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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 December 31, 2003

or

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

For the Transition Period From ____________ to ____________



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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 January 31, 2004
|                              |  |                                
|Common Stock, par value $0.01 |  | 14,724,380 shares              



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TABLE OF CONTENTS



|                                          |                                                                                               |                                                      |  |  |  |  |  | 
|----------------------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|Part I  Financial Information           
|                                          | Item 1. Financial Statements                                                                 
|                                          |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                                          |                                                                                               | 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 Security Holders                                  
|                                          | Item 5. Other Information                                                                    
|                                          | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                                
|EX-10.1: AMEND. TO CREDIT/GUARANTEE AGMT.
|EX-31.1: CERTIFICATE OF C.E.O.           
|EX-31.2: CERTIFICATE OF C.F.O.           
|EX-32.1: CERTIFICATE OF C.E.O.           
|EX-32.2: CERTIFICATE OF C.F.O.           



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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, 2003 and December 31, 2003                  |    |      | 1  | 
|                               |  |                                                                                       |  | B) Condensed Consolidated Statements of Operations for the Three Months Ended December
31, 2002 and 2003 |    |      | 2  | 
|                               |  |                                                                                       |  | C) Condensed Consolidated Statements of Cash Flows for the Three Months Ended December
31, 2002 and 2003 |    |      | 3  | 
|                               |  |                                                                                       |  | D) Notes to Condensed Consolidated Financial Statements                                                  |    |      | 4  | 
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  |                                                                                                          | 18 |     
|Item 3.                        |  | Quantitative and Qualitative Disclosure About Market Risk                             |  |                                                                                                          | 31 |     
|Item 4.                        |  | Controls and Procedures                                                               |  |                                                                                                          | 31 |     
|                               |  |                                                                                       |  |                                                                                                          |    |     
|Part II. Other Information:   
|Item 1.                        |  | Legal Proceedings                                                                     |  |                                                                                                          | 32 |     
|Item 2.                        |  | Changes in Securities and Use of Proceeds                                             |  |                                                                                                          | 32 |     
|Item 3.                        |  | Defaults Upon Senior Securities                                                       |  |                                                                                                          | 32 |     
|Item 4.                        |  | Submission of Matters to a Vote of Security Holders                                   |  |                                                                                                          | 32 |     
|Item 5.                        |  | Other Information                                                                     |  |                                                                                                          | 32 |     
|Item 6.                        |  | Exhibits and Reports on Form 8-K                                                      |  |                                                                                                          | 32 |     
|                               |  |                                                                                       |  | Signature                                                                                                |    |      | 33 | 





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Part I  Financial Information:




Item 1. Financial Statements




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

|                                     |                                                                                                                                                                 |                                            |   |         |         |               |   |              |         |  |  | 
|------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | - | ------- | ------- | ------------- | - | ------------ | ------- |  |  | 
|                                     |                                                                                                                                                                 |                                            |   |         |         | September 30, |   | December 31,
|                                     |                                                                                                                                                                 |                                            |   |         |         | 2003          |   | 2003        
|                                     |                                                                                                                                                                 |                                            |   |         |         |               |   |             
|Assets                               |                                                                                                                                                                 |                                            |   |         |         |               |   |             
|Assets:                              |                                                                                                                                                                 |                                            |   |         |         |               |   |             
|                                     | Cash                                                                                                                                                            |                                            | $ | 25,800  |         |               | $ | 13,288       |        
|                                     | Accounts receivable, net of allowance of $1,103 and $1,966, respectively                                                                                        |                                            |   | 60,201  |         |               |   | 42,960       |        
|                                     | Inventories, net                                                                                                                                                |                                            |   | 30,396  |         |               |   | 31,563       |        
|                                     | Prepaid and other current assets                                                                                                                                |                                            |   | 5,523   |         |               |   | 4,920        |        
|                                     |                                                                                                                                                                 |                                            |   |         |         |               |   |             
|                                     |                                                                                                                                                                 | Total current assets                       |   |         | 121,920 |               |   |              | 92,731  | 
|                                     | Property, plant and equipment, net                                                                                                                              |                                            |   | 24,419  |         |               |   | 24,251       |        
|                                     | Goodwill                                                                                                                                                        |                                            |   | 83,079  |         |               |   | 84,927       |        
|                                     | Intangible assets, net                                                                                                                                          |                                            |   | 200,085 |         |               |   | 198,904      |        
|                                     | Deferred financing costs, net                                                                                                                                   |                                            |   | 14,146  |         |               |   | 13,682       |        
|                                     | Other assets                                                                                                                                                    |                                            |   | 1,261   |         |               |   | 7,197        |        
|                                     |                                                                                                                                                                 |                                            |   |         |         |               |   |             
|                                     |                                                                                                                                                                 | Total assets                               |   | $       | 444,910 |               |   | $            | 421,692 | 
|                                     |                                                                                                                                                                 |                                            |   |         |         |               |   |             
|Liabilities and Stockholders Equity |                                                                                                                                                                 |                                            |   |         |         |               |   |             
|Liabilities:                         |                                                                                                                                                                 |                                            |   |         |         |               |   |             
|                                     | Current portion of long term debt                                                                                                                               |                                            | $ | 550     |         |               | $ | 550          |        
|                                     | Accounts payable                                                                                                                                                |                                            |   | 2,787   |         |               |   | 3,267        |        
|                                     | Accrued expenses and other current liabilities                                                                                                                  |                                            |   | 28,541  |         |               |   | 24,602       |        
|                                     | Income taxes payable                                                                                                                                            |                                            |   | 4,208   |         |               |   | 4,091        |        
|                                     | Customer advances on installation contracts                                                                                                                     |                                            |   | 18,989  |         |               |   | 26,375       |        
|                                     | Deferred revenue on maintenance contracts                                                                                                                       |                                            |   | 13,128  |         |               |   | 8,928        |        
|                                     | Current portion of guarantees on former parent obligations                                                                                                      |                                            |   | 1,353   |         |               |   | 1,353        |        
|                                     | Deferred purchase consideration                                                                                                                                 |                                            |   | 6,722   |         |               |   |             |        
|                                     |                                                                                                                                                                 |                                            |   |         |         |               |   |             
|                                     |                                                                                                                                                                 | Total current liabilities                  |   |         | 76,278  |               |   |              | 69,166  | 
|                                     | Term loan                                                                                                                                                       |                                            |   | 54,450  |         |               |   | 54,313       |        
|                                     | Senior subordinated notes                                                                                                                                       |                                            |   | 150,000 |         |               |   | 150,000      |        
|                                     | Deferred taxes, net                                                                                                                                             |                                            |   | 12,182  |         |               |   | 13,056       |        
|                                     | Deferred compensation                                                                                                                                           |                                            |   | 2,936   |         |               |   | 2,909        |        
|                                     | Guarantees on former parent obligations                                                                                                                         |                                            |   | 1,885   |         |               |   | 1,614        |        
|                                     |                                                                                                                                                                 |                                            |   |         |         |               |   |             
|                                     |                                                                                                                                                                 | Total liabilities                          |   |         | 297,731 |               |   |              | 291,058 | 
|                                     |                                                                                                                                                                 |                                            |   |         |         |               |   |             
|Commitments and Contingencies        |                                                                                                                                                                 |                                            |   |         |         |               |   |             
|Stockholders equity:                |                                                                                                                                                                 |                                            |   |         |         |               |   |             
|                                     | Common stock, $0.01 par value, 25,000,000 shares authorized; 14,724,380
shares issued and outstanding at September 30, 2003 and December 31,
2003, respectively |                                            |   | 147     |         |               |   | 147          |        
|                                     | Paid in capital                                                                                                                                                 |                                            |   | 145,846 |         |               |   | 145,846      |        
|                                     | Notes receivable for purchases of common stock                                                                                                                  |                                            |   | (393    | )       |               |   | (324         | )      
|                                     | Accumulated deficit                                                                                                                                             |                                            |   | (5,161  | )       |               |   | (24,889      | )      
|                                     | Accumulated other comprehensive income                                                                                                                          |                                            |   | 6,740   |         |               |   | 9,854        |        
|                                     |                                                                                                                                                                 |                                            |   |         |         |               |   |             
|                                     |                                                                                                                                                                 | Total stockholders equity                 |   |         | 147,179 |               |   |              | 130,634 | 
|                                     |                                                                                                                                                                 |                                            |   |         |         |               |   |             
|                                     |                                                                                                                                                                 | Total liabilities and stockholders equity |   | $       | 444,910 |               |   | $            | 421,692 | 
|                                     |                                                                                                                                                                 |                                            |   |         |         |               |   |             

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

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|                                                    |                                 |                                   |        |                    |        |      |        |        |        |  
|--------------------------------------------------- | ------------------------------- | --------------------------------- | ------ | ------------------ | ------ | ---- | ------ | ------ | ------ | -
|                                                    |                                 |                                   |        | Three Months Ended
|                                                    |                                 |                                   |        | December 31,      
|                                                    |                                 |                                   |        |                   
|                                                    |                                 |                                   |        | 2002               |        | 2003
|                                                    |                                 |                                   |        |                    |        |     
|Revenue:                                            |                                 |                                   |        |                    |        |      |        |       
|                                                    | Product sales and installations |                                   | $      | 23,751             |        |      | $      | 28,104 |       
|                                                    | Service                         |                                   |        | 24,632             |        |      |        | 32,063 |       
|                                                    |                                 |                                   |        |                    |        |      |        |       
|                                                    |                                 |                                   | 48,383 |                    |        |      | 60,167 |       
|                                                    |                                 |                                   |        |                    |        |      |        |       
|Cost of goods sold (depreciation shown separately): |                                 |                                   |        |                    |        |      |        |       
|                                                    | Product sales and installations |                                   |        | 12,254             |        |      |        | 17,267 |       
|                                                    | Service                         |                                   |        | 13,035             |        |      |        | 16,726 |       
|                                                    | Depreciation and amortization   |                                   |        | 297                |        |      |        | 742    |       
|                                                    |                                 |                                   |        |                    |        |      |        |       
|                                                    |                                 |                                   | 25,586 |                    |        |      | 34,735 |       
|                                                    |                                 |                                   |        |                    |        |      |        |       
|                                                    |                                 | Gross profit                      |        |                    | 22,797 |      |        |        | 25,432 |  
|                                                   
|Research and development                            |                                 |                                   | 2,735  |                    |        |      | 3,409  |       
|Selling, general and administrative expense         |                                 |                                   | 8,730  |                    |        |      | 13,288 |       
|Depreciation and amortization                       |                                 |                                   | 4,731  |                    |        |      | 5,167  |       
|                                                    |                                 |                                   |        |                    |        |      |        |       
|                                                    |                                 | Income from operations            |        |                    | 6,601  |      |        |        | 3,568  |  
|Other income (expense):                             |                                 |                                   |        |                    |        |      |        |       
|                                                    | Interest expense, net           |                                   |        | (6,205             | )      |      |        | (5,522 | )     
|                                                    | Other income, net               |                                   |        | 525                |        |      |        | 447    |       
|                                                    |                                 |                                   |        |                    |        |      |        |       
|                                                    |                                 | Income (loss) before income taxes |        |                    | 921    |      |        |        | (1,507 | )
|Income tax expense                                  |                                 |                                   | 1,123  |                    |        |      | 257    |       
|                                                    |                                 |                                   |        |                    |        |      |        |       
|Net loss                                            |                                 | $                                 | (202   | )                  |        | $    | (1,764 | )     
|                                                    |                                 |                                   |        |                    |        |      |        |       

