,663 |  |  | $ | 7,634 |  |  | $ | (1,971 | ) |  |  | (26 | %)

Research and development efforts are focused on the next generation of the
Trading Systems products, applications, and enhancements of our current product
lines.

Comparison of Q2 2003 to Q2 2002

Research and development expenses decreased by $0.9 million in Q2 2003
from Q2 2002 primarily due to planned reductions of both headcount and
discretionary spending.

Comparison of YTD 2003 to YTD 2002

Research and development expenses decreased by $2.0 million in YTD 2003
from YTD 2002 primarily due to planned reductions of both headcount and
discretionary spending.

Selling, General and Administrative Expense

|                                          |  |              |        |      |  |        |       |        |  |      |     |      |  |        |   |        |  |   |        |  |  |   |        |  |  |   |        |   |  |  |     |   
|----------------------------------------- |  | ------------ | ------ | ---- |  | ------ | ----- | ------ |  | ---- | --- | ---- |  | ------ | - | ------ |  | - | ------ |  |  | - | ------ |  |  | - | ------ | - |  |  | --- | --
|(dollars in thousands)                    |  | Consolidated
|                                          |  |             
|                                          |  | Q2           |        | Q2   |  | $      |       | %      |  | YTD  |     | YTD  |  | $      |   | %     
|                                          |  | 2003         |        | 2002 |  | Change |       | Change |  | 2003 |     | 2002 |  | Change |   | Change
|                                          |  |              |        |      |  |        |       |        |  |      |     |      |  |        |   |       
|Selling, general & administrative expense |  | $            | 10,742 |      |  | $      | 9,836 |        |  | $    | 906 |      |  |        | 9 | %      |  | $ | 19,472 |  |  | $ | 28,005 |  |  | $ | (8,533 | ) |  |  | (30 | %)

Comparison of Q2 2003 to Q2 2002

Selling, general and administrative expenses increased by $0.9 million in
Q2 2003 from Q2 2002 primarily due to increased professional fees relating to
regulatory filings and the amendment of our credit facility.

Comparison of YTD 2003 to YTD 2002

Selling, general and administrative expenses decreased by $8.5 million in
YTD 2003 from YTD 2002 primarily due to the inclusion of $2.5 million of
employee bonuses related to the IPC Information Systems Acquisition and a $6.9
million charge for corporate related services from Global Crossing in YTD
2002. These corporate related service charges represent an
allocation to IPC Information Systems, Inc. for the cost of services such as treasury, payroll,
tax compliance, legal and other professional fees. This was partially offset by
an increase in headcount and expenses associated with the set-up of our
operations as a stand-alone entity and higher professional fees in YTD 2003.

Depreciation and Amortization

|                              |  |              |       |      |  |        |       |        |  |      |     |      |  |        |    |        |  |   |       |  |  |   |        |  |  |   |        |   |  |  |     |   
|----------------------------- |  | ------------ | ----- | ---- |  | ------ | ----- | ------ |  | ---- | --- | ---- |  | ------ | -- | ------ |  | - | ----- |  |  | - | ------ |  |  | - | ------ | - |  |  | --- | --
|(dollars in thousands)        |  | Consolidated
|                              |  |             
|                              |  | Q2           |       | Q2   |  | $      |       | %      |  | YTD  |     | YTD  |  | $      |    | %     
|                              |  | 2003         |       | 2002 |  | Change |       | Change |  | 2003 |     | 2002 |  | Change |    | Change
|                              |  |              |       |      |  |        |       |        |  |      |     |      |  |        |    |       
|Depreciation and amortization |  | $            | 4,798 |      |  | $      | 4,351 |        |  | $    | 447 |      |  |        | 10 | %      |  | $ | 9,529 |  |  | $ | 15,400 |  |  | $ | (5,871 | ) |  |  | (38 | %)

Comparison of Q2 2003 to Q2 2002

Depreciation and amortization expense increased by $0.4 million in Q2 2003
from Q2 2002 primarily due to capital expenditures of approximately $6.6
million for the period from March 31, 2002 to March 31, 2003.

Comparison of YTD 2003 to YTD 2002

Depreciation and amortization expense decreased by $5.9 million in YTD
2003 from YTD 2002 primarily due to the adoption of SFAS 142, in which
goodwill and indefinite lived intangible assets are no longer subject to
periodic amortization.
This standard was adopted by us as of the December 20, 2001 acquisition
date, approximately midway through the YTD 2002 period.

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Interest Expense, net

|                       |  |              |       |      |  |        |       |        |  |      |      |      |  |        |    |        |  |   |        |  |  |   |        |  |  |   |        |   |  |  |    |   
|---------------------- |  | ------------ | ----- | ---- |  | ------ | ----- | ------ |  | ---- | ---- | ---- |  | ------ | -- | ------ |  | - | ------ |  |  | - | ------ |  |  | - | ------ | - |  |  | -- | --
|(dollars in thousands) |  | Consolidated
|                       |  |             
|                       |  | Q2           |       | Q2   |  | $      |       | %      |  | YTD  |      | YTD  |  | $      |    | %     
|                       |  | 2003         |       | 2002 |  | Change |       | Change |  | 2003 |      | 2002 |  | Change |    | Change
|                       |  |              |       |      |  |        |       |        |  |      |      |      |  |        |    |       
|Interest expense, net  |  | $            | 6,477 |      |  | $      | 6,935 |        |  | $    | (458 | )    |  |        | (7 | %)     |  | $ | 12,682 |  |  | $ | 13,771 |  |  | $ | (1,089 | ) |  |  | (8 | %)

Comparison of Q2 2003 to Q2 2002

Interest expense, net decreased by $0.5 million in Q2 2003 from Q2 2002
reflecting our September 2002 excess cash flow repayment and a prepayment made
on our term loan in March 2003, which reduced our outstanding indebtedness.