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)

|                                                                                |                                                          |                                           |        |                    |        |      |         |        |         |  
|------------------------------------------------------------------------------- | -------------------------------------------------------- | ----------------------------------------- | ------ | ------------------ | ------ | ---- | ------- | ------ | ------- | -
|                                                                                |                                                          |                                           |        | Three Months Ended
|                                                                                |                                                          |                                           |        | December 31,      
|                                                                                |                                                          |                                           |        |                   
|                                                                                |                                                          |                                           |        | 2002               |        | 2003
|                                                                                |                                                          |                                           |        |                    |        |     
|Cash flows from operating activities:                                           |                                                          |                                           |        |                    |        |      |         |       
|Net loss                                                                        |                                                          | $                                         | (202   | )                  |        | $    | (1,764  | )     
|Adjustments to reconcile net loss to net cash provided by operating activities: |                                                          |                                           |        |                    |        |      |         |       
|                                                                                | Depreciation and amortization                            |                                           |        | 1,462              |        |      |         | 2,127  |        
|                                                                                | Amortization of intangibles                              |                                           |        | 3,566              |        |      |         | 3,782  |        
|                                                                                | Amortization of deferred financing costs                 |                                           |        | 588                |        |      |         | 464    |        
|                                                                                | Provision for doubtful accounts                          |                                           |        | 86                 |        |      |         | 111    |        
|                                                                                | Deferred income taxes                                    |                                           |        | (342               | )      |      |         | (792   | )      
|                                                                                | Amortization of guarantees on former parent obligations  |                                           |        |                   |        |      |         | (339   | )      
|Changes in operating assets and liabilities:                                    |                                                          |                                           |        |                    |        |      |         |       
|                                                                                | Accounts receivables                                     |                                           |        | 12,159             |        |      |         | 17,881 |        
|                                                                                | Inventories                                              |                                           |        | (7,442             | )      |      |         | (911   | )      
|                                                                                | Prepaids and other current assets                        |                                           |        | 132                |        |      |         | 828    |        
|                                                                                | Other assets                                             |                                           |        | 3                  |        |      |         | (326   | )      
|                                                                                | Accounts payable, accrued expenses and other liabilities |                                           |        | (3,176             | )      |      |         | (4,244 | )      
|                                                                                | Income taxes payable                                     |                                           |        | 1,019              |        |      |         | (127   | )      
|                                                                                | Customer advances and deferred revenue                   |                                           |        | 8,207              |        |      |         | 2,810  |        
|                                                                                |                                                          |                                           |        |                    |        |      |         |       
|                                                                                |                                                          | Net cash provided by operating activities |        |                    | 16,060 |      |         |        | 19,500  |  
|                                                                                |                                                          |                                           |        |                    |        |      |         |       
|Cash flows from investing activities:                                           |                                                          |                                           |        |                    |        |      |         |       
|Capital expenditures                                                            |                                                          |                                           | (994   | )                  |        |      | (1,741  | )     
|Payment of Gains US and UK earn-out consideration and deferred purchase price   |                                                          |                                           |       |                    |        |      | (6,756  | )     
|Advance payment on acquisition of Gains Asia                                    |                                                          |                                           |       |                    |        |      | (5,528  | )     
|                                                                                |                                                          |                                           |        |                    |        |      |         |       
|                                                                                |                                                          | Net cash used in investing activities     |        |                    | (994   | )    |         |        | (14,025 | )
|                                                                                |                                                          |                                           |        |                    |        |      |         |       
|Cash flows from financing activities:                                           |                                                          |                                           |        |                    |        |      |         |       
|Principal payments on term loan                                                 |                                                          |                                           | (1,702 | )                  |        |      | (137    | )     
|Deferred compensation payments                                                  |                                                          |                                           | (24    | )                  |        |      | (27     | )     
|Payment of special cash dividend                                                |                                                          |                                           |       |                    |        |      | (17,839 | )     
|                                                                                |                                                          |                                           |        |                    |        |      |         |       
|                                                                                |                                                          | Net cash used in financing activities     |        |                    | (1,726 | )    |         |        | (18,003 | )
|                                                                                |                                                          |                                           |        |                    |        |      |         |       
|Effect of exchange rate changes on cash                                         |                                                          |                                           | 125    |                    |        |      | 16      |       
|                                                                                |                                                          |                                           |        |                    |        |      |         |       
|                                                                                |                                                          | Net increase (decrease) in cash           |        |                    | 13,465 |      |         |        | (12,512 | )
|Cash, beginning of period                                                       |                                                          |                                           | 25,294 |                    |        |      | 25,800  |       
|                                                                                |                                                          |                                           |        |                    |        |      |         |       
|Cash, end of period                                                             |                                                          | $                                         | 38,759 |                    |        | $    | 13,288  |       
|                                                                                |                                                          |                                           |        |                    |        |      |         |       
|Supplemental disclosures of cash flow information:                              |                                                          |                                           |        |                    |        |      |         |       
|Cash paid during the periods for:                                               |                                                          |                                           |        |                    |        |      |         |       
|                                                                                | Income taxes                                             |                                           | $      | 607                |        |      | $       | 945    |        
|                                                                                |                                                          |                                           |        |                    |        |      |         |       
|                                                                                | Interest                                                 |                                           | $      | 10,141             |        |      | $       | 9,656  |        
|                                                                                |                                                          |                                           |        |                    |        |      |         |       

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

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 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 for the fiscal year ended
September 30, 2003, as filed with the Securities and Exchange Commission.

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 unaudited condensed consolidated financial statements for the three
months ended December 31, 2002 and 2003 include the accounts of the Company and
its wholly owned subsidiaries. The Companys operations primarily consist
of the December 20, 2001 acquisition of IPC Information Systems, Inc. and Asia
Global Crossing IPC Trading Systems Australia Pty. Ltd. (the IPC Information
Systems Acquisition), and the April 30, 2003 purchase of
Gains International (US) Inc. and Gains International (Europe)
Limited. The results of operations of the
acquired businesses have been included in our financial statements
from their respective acquisition dates through December 31, 2003. Intercompany balances and
transactions have been eliminated.

Revenue Recognition

Revenue from product sales and installation is recognized upon completion
of the installation or, for contracts that are completed in stages and include
contract specified milestones, upon achieving such contract milestones, and the
delivery and customer acceptance of a fully functional system. Revenue from
sales to distributors is recognized upon shipment. Customers are generally
progress-billed prior to the completion of the installations. The revenue
related to these advance payments is deferred until the system installations
are completed or specified milestones are attained. Costs incurred on
uncompleted contracts and stages 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. Revenue from the Companys Network Services
division, which provides voice and data services to the financial community, is
billed in advance and recorded ratably (on a monthly basis) over the
contractual period, which generally ranges from three months to one year.

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. The Company adopted Statement of
Financial Accounting Standards (SFAS) No. 142 Goodwill and Other Intangible
Assets (SFAS 142) in December 2001 and, in accordance with SFAS 142, there
is no amortization of goodwill and intangible assets that have indefinite
useful lives. However, such assets are tested for impairment annually using the
two-step process specifically provided in SFAS 142. Other intangible assets are
carried at cost. Technology is amortized over its estimated useful life of
between 3 to 7 years, customer relationships are amortized over their estimated
useful lives of 8 to 20 years, and proprietary software is amortized over its
estimated useful life of 7 years. Trade name has been deemed to have an
indefinite life and is not subject to amortization expense, but
instead is subject to annual impairment tests in accordance with the provisions of SFAS
142. In determining that the trade name has an indefinite life, the Company
considered the following factors: the ongoing active use of its trade name,
which is directly associated with a leading position in turret solutions, the
lack of any legal, regulatory or contractual provisions that may limit the
useful life of the trade name, the lack of any substantial costs to maintain
the asset, the positive impact on its trade name generated by its other ongoing
business activities (including marketing and development of new technology and
new products) and its commitment to products branded with its trade name over
its 30 year history. The Companys acquired trade name has significant market
recognition and the Company expects to derive benefits from the use of such
asset beyond the foreseeable future.

The Company completed the required annual impairment test as of July 1,
2003 (the first day of the fourth quarter of the 2003 fiscal year), and
concluded that there was no impairment to its recorded goodwill or trade name.
There have been no indicators of impairment during the three months ended
December 31, 2003 that would require the Company to perform an

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

impairment test for this period. The Company believes the recorded values
of goodwill and trade name in the amounts of $84.9 million and $19.3 million,
respectively, at December 31, 2003 are fully recoverable.

Special Cash Dividend

On December 31, 2003, the Company declared a special cash dividend of
approximately $18.0 million, or $1.22 per share, to stockholders of record on
December 31, 2003, of which approximately $17.9 million was paid on December
31, 2003. The remaining $0.1 million was paid in January 2004.

Stock  Based Compensation

As permitted by Financial Accounting Standards Board (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 fixed on 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 for the three months ended December 31, 2002 and 2003:
weighted-average risk-free interest rate of 3.5% and 2.1%, respectively;
weighted-average volatility factor of the expected market price of the
Companys common stock of 74.2% and 90%, respectively; dividend yield of 14.2%
for the three months ended December 31, 2003 only and a weighted-average expected life of the options of 5 and 4
years, respectively.

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 three
months ended December 31, 2003 was $2.44. The Companys pro forma net loss for
all periods presented is 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 pro forma amounts indicated in the
table below:

|                                                                                                                                           |  |                    |      |      |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------ | ---- | ---- |  | - | ------ | -
|                                                                                                                                           |  | Three Months Ended
|                                                                                                                                           |  | December 31,      
|                                                                                                                                           |  |                   
|(dollars in thousands)                                                                                                                     |  | 2002               |      | 2003
|                                                                                                                                           |  |                    |      |     
|Reported net loss                                                                                                                          |  | $                  | (202 | )    |  | $ | (1,764 | )
|Add back total stock-based
employee compensation determined
under APB 25 intrinsic value
method, net of tax                                |  |                    |     |      |  |   |       |  
|Deduct total stock-based employee
compensation expense determined
under SFAS 123 fair value based
method for all awards, net of tax
effect |  |                    | (186 | )    |  |   | (369   | )
|                                                                                                                                           |  |                    |      |      |  |   |        |  
|Net loss, pro forma                                                                                                                        |  | $                  | (388 | )    |  | $ | (2,133 | )
|                                                                                                                                           |  |                    |      |      |  |   |        |  

The special cash dividend that was declared by the Company on December 31,
2003 reduced the market value per share of the Companys common stock. As a
result, in order to provide equitable treatment to holders of stock options to
purchase the Companys common stock, the Company repriced the exercise price of
all of its outstanding stock options from $10.00 per share
to $8.78 per share on December 31, 2003. This does not require variable
accounting treatment for such options (recording future compensation expense
based upon changes in the fair value of the options). The reduction in the
exercise price of $1.22 per share

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

is equivalent to the per share amount of the special cash dividend to
stockholders at that date and to the reduction in market value per share of the
Companys common stock.

Effects of Recently Issued Accounting Standards

In November 2002, the Emerging Issues Task Force 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 periods 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 adoption of this standard did not
have a material impact on the Companys consolidated financial
statements.

In November 2002, the 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 in its condensed
consolidated financial statements. 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 and has reflected the fair value of guarantees on behalf of
Global Crossing in the consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities (FIN 46), which requires variable interest
entities (commonly referred to as SPEs) to be consolidated by the primary
beneficiary of the entity if certain criteria are met. The required adoption
date of FIN 46 was deferred during 2003, and an amended interpretation was
issued in December 2003. The amended provisions of FIN 46 are effective for the
Company during the first calendar quarter of 2004. The Company has determined
that its investment in Purple Voice Holdings Limited (Purple Voice) meets the
criteria of a variable interest entity, however, pursuant to the deferrals of
the required adoption date of FIN 46 during 2003, the Company was not required
to apply FIN 46 in its fiscal year 2003 or first quarter of fiscal year 2004
financial statements. Notwithstanding the deferral of FIN 46, the Company has
consolidated Purple Voice in accordance with the requirements of Accounting
Research Bulletin No. 51 Consolidated Financial Statements because the
Company has voting control over Purple Voice. Accordingly, because Purple Voice
has been consolidated for financial reporting purposes, when the Company adopts
FIN 46 in the second quarter of its 2004 fiscal year, there will be
no further
impact upon the consolidated financial statements.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities (SFAS 149). SFAS 149 amends
and clarifies financial reporting for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities
under SFAS 133. SFAS 149 clarifies under what circumstances a contract with an
initial net investment meets the characteristic of a derivative, clarifies when
a derivative contains a financing component, amends the definition of an
underlying to conform it to language used in FIN 45, and amends certain other
existing pronouncements. SFAS 149 is effective for contracts entered into or
modified after June 30, 2003, and should be applied prospectively, with the
exception of certain SFAS 133 implementation issues that were effective for all
fiscal quarters prior to June 15, 2003. Any such implementation issues should
continue to be applied in accordance with their respective effective dates. The
adoption of SFAS 149 did not have a material impact on the Companys
consolidated financial statements.

Comprehensive Income

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 income.

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

|                                   |  |                    |       |      |  |   |        |  
|---------------------------------- |  | ------------------ | ----- | ---- |  | - | ------ | -
|                                   |  | Three Months Ended
|                                   |  | December 31,      
|                                   |  |                   
|(dollars in thousands)             |  | 2002               |       | 2003
|                                   |  |                    |       |     
|Reported net loss                  |  | $                  | (202  | )    |  | $ | (1,764 | )
|Translation adjustment, net of tax |  |                    | 1,110 |      |  |   | 3,114  |  
|                                   |  |                    |       |      |  |   |        |  
|Total comprehensive income         |  | $                  | 908   |      |  | $ | 1,350  |  
|                                   |  |                    |       |      |  |   |        |  

2. Acquisitions

IPC Information Systems Acquisition

The Company was formed in November 2001 by a group led by GS Capital
Partners 2000, L.P. (GSCP 2000), and other private equity funds affiliated
with Goldman, Sachs & Co., to acquire IPC Information Systems, Inc. and Asia
Global Crossing IPC Trading Systems Australia Pty. Ltd (collectively, IPC
Information Systems). The Company did not have any assets or operations prior
to the IPC Information Systems Acquisition. On December 20, 2001, the Company
purchased IPC Information Systems from Global Crossing and Asia Global
Crossing, Ltd. and various of their affiliates. The Company and various of its
subsidiaries also entered into a network services, channel sales and transition
services agreement with Global Crossing and various other parties that
obligated the Company to market or resell Global Crossings channel network
services to its customers and restricted its ability to supply
telecommunications services to any third party or to own a network capable of
providing these services to any third party. 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 a leader in turret
solutions, based on its base of approximately 110,000 turrets and related
equipment installed in trading positions worldwide.

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
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 Global Crossing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.

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 $1.0 million, assuming an exchange rate of
£1 to $1.7785. 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 December 31, 2003, Global Crossings
affiliate has made all of its required sublease payments.

Under the terms of the settlement and rejection agreement, the Company
deposited $5.2 million in an 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.

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.

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

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

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 and, as of December 31, 2003, the
Company has made settlement payments aggregating $0.8 million. The Company
estimates that the range of its exposure for additional tax liabilities is from
$0.0 to $36.0 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 make assurances that 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 an amendment to the network services, channel sales and transition
services agreement. Under the amendment, the Company no longer has any
obligation to market or resell Global Crossings channel network services to
its customers. Additionally, pursuant to the amendment, the Company is
permitted to use any other provider of network services for its own internal
purposes so long as the Companys aggregate annual payments to Global Crossing
and its subsidiaries are at least $48,000.

Gains Acquisition

On April 30, 2003, the Company exercised its option to purchase Gains
International (US) Inc. and Gains International (Europe) Limited (collectively
Gains) from GSCP 2000 and other private equity funds affiliated with Goldman,
Sachs & Co., who own substantially all of the Companys common stock, for
664,380 shares of common stock valued at approximately $5.7 million plus the
assumption of deferred consideration of $3.1 million and an October 2003
payment of earn-out consideration of approximately $3.6 million. With the
acquisition of Gains, the Company now offers voice and data services primarily
to the financial services community under the name Network Services. This
transaction followed the 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 GSCP 2000 and other
private equity funds affiliated with Goldman, Sachs & Co. As discussed further
in Note 11, the Company purchased Gains International Asia Holdings Limited on
January 6, 2004.

The following table summarizes the fair value of the assets acquired and
the liabilities assumed at the date of the acquisition. The purchase price on
the date of the acquisition exceeded the fair market value of the net assets
acquired by approximately $11.3 million and was recorded as goodwill on the
consolidated balance sheet. The primary factor that contributed to a purchase
price that resulted in the recognition of goodwill is the potential ability of
the Network Services division to generate income from operations and cash flows
from operating activities in the future. The goodwill and intangible assets are
not amortizable for income tax purposes.

|                                               |                           |   |        |        | 
|---------------------------------------------- | ------------------------- | - | ------ | ------ | 
|Condensed Balance Sheet (dollars in thousands) |                           |   |        |       
|Current assets                                 |                           | $ | 6,115  |       
|Property, plant and equipment, net             |                           |   | 2,645  |       
|Goodwill                                       |                           |   | 11,324 |       
|Intangible assets                              |                           |   | 1,664  |       
|Other long-term assets                         |                           |   | 12     |       
|                                               |                           |   |        |       
|                                               | Total assets acquired     |   |        | 21,760 | 
|                                               |                           |   |        |       
|Current liabilities                            |                           |   | 9,345  |       
|Deferred purchase consideration                |                           |   | 3,128  |       
|Earn-out consideration                         |                           |   | 3,594  |       
|                                               |                           |   |        |       
|                                               | Total liabilities assumed |   |        | 16,067 | 
|                                               |                           |   |        |       
|                                               | Net assets acquired       |   | $      | 5,693  | 
|                                               |                           |   |        |       

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

The acquisition of Gains was accounted for using the purchase method of
accounting in accordance with FASB Statement No. 141, Business Combinations
(SFAS 141) and accordingly, the Companys consolidated results of operations
for the three months ended December 31, 2003 include the operating results of
Gains from the date of purchase. The following table 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:

|                                                           |                                           |                                      |  |   |       |   |        |        |  | 
|---------------------------------------------------------- | ----------------------------------------- | ------------------------------------ |  | - | ----- | - | ------ | ------ |  | 
|(dollars in thousands)                                     |                                           |                                      |  |   |       |   |        |       
|Common stock issued at closing                             |                                           |                                      |  |   |       | $ | 5,693  |       
|Deferred purchase price payment                            |                                           |                                      |  |   |       |   | 3,128  |       
|Earn-out consideration                                     |                                           |                                      |  |   |       |   | 3,594  |       
|Transaction costs                                          |                                           |                                      |  |   |       |   | 1,703  |       
|                                                           |                                           |                                      |  |   |       |   |        |       
|Total consideration                                        |                                           |                                      |  |   |       |   | 14,118 |       
|Historical cost of net tangible assets acquired            |                                           |                                      |  |   |       |   | (1,130 | )     
|                                                           |                                           |                                      |  |   |       |   |        |       
|Excess of purchase price over net tangible assets acquired |                                           |                                      |  |   |       | $ | 12,988 |       
|                                                           |                                           |                                      |  |   |       |   |        |       
|Allocation of excess purchase price:                       |                                           |                                      |  |   |       |   |        |       
|                                                           | Residual goodwill (indefinite life)       |                                      |  |   |       |   | $      | 11,324 | 
|                                                           | Identified intangibles:                   |                                      |  |   |       |   |        |        | 
|                                                           |                                           | Customer relationships (8 year life) |  | $ | 1,200 |   |        |        |  | 
|                                                           |                                           | Proprietary software (7 year life)   |  |   | 464   |   |        |        |  | 
|                                                           |                                           |                                      |  |   |       |   |        |       
|                                                           | Total identified intangibles              |                                      |  |   |       |   |        | 1,664  | 
|                                                           |                                           |                                      |  |   |       |   |        |       
|                                                           | Total allocation of excess purchase price |                                      |  |   |       |   | $      | 12,988 | 
|                                                           |                                           |                                      |  |   |       |   |        |       

Set forth below is the unaudited pro forma consolidated results of
operations of the Company for the three months ended December 31, 2002,
assuming the Gains acquisition occurred as of the beginning of the period.