Comparison of YTD 2003 to YTD 2002

Interest expense, net decreased by $1.1 million in YTD 2003 from YTD 2002
primarily due to a reduction in principal outstanding under our term loan in
YTD 2003 as compared to YTD 2002.

Net Loss

|                       |  |              |      |      |  |        |        |        |  |      |        |      |  |        |     |        |  |   |      |   |  |   |         |   |  |   |         |   |  |  |     |   
|---------------------- |  | ------------ | ---- | ---- |  | ------ | ------ | ------ |  | ---- | ------ | ---- |  | ------ | --- | ------ |  | - | ---- | - |  | - | ------- | - |  | - | ------- | - |  |  | --- | --
|(dollars in thousands) |  | Consolidated
|                       |  |             
|                       |  | Q2           |      | Q2   |  | $      |        | %      |  | YTD  |        | YTD  |  | $      |     | %     
|                       |  | 2003         |      | 2002 |  | Change |        | Change |  | 2003 |        | 2002 |  | Change |     | Change
|                       |  |              |      |      |  |        |        |        |  |      |        |      |  |        |     |       
|Net loss               |  | $            | (611 | )    |  | $      | (5,310 | )      |  | $    | (4,699 | )    |  |        | (88 | %)     |  | $ | (813 | ) |  | $ | (17,720 | ) |  | $ | (16,907 | ) |  |  | (95 | %)

Comparison of Q2 2003 to Q2 2002

Net loss decreased by $4.7 million in Q2 2003 from Q2 2002 due in part to
non-cash GAAP adjustments made to the fair value of our inventory related to
our acquisition of IPC Information Systems in December 2001. These adjustments
increased the carrying value of the inventory to its fair value at the
acquisition date, which effectively reduced the gross profit on the sale of
such inventory to a nominal amount. The amount of inventory fair value
adjustments included as a cost of revenue in Q2 2002 was $16.9 million while
there was no impact in Q2 2003. These adjustments were offset by the decrease
in revenue for Q2 2003 due to current economic conditions. For the 2003 fiscal
year, we expect a return to net income primarily due to the completion of the
amortization of inventory fair value adjustments charged to cost of revenue in
FY 2002 as well as a reduction in selling, general and administrative costs due
to the exclusion of the intercompany charges we received in the past from
Global Crossing. We cannot predict when an economic recovery will occur in the
financial community and likewise cannot predict whether, when and to what
extent we will show increased revenue.

Comparison of YTD 2003 to YTD 2002

Net loss decreased by $16.9 million in YTD 2003 from YTD 2002 due in part
to non-cash GAAP adjustments made to the fair value of our inventory related to
our acquisition of IPC Information Systems in December 2001. The amount of
inventory fair value adjustments included as cost of revenue for YTD 2002 was
$23.9 million while there was no impact in YTD 2003. There will be no impact to
net income in fiscal year 2003 and beyond for these adjustments. In addition,
the net loss in YTD 2002 was unfavorably impacted by corporate related service
charges from Global Crossing totaling $6.9 million as well as the decrease in
revenue in YTD 2003 due to current economic conditions. For the 2003 fiscal
year, we expect a return to net income primarily due to the completion of the
inventory fair value adjustments charged to cost of revenue in FY 2002 and a
reduction in selling, general and administrative costs due to the exclusion of
the intercompany charges we received in the past from Global Crossing. We
cannot predict when an economic recovery will occur in the financial community
and likewise cannot predict whether, when and to what extent we will show
increased revenue.

Provision for Income Taxes

Our effective tax rate for Q2 2003 and YTD 2003 were 311.4% and 167.2%,
respectively, compared to 29.7% and 16.6% for Q2 2002 and YTD 2002,
respectively.

Our effective tax rate reflects our foreign, federal and state taxes,
non-deductibility of foreign losses for federal tax purposes, the
non-deductibility of certain expenses, and, for fiscal year 2003, taxable
income at several of our foreign
subsidiaries, which, combined with the lower absolute amount of pre-tax
income for the 2003 periods as compared to the absolute amount of pre-tax loss
for the 2002 periods, generates a more significant impact on our effective tax
rate.

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Liquidity and Capital Resources

On March 3, 2003, we voluntarily prepaid $14.0 million in debt on our
$120.0 million senior secured credit facility. Mandatory prepayments of the
senior secured credit facilities are required upon the occurrence of certain
events, including asset sales and equity issuances, as well as for 75% of our
excess free cash flow at each fiscal year end. Excess cash flow is defined in
our credit agreement, as amended, as: 1) the sum of net income, interest
expense, provisions for taxes, depreciation expense, amortization expense,
other non-cash items affecting net income and to the extent included in
calculating net income, expenses incurred by us in connection with the first
amendment to the credit agreement, plus 2) a working capital
adjustment, less 3) repayments of debt, capital expenditures, cash interest
expense and provisions for taxes based on income. There is no required
amortization on the revolving credit facility.