The unaudited pro forma condensed financial information is presented for
informational purposes only and does not purport to represent the results of
operations of the Company for the periods described above had the Gains
acquisition occurred as of the beginning of the period, or to project the
results for any future period.

|                       |  |              |        |  
|---------------------- |  | ------------ | ------ | -
|                       |  | Three Months
|                       |  | Ended       
|                       |  | December 31,
|(dollars in thousands) |  | 2002        
|                       |  |             
|Revenue                |  | $            | 53,453 |  
|Net loss               |  | $            | (1,211 | )

Investment in Purple Voice

IPC UK Holdings Limited (IPC UK), a subsidiary of the Company, entered
into a series of transactions with Purple Voice, a business-to-business
Internet Protocol (IP) software company that provides Voice over IP (VoIP)
solutions to the financial community. VoIP is the method by which voice
communication is delivered from one computer to another over a network. As a
result of these transactions, which closed on August 1, 2003:



| |  |  | IPC UK acquired approximately 40% of the currently outstanding common
shares (calculated on a non-diluted basis) of Purple Voice together with
a warrant for additional shares from certain minority shareholders of
Purple Voice for approximately $120,000;                                      
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | IPC UK invested $1.0 million in a 7% secured convertible note, due
September 2007, issued by Purple Voice, which is convertible into 49% of
Purple Voices share capital on a fully diluted basis;                                                                                                 
|
| |  |  | The remaining shareholders of Purple Voice granted a call option to
IPC UK, which permits IPC UK to acquire the remaining issued share
capital of Purple Voice for an aggregate amount of $0.8 million, plus an
earn-out of up to $9.0 million, dependent on certain revenue targets
being met; and
|
| |  |  | IPC Information Systems, Inc. and Purple Voice entered into an
agreement under which IPC Information Systems, Inc. has been appointed
Purple Voices exclusive reseller worldwide.                                                                                                                 

On a pro forma basis, this acquisition did not have a material impact on
the Companys results of operations for the three months ended December 31,
2002 or the three months ended December 31, 2003.

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

3. Inventories

|                                                  |  |               |        |              |  |   |        | 
|------------------------------------------------- |  | ------------- | ------ | ------------ |  | - | ------ | 
|                                                  |  | September 30, |        | December 31,
|(dollars in thousands)                            |  | 2003          |        | 2003        
|                                                  |  |               |        |             
|Components and manufacturing work in process      |  | $             | 5,980  |              |  | $ | 6,709  | 
|Inventory on customer sites awaiting installation |  |               | 17,874 |              |  |   | 18,333 | 
|Parts and maintenance supplies                    |  |               | 6,542  |              |  |   | 6,521  | 
|                                                  |  |               |        |              |  |   |        | 
|                                                  |  | $             | 30,396 |              |  | $ | 31,563 | 
|                                                  |  |               |        |              |  |   |        | 

4. Goodwill and Intangible Assets

The Company adopted SFAS 142 in December 2001. 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.

The following table reflects the changes in goodwill for the three months
ended December 31, 2003:

|                              |                                             |      |              |       | 
|----------------------------- | ------------------------------------------- | ---- | ------------ | ----- | 
|                              |                                             |      | December 31,
|(dollars in thousands)        |                                             | 2003
|                              |                                             |     
|Balance at September 30, 2003 |                                             | $    | 83,079       |      
|                              | Additions                                   |      |              |      | 
|                              | Write-offs                                  |      |              |      | 
|                              | Effects of currency translation adjustments |      |              | 1,848 | 
|                              |                                             |      |              |      
|Balance at December 31, 2003  |                                             | $    | 84,927       |      
|                              |                                             |      |              |      

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

|                       |                                  |                                                 |                     |      |               |         |              |   |         |         | 
|---------------------- | -------------------------------- | ----------------------------------------------- | ------------------- | ---- | ------------- | ------- | ------------ | - | ------- | ------- | 
|                       |                                  |                                                 |                     |      | September 30, |         | December 31,
|(dollars in thousands) |                                  | 2003                                            |                     | 2003
|                       |                                  |                                                 |                     |     
|Intangible assets:     |                                  |                                                 |                     |      |               |         |              |  
|                       | Amortized intangible assets:     |                                                 |                     |      |               |         |              |   |        
|                       |                                  | Technology                                      |                     | $    | 46,346        |         |              | $ | 46,346  |        
|                       |                                  | Customer relationships                          |                     |      | 155,230       |         |              |   | 155,230 |        
|                       |                                  | Effect of currency translation adjustments      |                     |      | 6,081         |         |              |   | 8,665   |        
|                       |                                  | Accumulated amortization-technology             |                     |      | (11,517       | )       |              |   | (13,237 | )      
|                       |                                  | Accumulated amortization-customer relationships |                     |      | (14,055       | )       |              |   | (16,100 | )      
|                       |                                  |                                                 |                     |      |               |         |              |  
|                       |                                  |                                                 | Net carrying amount |      |               | 182,085 |              |   |         | 180,904 | 
|                       | Non-amortized intangible assets: |                                                 |                     |      |               |         |              |   |        
|                       |                                  | Trade name                                      |                     |      | 18,000        |         |              |   | 18,000  |        
|                       |                                  |                                                 |                     |      |               |         |              |  
|                       |                                  |                                                 | Net carrying amount |      | $             | 200,085 |              |   | $       | 198,904 | 
|                       |                                  |                                                 |                     |      |               |         |              |  

Amortization expense for those intangible assets required to be amortized
under SFAS 142 was $3.6 million and $3.8 million for the three months ended
December 31, 2002 and 2003, respectively.

Estimated annual amortization expense for fiscal year 2004 and each of the
four succeeding fiscal years for identifiable intangible assets required to be
amortized under SFAS 142 are as follows:

|                        |      |  |   |        | 
|----------------------- | ---- |  | - | ------ | 
|(dollars in thousands): |      |  |   |       
|                        | 2004 |  | $ | 14,981 | 
|                        | 2005 |  |   | 14,981 | 
|                        | 2006 |  |   | 14,981 | 
|                        | 2007 |  |   | 14,533 | 
|                        | 2008 |  |   | 14,533 | 

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

5. Accrued Expenses and Other Current Liabilities

|                                         |  |               |        |              |  |   |        | 
|---------------------------------------- |  | ------------- | ------ | ------------ |  | - | ------ | 
|                                         |  | September 30, |        | December 31,
|(dollars in thousands)                   |  | 2003          |        | 2003        
|                                         |  |               |        |             
|Accrued compensation and benefits        |  | $             | 7,433  |              |  | $ | 6,942  | 
|Warranty reserves                        |  |               | 1,889  |              |  |   | 1,785  | 
|Sales taxes payable                      |  |               | 891    |              |  |   | 1,162  | 
|Job accruals                             |  |               | 2,536  |              |  |   | 2,522  | 
|Accrued transaction costs                |  |               | 2,124  |              |  |   | 2,221  | 
|Accrued carrier costs                    |  |               | 3,650  |              |  |   | 3,956  | 
|Current portion of deferred compensation |  |               | 692    |              |  |   | 692    | 
|Accrued interest                         |  |               | 5,299  |              |  |   | 767    | 
|Other accruals                           |  |               | 4,027  |              |  |   | 4,555  | 
|                                         |  |               |        |              |  |   |        | 
|                                         |  | $             | 28,541 |              |  | $ | 24,602 | 
|                                         |  |               |        |              |  |   |        | 

6. Long Term Debt

Senior Secured Credit Facilities

On December 20, 2001, the Company entered into the senior secured credit
facilities comprised of a $105.0 million term loan and a $15.0 million
revolving credit facility. On September 2, 2003, the Company amended and
restated its senior secured credit facilities. The amended and restated senior
secured credit facilities consist of a $25.0 million revolving credit facility
and a $55.0 million term loan; provided, however, that the Company can increase
the committed amount under these facilities by up to $25.0 million so long as
one or more lenders agrees to provide this incremental commitment and other
customary conditions are satisfied. The term loan was borrowed in full at
closing, but through December 31, 2003, the Company had not borrowed against
the revolving credit facility. As of December 31, 2003, the amount available
under the revolving credit facility was reduced by outstanding letters of
credit of $4.3 million. In January 2004, the Company borrowed $7.0 million from
the revolving credit facility and used the proceeds to fund a portion of the
purchase of Gains International Asia Holdings Limited (see Note 11). At
December 31, 2003, the interest rate for borrowings outstanding under the
amended and restated senior secured credit facilities was 5.12%.

Mandatory prepayments of the amended and restated senior secured credit
facilities are required upon the occurrence of certain events, including
certain asset sales, equity issuances and debt issuances, as well as from 50%
of the Companys excess cash flow in the 2004 fiscal year and thereafter. Excess cash
flow is defined in the Companys amended and restated credit agreement 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 an amendment of the then existing credit agreement, certain
restructuring expenses and prepayment premiums in connection with prepayment of
loans under the then existing credit agreement, plus (2) a working capital
adjustment less (3) scheduled repayments of debt, capital expenditures, cash
interest expense and provisions for taxes based on income.

As required under the terms of the Companys senior secured credit
facilities, the Company made mandatory excess cash flow repayments of $30.0
million and $0.8 million on September 30, 2002 and December 29, 2002,
respectively, based upon 75% of its excess cash flow for the period ended
September 30, 2002. On March 3, 2003, the Company also voluntarily prepaid
$14.0 million in debt on its then existing senior secured credit facilities.
For the year ended September 30, 2003, the Company was not required to make a
mandatory excess cash flow repayment under the terms of the amended and
restated senior secured credit facilities.

Obligations under the amended and restated senior secured credit
facilities are secured by a first priority security interest in substantially
all of the Companys assets and the assets of its domestic subsidiaries and by
a pledge of 100% of the shares of its domestic subsidiaries and 65% of the
shares of direct foreign subsidiaries. The Companys domestic subsidiaries have
unconditionally guaranteed its obligations under the amended and restated
senior secured credit facilities.

The amended and restated senior secured credit facilities contain
customary affirmative covenants as well as negative covenants that, among other
things, restrict the Companys and its subsidiaries ability to: incur
additional indebtedness (including guarantees of certain obligations); create
liens; 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; enter
into transactions with affiliates; make payments with respect to or modify
subordinated

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

debt instruments; enter into sale and leaseback transactions; change the
fiscal year or lines of business; and enter into agreements with negative
pledge clauses or clauses restricting subsidiary distributions.

The amended and restated senior secured credit facilities also contain
minimum interest coverage and fixed charge coverage ratios and maximum senior
secured and total leverage ratios as well as a restriction on the amount of
capital expenditures the Company can incur in a fiscal year.

As of December 31, 2003, annual principal repayments required under the
$55.0 million term loan, (excluding any future excess free cash flow amounts),
by fiscal year, are as follows (in thousands):

|     |  |  |   |       
|---- |  |  | - | ------
|2004 |  |  | $ | 413   
|2005 |  |  |   | 550   
|2006 |  |  |   | 550   
|2007 |  |  |   | 550   
|2008 |  |  |   | 52,800
|     |  |  |   |       
|     |  |  | $ | 54,863
|     |  |  |   |       

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 acquisition of IPC Information Systems. 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 million. The senior subordinated notes
mature on December 15, 2009. The senior subordinated notes are general
unsecured obligations of the Company, are subordinated in right of payment to
all existing and future senior debt, including the senior secured credit
facilities, are pari passu in right of payment with any future senior
subordinated indebtedness of the Company, and are unconditionally guaranteed by
certain of the Companys domestic restricted subsidiaries.

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, on June 21,
2002 the Company completed an exchange offer registered under the Securities
Act of 1933, as amended, in which 100% of the 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 or make distributions
in respect of capital stock or to 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. 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 periods presented are as
follows:

|                               |                          |      |                    |      |   |   |       |      |  
|------------------------------ | ------------------------ | ---- | ------------------ | ---- | - | - | ----- | ---- | -
|                               |                          |      | Three Months Ended
|                               |                          |      | December 31,      
|                               |                          |      |                   
|(dollars in thousands)         |                          | 2002 |                    | 2003
|                               |                          |      |                    |     
|Balance at beginning of period |                          | $    | 2,159              |      |   | $ | 1,889 |     
|                               | Warranty accrual         |      |                    | 288  |   |   |       | 321  |  
|                               | Material and labor usage |      |                    | (600 | ) |   |       | (425 | )
|                               |                          |      |                    |      |   |   |       |     
|Balance at end of period       |                          | $    | 1,847              |      |   | $ | 1,785 |     
|                               |                          |      |                    |      |   |   |       |     

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

Guarantees

The Company, through its subsidiaries, guaranteed certain equipment lease,
real estate and other obligations of its former affiliate, Global Crossing. 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 (as
discussed in Note 2), $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 carrying value of
these guaranties as of December 31, 2003 is $2.2 million, and such amount has
been recorded on the Companys consolidated balance sheet in accordance with
FIN 45. Such amount has been reduced by the $2.0 million escrow account. The
maximum potential future payments the Company could be required to make under
these obligations is $4.1 million. Through December 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 $75.0 million.

On September 8, 2003, an action was brought against several defendants,
including IPC Information Systems, Inc. and its President, in the United States
District Court for the Eastern District of New York by Advance Relocation &
Storage Co., Inc., a moving company. The complaint alleges that IPC Information
Systems, Inc. and 23 other defendants violated the Racketeer Influenced and
Corrupt Organizations Act and engaged in tortious interference with prospective
business advantage by preventing the plaintiff from obtaining work as a mover
in jobs performed in large commercial buildings in New York City. The Company
believes the suit is without merit and intends to vigorously defend against all
claims alleged against it in the complaint. Plaintiffs are seeking injunctive
relief and damages from the defendants, jointly and severally, in an aggregate
amount of approximately $7.0 million.

8. Income Taxes

The Companys effective tax rates for the three months ended December 31,
2002 and 2003 were 121.9% and (17.1%), respectively. The Companys effective
tax rates reflect the Companys foreign, federal and state taxes, the
non-deductibility of foreign losses for federal tax purposes, the
non-deductibility of certain expenses and taxable income at several of the
Companys foreign subsidiaries, which, as compared to the absolute amount of
pre-tax earnings (or loss), has
a significant impact on the Companys effective tax rates.

As of September 30, 2003 and December 31, 2003, the Company has recognized
deferred tax assets related to its US federal and state net operating loss
carryforwards of approximately $9.6 million and $10.9 million, respectively. 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, the Company
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 of the IPC Information Systems Acquisition (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

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

of operations for subsequent fiscal 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 the business), rather than a continuing
condition. As of December 31, 2003, no circumstances have arisen that would
require the Company to change such conclusion.

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 and, as of
December 31, 2003, the Company has made settlement payments aggregating $0.8
million. The Company estimates that the range of its exposure for additional
tax liabilities is from $0.0 to $36.0 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 that it will be able to
obtain additional financing on commercially reasonable terms, or at all.

9. Business Segment Information

The Companys operations include the Trading Systems, Information
Transport Systems, or I.T.S., and the Network Services 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 MACs 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. Revenue from the Network Services division, which provides voice and
data services to the financial community, is billed in advance and recorded
ratably (on a monthly basis) over the contractual period, which generally
ranges from three months to one year, as Service. The Companys primary
measures to evaluate performance are direct margin (revenue less cost of goods
sold, excluding indirect costs and depreciation and amortization) and income
from operations.

|                                             |                                 |                        |         |         |        |              |        |       |       |   |         |        |        | 
|-------------------------------------------- | ------------------------------- | ---------------------- | ------- | ------- | ------ | ------------ | ------ | ----- | ----- | - | ------- | ------ | ------ | 
|                                             |                                 |                        |         | Trading |        |              |        |       |       |   |         |       
|For the Three Months Ended December 31, 2002 |                                 | Systems                |         | I.T.S.  |        | Consolidated
|                                             |                                 |                        |         |         |        |             
|                                             |                                 | (dollars in thousands)
|Revenue:                                     |                                 |                        |         |         |        |              |        |       |       |   |         |       
|                                             | Product sales and installations |                        | $       | 21,009  |        |              | $      | 2,742 |       |   | $       | 23,751 |       
|                                             | Service                         |                        |         | 21,516  |        |              |        | 3,116 |       |   |         | 24,632 |       
|                                             |                                 |                        |         |         |        |              |        |       |       |   |         |       
|                                             |                                 | Total revenue          |         |         | 42,525 |              |        |       | 5,858 |   |         |        | 48,383 | 
|Direct margin                                |                                 |                        | 27,189  |         |        |              | 1,212  |       |       |   | 28,401  |       
|Depreciation and amortization                |                                 |                        | 4,968   |         |        |              | 60     |       |       |   | 5,028   |       
|Income (loss) from operations                |                                 |                        | 6,901   |         |        |              | (300   | )     |       |   | 6,601   |       
|Interest expense, net                        |                                 |                        | (6,205  | )       |        |              |       |       |       |   | (6,205  | )     
|Other income, net                            |                                 |                        | 525     |         |        |              |       |       |       |   | 525     |       
|Income (loss) before income taxes            |                                 |                        | 1,221   |         |        |              | (300   | )     |       |   | 921     |       
|Income tax provision                         |                                 |                        | 1,123   |         |        |              |       |       |       |   | 1,123   |       
|Goodwill                                     |                                 | $                      | 72,350  |         |        | $            | 971    |       |       | $ | 73,321  |       
|Total assets                                 |                                 | $                      | 419,507 |         |        | $            | 16,338 |       |       | $ | 435,845 |       
|Capital expenditures                         |                                 | $                      | 986     |         |        | $            | 8      |       |       | $ | 994     |       

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

|                                             |                                 |               |         |         |        |                        |        |              |       |         |        |       |       |   |         |        |        | 
|-------------------------------------------- | ------------------------------- | ------------- | ------- | ------- | ------ | ---------------------- | ------ | ------------ | ----- | ------- | ------ | ----- | ----- | - | ------- | ------ | ------ | 
|                                             |                                 |               |         | Trading |        |                        |        |              |       | Network |        |       |       |  
|For the Three Months Ended December 31, 2003 |                                 | Systems       |         | I.T.S.  |        | Services               |        | Consolidated
|                                             |                                 |               |         |         |        |                        |        |             
|                                             |                                 |               |         |         |        | (dollars in thousands) |        |              |       |        
|Revenue:                                     |                                 |               |         |         |        |                        |        |              |       |         |        |       |       |   |         |       
|                                             | Product sales and installations |               | $       | 21,458  |        |                        | $      | 6,646        |       |         | $      |      |       |   | $       | 28,104 |       
|                                             | Service                         |               |         | 23,992  |        |                        |        | 827          |       |         |        | 7,244 |       |   |         | 32,063 |       
|                                             |                                 |               |         |         |        |                        |        |              |       |         |        |       |       |   |         |       
|                                             |                                 | Total revenue |         |         | 45,450 |                        |        |              | 7,473 |         |        |       | 7,244 |   |         |        | 60,167 | 
|Direct margin                                |                                 |               | 27,869  |         |        |                        | 1,013  |              |       |         | 3,284  |       |       |   | 32,166  |       
|Depreciation and amortization                |                                 |               | 5,289   |         |        |                        | 60     |              |       |         | 560    |       |       |   | 5,909   |       
|Income (loss) from operations                |                                 |               | 3,814   |         |        |                        | (265   | )            |       |         | 19     |       |       |   | 3,568   |       
|Interest expense, net                        |                                 |               | (5,522  | )       |        |                        |       |              |       |         |       |       |       |   | (5,522  | )     
|Other income (expense), net                  |                                 |               | 538     |         |        |                        |       |              |       |         | (91    | )     |       |   | 447     |       
|Loss before income taxes                     |                                 |               | (1,170  | )       |        |                        | (265   | )            |       |         | (72    | )     |       |   | (1,507  | )     
|Income tax provision                         |                                 |               | 117     |         |        |                        |       |              |       |         | 140    |       |       |   | 257     |       
|Goodwill                                     |                                 | $             | 72,056  |         |        | $                      | 971    |              |       | $       | 11,900 |       |       | $ | 84,927  |       
|Total assets                                 |                                 | $             | 378,144 |         |        | $                      | 21,239 |              |       | $       | 22,309 |       |       | $ | 421,692 |       
|Capital expenditures                         |                                 | $             | 1,089   |         |        | $                      |       |              |       | $       | 652    |       |       | $ | 1,741   |       