Simultaneously with the prepayment, we amended our credit facility to
modify the senior secured leverage, total leverage, interest coverage and
capital expenditures covenants to be less restrictive and secured consent from
our lenders for the acquisition of the shares of Gains International (US) and
Gains International (Europe) Limited. In addition, the credit facility was
amended to reduce the mandatory excess cash flow payments by the $14 million
prepayment on a dollar for dollar basis as well as any payments made relating
to the acquisition of Gains. Following the prepayment, we had approximately
$55.4 million outstanding under the credit facility. We expect net interest
savings from the $14.0 million prepayment to be approximately $0.3 million in
the 2003 fiscal year. As a result of the prepayment, there is a pro rata
reduction of the quarterly amortization payments required by the credit
agreement. The original amortization payment schedule prior to the prepayment
was $1.8 million per quarter from March 31, 2003 through December 31, 2005 and
$11.9 million per quarter thereafter through December 31, 2006. Due to the pro
rata reduction of required amortization payments, the revised payment schedule
is $1.5 million per quarter from March 31, 2003 through December 31, 2005 and
$9.5 million thereafter through December 31, 2006.

On March 13, 2003, we entered into a settlement and rejection agreement
with Global Crossing. Pursuant to the settlement and rejection agreement, all
of the remaining obligations under the purchase agreement relating to the IPC
Information Systems Acquisition were terminated including the
Companys obligation to pay any portion of the deferred purchase
price and Global Crossings obligation to indemnify us for
specific tax liabilities. In addition, we and Global
Crossing mutually released each other for all prior claims. The bankruptcy
court entered an order on March 14, 2003 approving the settlement and rejection
agreement.

Under the terms of the settlement and rejection agreement, we have
deposited $5.2 million in a new escrow account. Global Crossing received $3.2
million from the escrow account upon the filing of certain tax returns. Global
Crossing will receive the remaining $2.0 million from the escrow account after
a $2.0 million irrevocable letter of credit is issued on behalf of us. We will
have the right to draw on that letter of credit in the event Global Crossings
affiliate fails to make any payments due to us pursuant to the sublease for
office space at 67-73 Worship Street in London, England.

We believe that all tax returns required to be filed in respect of IPC
Information Systems, Inc. and its subsidiaries for periods prior to and
including the date of the IPC Information Systems Acquisition, have now been
filed. These returns consist of consolidated tax returns with Global Crossing,
and, where required by law, separate tax returns for IPC Information Systems,
Inc. and/or its subsidiaries.

As a result of the termination of the purchase agreement, Global Crossing
has been relieved of all of its obligations under the purchase agreement,
including, among other things, indemnifying us for tax liabilities that may be
imposed upon IPC Information Systems, Inc. and its subsidiaries for periods
prior to and including the date of the IPC Information Systems Acquisition.
Therefore, in the event that any tax liabilities are imposed, as a result of an
audit or otherwise, on IPC Information Systems, Inc. and/or its subsidiaries
for these periods prior to and including the date of the IPC Information
Systems Acquisition, we may be required to pay those taxes and are no longer
able to recover indemnification from Global Crossing. As of the date of this
filing, the aggregate amount of taxes for which we have received notices of
taxes due from various jurisdictions and recognized as tax liabilities under
purchase accounting is approximately $6.5 million. We estimate that the range
of our exposure for additional tax liabilities is from $0 to $36 million. In
computing its estimated range of potential tax liabilities, we took into
account tax returns in certain jurisdictions where the statutes of limitations
have not yet expired. Under those tax returns as filed, the remaining liability
is zero. Although we believe that all those tax returns have been filed
correctly, such returns may be audited and additional taxes may be assessed (or
refunds may be granted). Payment by us of a significant amount of these
potential tax liabilities could have a material adverse effect on our financial
condition and results of operations, requiring us to seek additional financing.
In that event , we cannot assure you we will be able to obtain additional
financing on commercially reasonable terms, or at all.

Pursuant to the settlement and rejection agreement, Global Crossing has
also paid over to us approximately $2.2 million for payroll and federal tax
refunds received by it for periods prior to and including the date of the IPC
Information Systems
Acquisition. Global Crossing is also required to pay us any future tax
refunds or credits it receives applicable to IPC Information Systems, Inc. and
its subsidiaries for these periods.

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As part of the settlement and rejection agreement, we also entered into a
second amendment to the network services, channel sales and transition services
agreement. Under the second amendment, we no longer have any obligation to
market or resell Global Crossings channel network services to its customers.
In addition, the restrictions on our ability to compete with Global Crossing
will terminate on June 20, 2004 (instead of December 20, 2004), or, on June 20,
2003 (instead of December 20, 2003) in connection with a business combination
transaction with an unrelated third party that is or becomes a competitor of
Global Crossing. Finally, pursuant to the settlement and rejection agreement,
we will be permitted to use any other provider of network services for our own
internal purposes provided its aggregate annual payments to Global Crossing and
their subsidiaries is at least $48,000. Neither this second amendment nor the
first amendment to the network services, channel sales and transition services
agreement was signed by Asia Global Crossing Asia Pacific Commercial, Ltd., a
former Global Crossing affiliate that was an original signatory to this
agreement. Accordingly, with respect to Asia Global Crossing Asia Pacific
Commercial, Ltd., the non-compete restrictions contained in the original
network services, channel sales and transition services agreement have not been
suspended and our ability to engage in certain new lines of business activities
in Asia may be restricted.