10. 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):

|                                         |                                                                  |                           |   |              |         |              |   |              |          |              |   |         |         |  |   |          |          |   |   |         |         | 
|---------------------------------------- | ---------------------------------------------------------------- | ------------------------- | - | ------------ | ------- | ------------ | - | ------------ | -------- | ------------ | - | ------- | ------- |  | - | -------- | -------- | - | - | ------- | ------- | 
|                                         |                                                                  |                           |   |              |         |              |   |              |          |              |   | Non-    |         |  |   |          |          |   |   |        
|Condensed Consolidating Balance Sheet at |                                                                  | IPC                       |   | Guarantor    |         | Guarantor    |   |              |          |              |   |         |         | 
|September 30, 2003                       |                                                                  | Acquisition               |   | Subsidiaries |         | Subsidiaries |   | Eliminations |          | Consolidated
|                                         |                                                                  |                           |   |              |         |              |   |              |          |             
|Assets:                                  |                                                                  |                           |   |              |         |              |   |              |          |              |   |         |         |  |   |          |          |   |   |        
|                                         | Cash                                                             |                           | $ | 9,088        |         |              | $ | 3,135        |          |              | $ | 13,577  |         |  | $ |         |          |   | $ | 25,800  |        
|                                         | Accounts receivable, net                                         |                           |   |             |         |              |   | 47,025       |          |              |   | 13,176  |         |  |   |         |          |   |   | 60,201  |        
|                                         | Inventories, net                                                 |                           |   |             |         |              |   | 28,584       |          |              |   | 4,666   |         |  |   | (2,854   | )        |   |   | 30,396  |        
|                                         | Prepaid and other current assets                                 |                           |   |             |         |              |   | 2,110        |          |              |   | 3,413   |         |  |   |         |          |   |   | 5,523   |        
|                                         | Due from (to) affiliate                                          |                           |   | 213,600      |         |              |   | (190,517     | )        |              |   | (23,083 | )       |  |   |         |          |   |   |        |        
|                                         |                                                                  |                           |   |              |         |              |   |              |          |              |   |         |         |  |   |          |          |   |   |        
|                                         |                                                                  | Total current assets      |   |              | 222,688 |              |   |              | (109,663 | )            |   |         | 11,749  |  |   |          | (2,854   | ) |   |         | 121,920 | 
|                                         | Investment in subsidiaries                                       |                           |   | 129,364      |         |              |   | 10,524       |          |              |   | 1,375   |         |  |   | (141,263 | )        |   |   |        |        
|                                         | Property, plant and equipment, net                               |                           |   |             |         |              |   | 20,433       |          |              |   | 3,986   |         |  |   |         |          |   |   | 24,419  |        
|                                         | Goodwill and intangibles, net                                    |                           |   |             |         |              |   | 195,802      |          |              |   | 87,362  |         |  |   |         |          |   |   | 283,164 |        
|                                         | Deferred financing costs, net                                    |                           |   | 14,146       |         |              |   |             |          |              |   |        |         |  |   |         |          |   |   | 14,146  |        
|                                         | Other assets                                                     |                           |   |             |         |              |   | 855          |          |              |   | 406     |         |  |   |         |          |   |   | 1,261   |        
|                                         |                                                                  |                           |   |              |         |              |   |              |          |              |   |         |         |  |   |          |          |   |   |        
|                                         |                                                                  | Total assets              |   | $            | 366,198 |              |   | $            | 117,951  |              |   | $       | 104,878 |  |   | $        | (144,117 | ) |   | $       | 444,910 | 
|                                         |                                                                  |                           |   |              |         |              |   |              |          |              |   |         |         |  |   |          |          |   |   |        
|Liabilities and stockholders equity:    |                                                                  |                           |   |              |         |              |   |              |          |              |   |         |         |  |   |          |          |   |   |        
|                                         | Current portion of long-term debt                                |                           | $ | 550          |         |              | $ |             |          |              | $ |        |         |  | $ |         |          |   | $ | 550     |        
|                                         | Accounts payable, accrued expenses and
other current liabilities |                           |   | 5,299        |         |              |   | 15,384       |          |              |   | 16,206  |         |  |   |         |          |   |   | 36,889  |        
|                                         | Customer advances and deferred revenue                           |                           |   |             |         |              |   | 26,043       |          |              |   | 6,074   |         |  |   |         |          |   |   | 32,117  |        
|                                         | Deferred purchase price consideration                            |                           |   |             |         |              |   | 6,722        |          |              |   |        |         |  |   |         |          |   |   | 6,722   |        
|                                         |                                                                  |                           |   |              |         |              |   |              |          |              |   |         |         |  |   |          |          |   |   |        
|                                         |                                                                  | Total current liabilities |   |              | 5,849   |              |   |              | 48,149   |              |   |         | 22,280  |  |   |          |         |   |   |         | 76,278  | 
|                                         | Long-term debt                                                   |                           |   | 204,450      |         |              |   |             |          |              |   |        |         |  |   |         |          |   |   | 204,450 |        
|                                         | Other long-term liabilities                                      |                           |   | 8,720        |         |              |   | 4,159        |          |              |   | 5,124   |         |  |   | (1,000   | )        |   |   | 17,003  |        
|                                         |                                                                  |                           |   |              |         |              |   |              |          |              |   |         |         |  |   |          |          |   |   |        
|                                         |                                                                  | Total liabilities         |   |              | 219,019 |              |   |              | 52,308   |              |   |         | 27,404  |  |   |          | (1,000   | ) |   |         | 297,731 | 
|                                         | Total stockholders equity                                       |                           |   | 147,179      |         |              |   | 65,643       |          |              |   | 77,474  |         |  |   | (143,117 | )        |   |   | 147,179 |        
|                                         |                                                                  |                           |   |              |         |              |   |              |          |              |   |         |         |  |   |          |          |   |   |        
|                                         | Total liabilities and stockholders equity                       |                           | $ | 366,198      |         |              | $ | 117,951      |          |              | $ | 104,878 |         |  | $ | (144,117 | )        |   | $ | 444,910 |        
|                                         |                                                                  |                           |   |              |         |              |   |              |          |              |   |         |         |  |   |          |          |   |   |        