Comparison of YTD 2003 to YTD 2002

Cash
provided by operating activities was $13.3 million for YTD 2003
as compared to $28.4 million for YTD 2002. This decrease of
$15.1 million is primarily due to a decrease in inventories of
$49.1 million offset by an increase in customer advances and
deferred revenue of $27.3 million. The inventories and customer
advances/deferred revenue reflect the timing of the completion of
several large installation projects and higher volume of installation
projects completed in YTD 2002 due to disaster recovery projects
resulting from the events of September 11, 2001 versus no
installation projects of comparable size or events occurring in YTD
2003. In addition, this was partially offset by a decrease in net
loss of $16.9 million for the comparative periods. The remaining
decrease is principally related to timing differences in accounts
payable and accrued expenses of $7.4 million as well as other
changes in operating assets and liabilities of $2.8 million.

Cash provided by investing activities was $1.9 million for YTD 2003 as
compared to cash used of $349.3 million for YTD 2002. Cash provided by
investing activities for YTD 2003 related to capital expenditures of $2.3
million offset by the net cash received of $4.2 million
relating to the settlement and rejection agreement with Global Crossing. Cash
used in investing activities for YTD 2002 related almost exclusively to cash
used to fund the IPC Information Systems Acquisition.

Cash used in financing activities was $17.5 million for YTD 2003 as
compared to cash provided by financing activities of $359.8 million for YTD
2002. Cash used in financing activities in YTD 2003 represented the voluntary
prepayment of $14.0 million of principal on our senior secured credit
facilities in addition to the normal amortization repayment of principal as
required under the terms of our senior secured credit facilities. Cash provided
by financing activities in YTD 2002 included $140 million of common equity
contribution from a group led by Goldman Sachs Capital Partners 2000 and its
affiliates, the proceeds from the sale of $150 million of senior subordinated
notes, and the borrowing of $105 million under our senior secured credit
facilities. These inflows were partially offset by outflows of $15.1 million of
intercompany activity that occurred prior to the IPC Information Systems
Acquisition and issuance costs for the financing of the IPC Information Systems
Acquisition.

The effect of exchange rate changes on cash represents increases and
decreases in various currencies when translated into US dollars. As an
international company, we are subjected to currency fluctuation risk, which
resulted in a net decrease of cash of approximately $0.7 million in YTD 2003 as
compared to $3.0 million in YTD 2002. Currently our largest currency exposure
is to the British Pound, although we have additional exposure, to a lesser
extent, to the Euro, Canadian Dollar, Australian Dollar, Japanese Yen, Hong
Kong Dollar and Singapore Dollar.

Capital Resources and Expenditures

We expect that our capital expenditures for fiscal year 2003 will be
approximately $6.0 million, however, actual capital expenditures for fiscal
year 2003 may be greater. We expect to increase spending on capital
expenditures in subsequent years, but are limited to the amount of capital
expenditures in any fiscal year by our capital expenditure covenant in our
credit agreement as amended. The limits imposed by our credit agreement are
$8.0 million for fiscal 2003 and $12.0 million thereafter. We have no off
balance sheet arrangements.

Our primary future uses of cash will be to fund interest expense and
principal repayments on our debt, capital expenditures, research and
development efforts and working capital as needed for potential strategic
acquisitions and/or alliances. Our primary future sources of cash will be cash
flows from operations, primarily the design, manufacture, installation and
service of turret systems for the trading operations of investment and
commercial banks, foreign exchange and commodity brokers and dealers, market
exchanges, mutual and hedge fund companies, asset managers and insurance
companies, and, if necessary, borrowings under the revolving credit facility.
At March 31, 2003, we had $22.4 million of unrestricted cash. The amount of
unrestricted cash on our balance sheet was affected by both the voluntary
prepayment of debt under our senior secured credit agreement and the settlement
agreement with Global Crossing mentioned above. Additionally, we had liquidity
available to us of $10.7 million through our $15.0 million revolving credit
facility under our senior secured credit facilities under which there were no
amounts

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outstanding at March 31, 2003 ($15.0 million revolving credit facility
reduced by outstanding letters of credit of $4.3 million at March 31, 2003).

Our ability to make payments on our indebtedness, including the senior
subordinated notes, and to fund planned capital expenditures and research and
development efforts will depend on our ability to generate cash in the future,
which is subject, in part, to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our control.

Since the IPC Information Systems Acquisition, our cash generated from the
operations of the business has been sufficient to meet our cash needs. Based
on our forecasts, we believe that this trend will continue and our cash flow
from operations, available cash and available borrowings under our revolving
credit facility will be adequate to meet our current and long-term liquidity
needs. We cannot assure you, however, that our business will generate
sufficient cash flow from operations or that future borrowings will be
available to us under the revolving credit facility in an amount sufficient to
enable us to pay our indebtedness, including the senior subordinated notes, or
to fund our other liquidity needs. We may need to refinance all or a portion of
our indebtedness, including the senior subordinated notes, on or before
maturity. We cannot assure you that we will be able to refinance any of our
indebtedness, including the senior subordinated notes, on commercially
reasonable terms, or at all.

Contractual Obligations and Other Commercial Commitments

The following summarizes our contractual obligations at March 31, 2003,
and the effect such obligations are expected to have on our liquidity and cash
flow in future periods.

|                                          |                                    |                        |                                            |         |           |       |           |       |     |       |        |        |         |   |       |        |  |   |         |         | 
|----------------------------------------- | ---------------------------------- | ---------------------- | ------------------------------------------ | ------- | --------- | ----- | --------- | ----- | --- | ----- | ------ | ------ | ------- | - | ----- | ------ |  | - | ------- | ------- | 
|(dollars in thousands)                    |                                    | Payments Due by Period
|                                          |                                    |                       
|                                          |                                    |                        |                                            |         |           |       | Less than |       | 1-3 |       | 4-5    |        | After 5
|Contractual Obligations:                  |                                    | Total                  |                                            | 1 year  |           | years |           | years |     | years
|                                          |                                    |                        |                                            |         |           |       |           |       |     |      
|Deferred Compensation Agreements          |                                    | $                      | 5,415                                      |         |           | $     | 446       |       |     | $     | 1,491  |        |         | $ | 955   |        |  | $ | 2,523   |        
|Long-Term Debt                            |                                    |                        | 203,902                                    |         |           |       | 2,914     |       |     |       | 41,519 |        |         |   | 9,469 |        |  |   | 150,000 |        
|Operating Leases                          |                                    |                        | 25,863                                     |         |           |       | 2,470     |       |     |       | 11,604 |        |         |   | 6,577 |        |  |   | 5,212   |        
|                                          |                                    |                        |                                            |         |           |       |           |       |     |       |        |        |         |   |       |        |  |   |         |        
|                                          | Total Contractual Cash Obligations |                        | $                                          | 235,180 |           |       | $         | 5,830 |     |       | $      | 54,614 |         |   | $     | 17,001 |  |   | $       | 157,735 | 
|                                          |                                    |                        |                                            |         |           |       |           |       |     |       |        |        |         |   |       |        |  |   |         |        
|                                         
|                                          |                                    |                        | Amount of Commitment Expiration Per Period
|                                          |                                    |                        |                                           
|                                          |                                    |                        | Total                                      |         |           |       |           |       |     |       |        |        |         |   |       |        |  |   |        
|                                          |                                    |                        | Amounts                                    |         | Less than |       | 1-3       |       | 4-5 |       | Over 5
|Other Commercial Commitments:             |                                    | Committed              |                                            | 1 year  |           | years |           | years |     | years
|                                          |                                    |                        |                                            |         |           |       |           |       |     |      
|Line of Credit                            |                                    | $                      |                                           |         |           | $     |          |       |     | $     |       |        |         | $ |      |        |  | $ |        |        
|Standby Letters of Credit                 |                                    |                        | 4,250                                      |         |           |       | 4,250     |       |     |       |       |        |         |   |      |        |  |   |        |        
|Guaranties for Global Crossing Affiliates |                                    |                        | 5,793                                      |         |           |       | 1,128     |       |     |       | 4,665  |        |         |   |      |        |  |   |        |        
|                                          |                                    |                        |                                            |         |           |       |           |       |     |       |        |        |         |   |       |        |  |   |         |        
|                                          | Total Commercial Commitments       |                        | $                                          | 10,043  |           |       | $         | 5,378 |     |       | $      | 4,665  |         |   | $     |       |  |   | $       |        | 
|                                          |                                    |                        |                                            |         |           |       |           |       |     |       |        |        |         |   |       |        |  |   |         |        

Recent Accounting Pronouncements

In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations, which requires entities to record the fair value of
the estimated liability for an asset retirement obligation in the period in
which it is incurred. When the liability is initially recorded, the entity
capitalizes an amount equal to the present value of the estimated liability by
increasing the carrying amount of the related long-lived asset. Over time, the
liability is accreted to its present value each period, and the capitalized
cost is depreciated over the useful life of the related asset. Upon settlement
of the liability, an entity either settles the obligation for its recorded
amount or incurs a gain or loss upon settlement. SFAS 143 is effective for
fiscal years beginning after June 15, 2002, with earlier application
encouraged. We adopted SFAS 143 on October 1, 2002. The adoption of this
standard did not have a material impact on our condensed consolidated financial
statements.

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This statement supersedes SFAS 121, Accounting for Impairment of Long Lived
Assets and the accounting and reporting provisions of APB Opinion No. 30,
Reporting the Results of OperationsReporting the Effects of Disposal of a
Segment of a Business, and Extraordinary and Unusual and Infrequently Occurring
Events and Transactions, for the disposal of a segment of a business (as
previously defined in that Opinion). This statement was adopted by us on
October 1, 2002. The adoption of this standard did not have a material impact
on our condensed consolidated financial statements.