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##### Table of Contents



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

|                                               |                                                                  |                           |        |              |         |              |        |              |          |              |        |         |         |   |        |          |          |   |        |         |         | 
|---------------------------------------------- | ---------------------------------------------------------------- | ------------------------- | ------ | ------------ | ------- | ------------ | ------ | ------------ | -------- | ------------ | ------ | ------- | ------- | - | ------ | -------- | -------- | - | ------ | ------- | ------- | 
|                                               |                                                                  |                           |        |              |         |              |        |              |          |              |        | Non-    |         |   |        |          |          |   |        |        
|Condensed Consolidating Balance Sheet at       |                                                                  | IPC                       |        | Guarantor    |         | Guarantor    |        |              |          |              |        |         |         |  
|December 31, 2003                              |                                                                  | Acquisition               |        | Subsidiaries |         | Subsidiaries |        | Eliminations |          | Consolidated
|                                               |                                                                  |                           |        |              |         |              |        |              |          |             
|Assets:                                        |                                                                  |                           |        |              |         |              |        |              |          |              |        |         |         |   |        |          |          |   |        |        
|                                               | Cash                                                             |                           | $      | 4,126        |         |              | $      | 3,206        |          |              | $      | 5,956   |         |   | $      |         |          |   | $      | 13,288  |        
|                                               | Accounts receivable, net                                         |                           |        |             |         |              |        | 30,392       |          |              |        | 12,568  |         |   |        |         |          |   |        | 42,960  |        
|                                               | Inventories, net                                                 |                           |        |             |         |              |        | 29,380       |          |              |        | 4,756   |         |   |        | (2,573   | )        |   |        | 31,563  |        
|                                               | Prepaid and other current assets                                 |                           |        |             |         |              |        | 1,644        |          |              |        | 3,276   |         |   |        |         |          |   |        | 4,920   |        
|                                               | Due from (to) affiliate                                          |                           |        | 190,327      |         |              |        | (178,107     | )        |              |        | (12,220 | )       |   |        |         |          |   |        |        |        
|                                               |                                                                  |                           |        |              |         |              |        |              |          |              |        |         |         |   |        |          |          |   |        |         |        
|                                               |                                                                  | Total current assets      |        |              | 194,453 |              |        |              | (113,485 | )            |        |         | 14,336  |   |        |          | (2,573   | ) |        |         | 92,731  | 
|                                               | Investment in subsidiaries                                       |                           |        | 136,182      |         |              |        | 10,524       |          |              |        | 1,375   |         |   |        | (148,081 | )        |   |        |        |        
|                                               | Property, plant and equipment, net                               |                           |        |             |         |              |        | 20,315       |          |              |        | 3,936   |         |   |        |         |          |   |        | 24,251  |        
|                                               | Goodwill and intangibles, net                                    |                           |        |             |         |              |        | 192,822      |          |              |        | 91,009  |         |   |        |         |          |   |        | 283,831 |        
|                                               | Deferred financing costs, net                                    |                           |        | 13,682       |         |              |        |             |          |              |        |        |         |   |        |         |          |   |        | 13,682  |        
|                                               | Other assets                                                     |                           |        |             |         |              |        | 6,424        |          |              |        | 773     |         |   |        |         |          |   |        | 7,197   |        
|                                               |                                                                  |                           |        |              |         |              |        |              |          |              |        |         |         |   |        |          |          |   |        |         |        
|                                               |                                                                  | Total assets              |        | $            | 344,317 |              |        | $            | 116,600  |              |        | $       | 111,429 |   |        | $        | (150,654 | ) |        | $       | 421,692 | 
|                                               |                                                                  |                           |        |              |         |              |        |              |          |              |        |         |         |   |        |          |          |   |        |         |        
|Liabilities and stockholders equity:          |                                                                  |                           |        |              |         |              |        |              |          |              |        |         |         |   |        |          |          |   |        |        
|                                               | Current portion of long-term debt                                |                           | $      | 550          |         |              | $      |             |          |              | $      |        |         |   | $      |         |          |   | $      | 550     |        
|                                               | Accounts payable, accrued expenses and
other current liabilities |                           |        | 892          |         |              |        | 16,351       |          |              |        | 16,070  |         |   |        |         |          |   |        | 33,313  |        
|                                               | Customer advances and deferred revenue                           |                           |        |             |         |              |        | 28,790       |          |              |        | 6,513   |         |   |        |         |          |   |        | 35,303  |        
|                                               |                                                                  |                           |        |              |         |              |        |              |          |              |        |         |         |   |        |          |          |   |        |         |        
|                                               |                                                                  | Total current liabilities |        |              | 1,442   |              |        |              | 45,141   |              |        |         | 22,583  |   |        |          |         |   |        |         | 69,166  | 
|                                               | Long-term debt                                                   |                           |        | 204,313      |         |              |        |             |          |              |        |        |         |   |        |         |          |   |        | 204,313 |        
|                                               | Other long-term liabilities                                      |                           |        | 7,928        |         |              |        | 3,793        |          |              |        | 6,858   |         |   |        | (1,000   | )        |   |        | 17,579  |        
|                                               |                                                                  |                           |        |              |         |              |        |              |          |              |        |         |         |   |        |          |          |   |        |         |        
|                                               |                                                                  | Total liabilities         |        |              | 213,683 |              |        |              | 48,934   |              |        |         | 29,441  |   |        |          | (1,000   | ) |        |         | 291,058 | 
|                                               | Total stockholders equity                                       |                           |        | 130,634      |         |              |        | 67,666       |          |              |        | 81,988  |         |   |        | (149,654 | )        |   |        | 130,634 |        
|                                               |                                                                  |                           |        |              |         |              |        |              |          |              |        |         |         |   |        |          |          |   |        |         |        
|                                               | Total liabilities and stockholders equity                       |                           | $      | 344,317      |         |              | $      | 116,600      |          |              | $      | 111,429 |         |   | $      | (150,654 | )        |   | $      | 421,692 |        
|                                               |                                                                  |                           |        |              |         |              |        |              |          |              |        |         |         |   |        |          |          |   |        |         |        
|                                              
|                                               |                                                                  |                           |        |              |         |              |        |              |          |              | Non-   |         |         |   |        |          |          |   |       
|Condensed Consolidated Statement of Operations |                                                                  | IPC                       |        | Guarantor    |         | Guarantor    |        |              |          |              |        |         |         |  
|For the Three Months Ended December 31, 2002   |                                                                  | Acquisition               |        | Subsidiaries |         | Subsidiaries |        | Eliminations |          | Consolidated
|                                               |                                                                  |                           |        |              |         |              |        |              |          |             
|Revenue                                        |                                                                  | $                         |       |              |         | $            | 40,489 |              |          | $            | 11,721 |         |         | $ | (3,827 | )        |          | $ | 48,383 |        
|Cost of goods sold                             |                                                                  |                           |       |              |         |              | 22,213 |              |          |              | 6,703  |         |         |   | (3,330 | )        |          |   | 25,586 |        
|                                               |                                                                  |                           |        |              |         |              |        |              |          |              |        |         |         |   |        |          |          |   |        |        
|                                               | Gross profit                                                     |                           |        |             |         |              |        | 18,276       |          |              |        | 5,018   |         |   |        | (497     | )        |   |        | 22,797  |        
|Other operating expenses                       |                                                                  |                           |       |              |         |              | 12,578 |              |          |              | 3,618  |         |         |   |       |          |          |   | 16,196 |        
|                                               |                                                                  |                           |        |              |         |              |        |              |          |              |        |         |         |   |        |          |          |   |        |        
|Income (loss) from operations                  |                                                                  |                           |       |              |         |              | 5,698  |              |          |              | 1,400  |         |         |   | (497   | )        |          |   | 6,601  |        
|Interest income (expense) and other, net       |                                                                  |                           | (6,300 | )            |         |              | (65    | )            |          |              | 685    |         |         |   |       |          |          |   | (5,680 | )      
|Income tax provision                           |                                                                  |                           |       |              |         |              | 28     |              |          |              | 1,095  |         |         |   |       |          |          |   | 1,123  |        
|                                               |                                                                  |                           |        |              |         |              |        |              |          |              |        |         |         |   |        |          |          |   |        |        
|Net income (loss)                              |                                                                  | $                         | (6,300 | )            |         | $            | 5,605  |              |          | $            | 990    |         |         | $ | (497   | )        |          | $ | (202   | )      
|                                               |                                                                  |                           |        |              |         |              |        |              |          |              |        |         |         |   |        |          |          |   |        |        
|                                              
|                                               |                                                                  |                           |        |              |         |              |        |              |          |              | Non-   |         |         |   |        |          |          |   |       
|Condensed Consolidated Statement of Operations |                                                                  | IPC                       |        | Guarantor    |         | Guarantor    |        |              |          |              |        |         |         |  
|For the Three Months Ended December 31, 2003   |                                                                  | Acquisition               |        | Subsidiaries |         | Subsidiaries |        | Eliminations |          | Consolidated
|                                               |                                                                  |                           |        |              |         |              |        |              |          |             
|Revenue                                        |                                                                  | $                         |       |              |         | $            | 44,843 |              |          | $            | 17,098 |         |         | $ | (1,774 | )        |          | $ | 60,167 |        
|Cost of goods sold                             |                                                                  |                           |       |              |         |              | 27,131 |              |          |              | 9,659  |         |         |   | (2,055 | )        |          |   | 34,735 |        
|                                               |                                                                  |                           |        |              |         |              |        |              |          |              |        |         |         |   |        |          |          |   |        |        
|                                               | Gross profit                                                     |                           |        |             |         |              |        | 17,712       |          |              |        | 7,439   |         |   |        | 281      |          |   |        | 25,432  |        
|Other operating expenses                       |                                                                  |                           |       |              |         |              | 16,287 |              |          |              | 5,577  |         |         |   |       |          |          |   | 21,864 |        
|                                               |                                                                  |                           |        |              |         |              |        |              |          |              |        |         |         |   |        |          |          |   |        |        
|Income from operations                         |                                                                  |                           |       |              |         |              | 1,425  |              |          |              | 1,862  |         |         |   | 281    |          |          |   | 3,568  |        
|Interest income (expense) and other, net       |                                                                  |                           | (5,468 | )            |         |              | 278    |              |          |              | 115    |         |         |   |       |          |          |   | (5,075 | )      
|Income tax provision (benefit)                 |                                                                  |                           |       |              |         |              | (320   | )            |          |              | 577    |         |         |   |       |          |          |   | 257    |        
|                                               |                                                                  |                           |        |              |         |              |        |              |          |              |        |         |         |   |        |          |          |   |        |        
|Net income (loss)                              |                                                                  | $                         | (5,468 | )            |         | $            | 2,023  |              |          | $            | 1,400  |         |         | $ | 281    |          |          | $ | (1,764 | )      
|                                               |                                                                  |                           |        |              |         |              |        |              |          |              |        |         |         |   |        |          |          |   |        |        

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

|                                                    |  |             |         |              |  |              |         |              |  |              |        |   |  |   |   |  |  |   |        |  
|--------------------------------------------------- |  | ----------- | ------- | ------------ |  | ------------ | ------- | ------------ |  | ------------ | ------ | - |  | - | - |  |  | - | ------ | -
|                                                    |  |             |         |              |  |              |         |              |  | Non-         |        |   |  |   |   |  |  |  
|Condensed Consolidated Statement of Cash Flows      |  | IPC         |         | Guarantor    |  | Guarantor    |         |              |  |              |        |   |  |  
|For the Three Months Ended December 31, 2002        |  | Acquisition |         | Subsidiaries |  | Subsidiaries |         | Eliminations |  | Consolidated
|                                                    |  |             |         |              |  |              |         |              |  |             
|Net cash provided by (used in) operating activities |  | $           | (10,366 | )            |  | $            | 18,535  |              |  | $            | 7,891  |   |  | $ |  |  |  | $ | 16,060 |  
|Intercompany borrowings                             |  |             | 18,130  |              |  |              | (12,015 | )            |  |              | (6,115 | ) |  |   |  |  |  |   |       |  
|Capital expenditures                                |  |             |        |              |  |              | (798    | )            |  |              | (196   | ) |  |   |  |  |  |   | (994   | )
|                                                    |  |             |         |              |  |              |         |              |  |              |        |   |  |   |   |  |  |   |        |  
|Net
cash provided by (used in) investing activities |  |             | 18,130  |              |  |              | (12,813 | )            |  |              | (6,311 | ) |  |   |  |  |  |   | (994   | )
|Principal payments on term loan                     |  |             | (1,702  | )            |  |              |        |              |  |              |       |   |  |   |  |  |  |   | (1,702 | )
|Deferred compensation payments                      |  |             |        |              |  |              | (24     | )            |  |              |       |   |  |   |  |  |  |   | (24    | )
|                                                    |  |             |         |              |  |              |         |              |  |              |        |   |  |   |   |  |  |   |        |  
|Net cash used in financing activities               |  |             | (1,702  | )            |  |              | (24     | )            |  |              |       |   |  |   |  |  |  |   | (1,726 | )
|Effect of exchange rate changes on cash             |  |             |        |              |  |              | 125     |              |  |              |       |   |  |   |  |  |  |   | 125    |  
|                                                    |  |             |         |              |  |              |         |              |  |              |        |   |  |   |   |  |  |   |        |  
|Net increase in cash                                |  |             | 6,062   |              |  |              | 5,823   |              |  |              | 1,580  |   |  |   |  |  |  |   | 13,465 |  
|Cash at beginning of period                         |  |             | 6,123   |              |  |              | (1,610  | )            |  |              | 20,781 |   |  |   |  |  |  |   | 25,294 |  
|                                                    |  |             |         |              |  |              |         |              |  |              |        |   |  |   |   |  |  |   |        |  
|Cash at end of period                               |  | $           | 12,185  |              |  | $            | 4,213   |              |  | $            | 22,361 |   |  | $ |  |  |  | $ | 38,759 |  
|                                                    |  |             |         |              |  |              |         |              |  |              |        |   |  |   |   |  |  |   |        |  