34



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In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS 145 eliminates the requirement under SFAS No. 4, Reporting
Gains and
Losses from Extinguishment of Debt, to report gains and losses from
extinguishments of debt as extraordinary items in the income statement.
Accordingly, gains or losses from extinguishments of debt for fiscal years
beginning after May 15, 2002 shall not be reported as extraordinary items
unless the extinguishment qualifies as an extraordinary item under the
provisions of APB Opinion No. 30, Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions
(Opinion 30). Upon adoption of this pronouncement, any gain or loss on
extinguishment of debt previously classified as an extraordinary item in prior
periods that does not meet the criteria of Opinion 30 for such classification
should be reclassified to conform with the provisions of SFAS 145. This
statement was adopted by us on October 1, 2002. The adoption of this standard
did not have a material impact on our condensed consolidated financial
statements.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities and nullifies EITF Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring) (EITF No. 94-3). SFAS 146 requires that a liability for a
cost associated with an exit or disposal activity be recognized when the
liability is incurred, whereas EITF No. 94-3 had recognized the liability at
the commitment date to an exit plan. We are required to adopt the provisions
of SFAS 146 effective for exit or disposal activities initiated after December
31, 2002. This statement was adopted by us on December 31, 2002. The adoption
of this standard did not have a material impact on our condensed consolidated
financial statements.

In November 2002, the EITF reached a consensus on Issue 00-21,
Multiple-Deliverable Revenue Arrangements. EITF 00-21 addresses how to
account for arrangements that may involve the delivery or performance of
multiple products, services, and/or rights to use assets. The consensus
mandates how to identify whether goods or services or both which are to be
delivered separately in a bundled sales arrangement should be accounted for
separately because they are separate units of accounting. The guidance can
affect the timing of revenue recognition for such arrangements, even though it
does not change rules governing the timing or pattern of revenue recognition of
individual items accounted for separately. The final consensus will be
applicable to agreements entered into in fiscal years beginning after June 15,
2003 with early adoption permitted. Additionally, companies will be permitted
to apply the consensus guidance to all existing arrangements as the cumulative
effect of a change in accounting principle in accordance with APB Opinion No.
20, Accounting Changes. We are assessing the impact that the adoption of EITF
00-21 will have on our condensed consolidated financial statements.

In November 2002, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others. This
interpretation elaborates on disclosures to be made by a guarantor in its
interim and annual financial statements with regard to 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
disclosure requirements of FIN 45 are effective for interim and annual periods
ending after December 15, 2002, and we have adopted those requirements for our
financial statements included in this Form 10-Q. The initial recognition and
initial measurement requirements of FIN 45 are effective prospectively for
guarantees issued or modified after December 31, 2002. We applied FIN 45 in
connection with the March 13, 2003 settlement and rejection agreement with
Global Crossing (see Note 2). We have reflected the fair value of guarantees on
behalf of Global Crossing in our March 31, 2003 condensed consolidated
financial statements.

In December 2002, the FASB issued Statement of Financial Accounting
Standards No. 148, Accounting for Stock-Based Compensation-Transition and
Disclosure. SFAS 148 amends Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation, and provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. SFAS 148 also amends the
disclosure requirements of SFAS 123 to require more prominent and frequent
disclosures in financial statements about the effects of stock-based
compensation. The transition guidance and annual disclosure provisions of SFAS
148 are effective for financial statements issued for fiscal years ending after
December 15, 2002. The interim disclosure provisions are effective for
financial reports containing financial statements for interim periods beginning
after December 15, 2002 and have been reflected in the
accompanying notes to our condensed consolidated financial statements.

Summary of Critical Accounting Policies

The discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
the United States. The preparation of these financial statements requires us to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an ongoing basis, we continually evaluate our estimates. We
base our estimates on historical experience and on various other assumptions
that are believed to be

35



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##### Table of Contents



reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates.

We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our condensed
consolidated financial statements.

Revenue Recognition

Revenue from product sales and installation is recognized upon completion
of the installation, except for revenue from sales of turret products to
distributors, which is recognized upon shipment. Under contract provisions,
customers are progress-billed prior to the completion of the installation. The
revenue related to such advance payments is deferred until system installation
is completed. All costs incurred on uncompleted contracts are accumulated and
recorded as inventory awaiting installation. In addition, contracts for annual
recurring turret and I.T.S. services are generally billed in advance, and are
recorded as revenue ratably (on a monthly basis) over the contractual periods.
Revenue from moves, additions and changes, or MACs to turret systems is
recognized upon completion, which generally occurs in the same month or the
month following the order for services.

Inventories

Inventories are stated at the lower of FIFO (first in, first out) cost or
market but not in excess of net realizable value. Inventory costs include all
direct manufacturing costs and applied overhead. Allowances are established
based on managements estimate of inventory on hand that is potentially
obsolete or for which its market value is below cost.

Impairment of Long-Lived Assets

We review long-lived assets, including property, plant and equipment and
intangible assets, for impairment whenever events or changes in business
circumstances indicate that the carrying amount of the assets may not be fully
recoverable. An impairment loss would be recognized when estimated undiscounted
future cash flows expected to result from the use of the assets and its
eventual disposition is less than its carrying amount. Impairment, if any, is
assessed using discounted cash flows. No impairments have occurred.

Income Taxes

In accordance with SFAS No.109, Accounting for Income Taxes, we
recognize deferred income taxes for the tax consequences in future years of
differences between the tax basis of assets and liabilities and their financial
reporting amounts at each year end, based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount that is more likely than not to be
realized. The provision for income taxes is the tax payable for the period and
the change during the period in deferred tax assets and liabilities. Although
realization is not assured, management believes it is more likely than not that
the recorded deferred tax assets will be realized. Additionally, deferred tax
liabilities are regularly reviewed to confirm that the amounts recorded are
appropriately stated. All such evaluations require significant management
judgments.

For periods prior to the acquisition of IPC Information Systems, we had
filed a consolidated federal tax return and separate and combined state tax
returns with our parent. For purposes of the accompanying combined financial
statements for the period October 1, 2001 to December 20, 2001, income taxes
have been prepared in accordance with SFAS No.109, Accounting for Income
Taxes and SEC Staff Accounting Bulletin Topic 1B, Allocation of Expenses and
Related Disclosure in Financial Statements of Subsidiaries, utilizing the
separate return method. Resulting payables for taxes have been recorded as
adjustments to the intercompany accounts. For periods subsequent to December
20, 2001, we are required to file separate stand-alone tax returns.

Other Matters

We do not have any off balance sheet financial arrangements.

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##### Table of Contents






Item 3. Quantitative and Qualitative Disclosure About Market Risk

Market risks relating to our operations result primarily from changes in
interest rates and changes in foreign exchange rates. We monitor our interest
rate and foreign exchange rate exposures on an ongoing basis. We have not
entered into any interest rate hedging contracts.

The following table provides information about our financial instruments
that are sensitive to changes in interest rates. For debt obligations, the
table presents principal cash flows and related weighted average interest rates
by expected maturity dates. The fair value of our long-term debt is shown
below. Due to current economic conditions, the fair value of our senior
subordinated notes and our senior secured credit facilities are below their
carrying amounts. Although there were reductions in the prime and LIBOR
interest rates in the period from issuance on December 20, 2001 to March 31,
2003, they did not affect the interest rate on our senior secured credit
facilities.

|                      |                |                                                                      |  |            |       |      |  |      |     |      |  |      |     |            |  |                           |     |  |  |   |      |  |  |   |     |  |  |   |       |  |  |   |       | 
|--------------------- | -------------- | -------------------------------------------------------------------- |  | ---------- | ----- | ---- |  | ---- | --- | ---- |  | ---- | --- | ---------- |  | ------------------------- | --- |  |  | - | ---- |  |  | - | --- |  |  | - | ----- |  |  | - | ----- | 
|                      |                |                                                                      |  |            |       |      |  |      |     |      |  |      |     |            |  | Future Principal Payments |     |  |  |   |      | 
|                      |                |                                                                      |  | Fair Value |       |      |  |      |     |      |  |      |     |            |  |                           |     |  |  |   |      | 
|                      |                |                                                                      |  | on March   |       |      |  |      |     |      |  |      |     |            |  |                           |     |  |  |   |      |  |  |   |     |  |  |   |       |  |  |  
|(dollars in millions) |                | 31,
2003                                                             |  | 2003       |       | 2004 |  | 2005 |     | 2006 |  | 2007 |     | Thereafter |  | Total                    
|                      |                |                                                                      |  |            |       |      |  |      |     |      |  |      |     |            |  |                          
|Long-Term Debt:       |                |                                                                      |  |            |       |      |  |      |     |      |  |      |     |            |  |                           |     |  |  |   |      |  |  |   |     |  |  |   |       |  |  |  
|                      | Fixed Rate:    |                                                                      |  |            |       |      |  |      |     |      |  |      |     |            |  |                           |     |  |  |   |      |  |  |   |     |  |  |   |       |  |  |   |      
|                      |                | Senior
Subordinated
Notes,
interest
payable at
11.50%,
maturing 2009 |  | $          | 142.5 |      |  | $    |    |      |  | $    |    |            |  | $                         |    |  |  | $ |     |  |  | $ |    |  |  | $ | 150.0 |  |  | $ | 150.0 | 
|                      |                |                                                                      |  |            |       |      |  |      |     |      |  |      |     |            |  |                           |     |  |  |   |      |  |  |   |     |  |  |   |       |  |  |  
|                      | Variable Rate: |                                                                      |  |            |       |      |  |      |     |      |  |      |     |            |  |                           |     |  |  |   |      |  |  |   |     |  |  |   |       |  |  |   |      
|                      |                | Senior Secured
Credit
Facilities
Term Loan
(7.50% at
March 31,
2003) |  | $          | 52.8  |      |  | $    | 2.9 |      |  | $    | 5.8 |            |  | $                         | 5.8 |  |  | $ | 29.9 |  |  | $ | 9.5 |  |  | $ |      |  |  | $ | 53.9  | 
|                      |                |                                                                      |  |            |       |      |  |      |     |      |  |      |     |            |  |                           |     |  |  |   |      |  |  |   |     |  |  |   |       |  |  |  




Item 4. Controls and Procedures

The Company maintains disclosure controls and procedures designed to
ensure that information required to be disclosed in the Companys Exchange Act
reports is recorded, processed, summarized and reported within the time periods
specified by the SEC and that such information is accumulated and communicated
to the Companys management, including its Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosures. In designing and evaluating the disclosure controls and
procedures, the Companys management recognized that any controls and
procedures, no matter how well designed and operated, can only provide
reasonable assurance of achieving the desired control objectives and the
Companys management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.

Within 90 days preceding the filing date of this report, the Company
performed an evaluation of the effectiveness of the design and operation of its
disclosure controls and procedures as defined in Exchange Act Rule 13a-14 and
15d-14. The evaluation was performed under the supervision and with the
participation of the Companys management, including the Companys Chief
Executive Officer and Chief Financial Officer. Based upon the evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the
Companys disclosure controls and procedures were effective in ensuring that
material information relating to the Company (including its consolidated
subsidiaries) was made known to them by others within the Companys
consolidated group during the period in which this report was being prepared
and that the information required to be included in the report has been
recorded, processed, summarized and reported on a timely basis.

There have been no significant changes in the Companys internal controls
or in other factors that could significantly affect these controls subsequent
to the date the Company completed its evaluation.

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Part II  Other Information:




Item 1. Legal Proceedings

Except as described below, we are not a party to any pending legal
proceedings other than claims and lawsuits arising in the ordinary course of
business. We believe these proceedings will not have a material adverse effect
on our consolidated financial condition or results of operations.

On June 27, 2000, an action was brought against several defendants,
including IPC Communications, Inc., in the United States District Court for the
Southern District of New York by two telecommunications cabling contractors
alleging that IPC Communications, Inc. violated federal antitrust and New York
state law by conspiring with the International Brotherhood of Electrical
Workers Local Union Number 3, AFL-CIO, and five electrical contractors, to
exclude plaintiffs from telecommunications wiring and systems installation jobs
in the New York City metropolitan area. Subsequently, the complaint was amended
to add an additional plaintiff and an additional defendant contractor. We
believe the suit is without merit. However, there can be no assurance that the
resolution of this lawsuit will ultimately be favorable. Plaintiffs are seeking
injunctive relief and damages from the defendants, jointly and severally, in
excess of an aggregate of $75 million.
















|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 2. |  | Changes in Securities and Use of Proceeds
On April 30, 2003, the Company issued an aggregate of 664,380
shares of its common stock to Goldman Sachs Capital Partners 2000
and its affiliates in connection with its purchase of Gains
International (US) Inc. and Gains International (Europe) Limited
from Goldman Sachs Capital Partners 2000 and its affiliates.
These shares were issued in reliance upon Section 4(2) of the
Securities Act of 1933, as amended.
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Item 3. |  | Defaults Upon Senior Securities
None                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Item 4. |  | Submission of Matters to a Vote of Security Holders
None                                                                                                                                                                                                                                                                                                                                                                                                             
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Item 5. |  | Other Information
None                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Item 6. |  | Exhibits and Reports on Form 8-K                                                                                                                                                                                                                                                                                                                                                                                                                                     



|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A)  |  | EXHIBITS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|99.1 |  | Certificate of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                        
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|99.2 |  | Certificate of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                        
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(B)  |  | REPORTS ON FORM 8-K                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|     |  | The Company filed a report on Form 8-K on January 24, 2003. The
Form 8-K was for the purpose of announcing that on January 22,
2003, IPC Information Systems, Inc. reached an agreement with
Gains International (US) Inc. and Gains International (Europe)
Limited to co-market voice and data network services to financial
institutions in the Americas and Europe.                                                                                                                                                               
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|     |  | The Company filed a report on Form 8-K on March 7, 2003. The Form
8-K was for the purpose of announcing that on March 6, 2003, the
Company voluntarily prepaid $14.0 million in debt pursuant to the
Companys $120.0 million senior secured credit facilities. In
addition, the Company successfully completed an amendment to the
senior secured credit facilities that modifies certain covenants
and secures consent for the acquisition of the shares of Gains
International (US) Inc. and Gains International (Europe) Limited.

38



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##### Table of Contents






SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                    |                        |                                                                                                                
|------------------- | ---------------------- | ---------------------------------------------------------------------------------------------------------------
|                    | IPC Acquisition Corp. 
|                    |                        |                                                                                                                
|Dated: May 15, 2003 | By: /s/ TIMOTHY WHELAN
|                    |                        | Timothy Whelan
Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)

39



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##### Table of Contents






Certifications



|   |  | I, Greg Kenepp, certify that:                                                                                                                                                                                                                                                                                                 
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|1. |  | I have reviewed this quarterly report on Form 10-Q of IPC Acquisition Corp.;                                                                                                                                                                                                                                                  
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                      



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                   |  |                                                    
|------------------ |  | ---------------------------------------------------
|Date: May 15, 2003 |  | /s/ GREG KENEPP

Greg Kenepp
President and Director

40



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##### Table of Contents





|   |  | I, Timothy Whelan, certify that:                                                                                                                                                                                                                                                                                              
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|1. |  | I have reviewed this quarterly report on Form 10-Q of IPC Acquisition
Corp.;                                                                                                                                                                                                                                                  
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                     



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                   |  |                                                          
|------------------ |  | ---------------------------------------------------------
|Date: May 15, 2003 |  | /s/ TIMOTHY WHELAN
Timothy Whelan
Chief Financial Officer

41