|                                                                |  |             |         |              |  |              |         |              |  |              |         |   |  |   |   |  |  |   |         |  
|--------------------------------------------------------------- |  | ----------- | ------- | ------------ |  | ------------ | ------- | ------------ |  | ------------ | ------- | - |  | - | - |  |  | - | ------- | -
|                                                                |  |             |         |              |  |              |         | Non-         |  |              |         |   |  |   |   | 
|Condensed Consolidated Statement of Cash Flows                  |  | IPC         |         | Guarantor    |  | Guarantor    |         |              |  |              |         |   |  |  
|For the Three Months Ended December 31, 2003                    |  | Acquisition |         | Subsidiaries |  | Subsidiaries |         | Eliminations |  | Consolidated
|                                                                |  |             |         |              |  |              |         |              |  |             
|Net cash provided by (used in) operating activities             |  | $           | (10,259 | )            |  | $            | 26,212  |              |  | $            | 3,547   |   |  | $ |  |  |  | $ | 19,500  |  
|Capital expenditures                                            |  |             |        |              |  |              | (1,437  | )            |  |              | (304    | ) |  |   |  |  |  |   | (1,741  | )
|Intercompany borrowings                                         |  |             | 23,273  |              |  |              | (12,393 | )            |  |              | (10,880 | ) |  |   |  |  |  |   |        |  
|Payment of Gains US and UK earn-out and deferred purchase
price |  |             |        |              |  |              | (6,756  | )            |  |              |        |   |  |   |  |  |  |   | (6,756  | )
|Advance payment on acquisition of Gains Asia                    |  |             |        |              |  |              | (5,528  | )            |  |              |        |   |  |   |  |  |  |   | (5,528  | )
|                                                                |  |             |         |              |  |              |         |              |  |              |         |   |  |   |   |  |  |   |         |  
|Net cash provided by (used in) investing activities             |  |             | 23,273  |              |  |              | (26,114 | )            |  |              | (11,184 | ) |  |   |  |  |  |   | (14,025 | )
|Principal payments on term loan                                 |  |             | (137    | )            |  |              |        |              |  |              |        |   |  |   |  |  |  |   | (137    | )
|Deferred compensation payments                                  |  |             |        |              |  |              | (27     | )            |  |              |        |   |  |   |  |  |  |   | (27     | )
|Dividends paid                                                  |  |             | (17,839 | )            |  |              |        |              |  |              |        |   |  |   |  |  |  |   | (17,839 | )
|                                                                |  |             |         |              |  |              |         |              |  |              |         |   |  |   |   |  |  |   |         |  
|Net cash used in financing activities                           |  |             | (17,976 | )            |  |              | (27     | )            |  |              |        |   |  |   |  |  |  |   | (18,003 | )
|Effect of exchange rate changes on cash                         |  |             |        |              |  |              |        |              |  |              | 16      |   |  |   |  |  |  |   | 16      |  
|                                                                |  |             |         |              |  |              |         |              |  |              |         |   |  |   |   |  |  |   |         |  
|Net increase (decrease) in cash                                 |  |             | (4,962  | )            |  |              | 71      |              |  |              | (7,621  | ) |  |   |  |  |  |   | (12,512 | )
|Cash at beginning of period                                     |  |             | 9,088   |              |  |              | 3,135   |              |  |              | 13,577  |   |  |   |  |  |  |   | 25,800  |  
|                                                                |  |             |         |              |  |              |         |              |  |              |         |   |  |   |   |  |  |   |         |  
|Cash at end of period                                           |  | $           | 4,126   |              |  | $            | 3,206   |              |  | $            | 5,956   |   |  | $ |  |  |  | $ | 13,288  |  
|                                                                |  |             |         |              |  |              |         |              |  |              |         |   |  |   |   |  |  |   |         |  

11. Subsequent Events

Gains Asia Acquisition

On January 6, 2004, the Company purchased Gains International Asia
Holdings Limited from GSCP 2000 and other private equity funds affiliated with
Goldman, Sachs & Co. for a total net cash purchase price of approximately $15.5
million. Gains International Asia Holdings Limited is a provider of voice and
data services to the financial services community in Asia. In October 2003, the
Company made an advance payment of approximately $5.5 million in connection
with this acquisition which is included in Other assets in the
condensed consolidated balance sheet at December 31, 2003.

17



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##### Table of Contents






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 filing.

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:



| |  |  | risks associated with substantial indebtedness, leverage and debt service;                                       
| | - |  | -----------------------------------------------------------------------------------------------------------------
|
| |  |  | performance of our business and future operating results;                                                        
|
| |  |  | risks of competition in our existing and future markets;                                                         
|
| |  |  | loss or retirement of any key executives;                                                                        
|
| |  |  | general business and economic conditions;                                                                        
|
| |  |  | market acceptance issues, including the failure of products or services to generate anticipated sales levels; and
|
| |  |  | other risks described in our Registration Statement on Form S-1 (333-103264).                                    

Our actual results and performance may 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
includes 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 a leader
in turret solutions, based on our base of approximately 110,000 turrets and
related equipment 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 well as sell network
voice and data services to customers primarily in the financial community.

Our major operating divisions are Trading Systems, I.T.S., and Network
Services. Trading Systems reports (1) sales of turret systems to distributors
and direct sales and installations of turret systems as Product sales and
installations, and (2) revenue from turret system maintenance, including
annual and multi-year service contracts, and from MACs to existing turret
system installations as Service.

I.T.S. reports (1) revenue from the 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 installations 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. Network Services records the sale of voice and data services as
Service.

Revenue from product sales and installations is recognized upon completion
of the installation or, for contracts that are completed in stages and include
contract specified milestones, upon achieving such contract milestones, and
delivery and customer acceptance of a fully functional system. Revenue from
sales to distributors is recognized upon shipment. Customers are generally
progress-billed prior to the completion of the installations. The revenue
related to these advance payments is deferred until the system installations
are completed or specified milestones are attained. Costs incurred on
uncompleted contracts and stages 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 MACs to
turret systems is recognized upon completion, which generally occurs in the
same month or the month following the order for services. Revenue from our
Network Services division is billed in advance and recorded ratably (on a
monthly basis) over the contractual period, which generally ranges from three
months to one year.

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Cost of revenue for our Trading Systems and I.T.S. divisions includes the
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 our Network Services
division includes the costs to lease local and long distance circuits and
depreciation of the equipment.

Our revenues and operating results 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 or specified
contract milestones, 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 will likely decline during periods of economic downturn that
impact those sectors.

Our Strategy

The key elements of our strategy are to:



| |  | Generate revenue growth through replacement sales, technology
upgrades and trading floor expansions.Regular turnover of our installed
base is driven primarily by customers facility moves, mergers or
consolidations and the development of new trading markets and products.
Additionally, other factors, such as customer business initiatives,
including global trading platform standardization, regulatory
developments, and customer expansion affect turnover, as customers
require more flexible, efficient and technologically advanced turret
systems. By developing new systems, such as our IQMX turret system,
that address these factors in a timely, proactive fashion, we believe we
can increase overall turnover rates, as customers are motivated to
replace older, less-advanced equipment with our latest most-advanced
product offerings.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Expand by developing new products and services and capitalizing on
new trends.We believe there is an opportunity to increase our revenues
by strategically broadening our product portfolio, enhancing our
technology architecture and addressing new developments in the
marketplace. Examples of our efforts include:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



| |  |  | Providing voice, data and video communications.The
introduction of our IQMX product with expansion modules provides the
ability to communicate by exchanging text (such as Chat and Instant
Messaging programs) and video (such as popular desktop video
conferencing systems) as quickly and easily as the communications
systems currently allow traders to do so with voice. By creating a
communications system that utilizes IP to deliver communications, and
by combining this delivery methodology with the expansion modules
that support exchanging text and video in addition to voice, we
eliminate the need for our customers to purchase stand-alone
equipment to deliver these solutions and leverage opportunities to
sell additional solutions to our established customers.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Developing applications.Application integration and
development is driven by the need to create a seamless and efficient
work environment in much the same way that increasingly sophisticated
call centers were developed in the mid-1990s. We have demonstrated
our capability in this market through sales of our Computer
Telephony Integration, or CTI, products which allow telephony devices
to communicate with computers.                                                                                                                                                                                                                                                                                                                                                           
|
| |  |  | Increasing our penetration of disaster recovery and contingency
planning sales.We intend to further penetrate the growing demand for
disaster recovery and business continuity solutions. We believe we
can effectively capitalize on our strong track record and customer
relationships to drive future business in this area from both
existing customers and emerging third-party providers.                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  |  | Penetrating middle office support positions.In June 2002, we
released the ICMX, a VoIP intercom module, and a member of our IQMX
family of turret products. The ICMX extends intercom functionality by
providing hands-free communication between sites, a unified numbering
plan, group calls and all calls and support for hoot and holler
applications, an open broadcast system that allows a trader to
communicate with a large group of traders located around the world.
Compact in size and with features designed specifically for support
functions of a trading floor, we believe the ICMX positions us to
penetrate a large number of trading support positions.                                                                                                                 
|
| |  |  | Increase our product offerings.With the acquisition of Gains
International (US) Inc. and Gains International (Europe) Limited in
April 2003, we created a new business division called Network
Services. Our Network Services division provides network voice and
data services that connect traders across six continents. In
addition, in June 2003, we launched a suite of services under the
name Managed Services. Managed Services are a set of premium,
specialized services that deliver fully managed connectivity to
trading floors worldwide. We believe we can provide                                                                                                                                                                                                           

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| |  |  | these services to customers in combination with sales of our turrets.
With several different service products being offered, we believe we
can be successful in marketing these services to customers of our
turrets. Also, with our investment in Purple Voice in August 2003, we
will provide users such as researchers, analysts, and retail brokers
who are based off the main trading floor with seamless access to audio
broadcasts, intercom calls, group calls and hoot and holler broadcasts
regardless of the users location.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Increase our sales through organic growth and opportunistic
acquisitions.We intend to continue to enhance our competitive position
by (1) converting customers from competitors systems to our own, (2)
further expanding into currently under-penetrated business
opportunities, (3) winning competitive bids for new installation
opportunities, and (4) expanding geographically. We plan to achieve
these objectives through a combination of expanding our direct presence,
continuing our new product development efforts and making strategic
acquisitions and/or alliances.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Continue our track record of customer service excellence.We believe
our high level of customer service differentiates us from our
competition, positions us to capture more revenue from our existing
client base by providing value-added services, and allows us to maintain
our pricing and profitability.                                                                                                                                                                                                                                                                       

Recent Events

On January 6, 2004, we purchased Gains International Asia Holdings Limited
from GSCP 2000 and other private equity funds affiliated with Goldman, Sachs &
Co. for a total net cash purchase price of approximately $15.5 million. Gains
International Asia Holdings Limited is a provider of voice and data services to
the financial services community in Asia. In October 2003, we made an advance
payment of approximately $5.5 million in connection with this
acquisition which is included in Other assets in the condensed
consolidated balance sheet at December 31, 2003.

Comparison of the Three Months Ended December 31, 2003 (Q1 2004) to the Three
Months Ended December 31, 2002 (Q1 2003).

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 division revenue, our
statements of operations for our three major operating divisions for the
periods indicated.

|                                                    |                             |                                 |                               |                                   |    |              |     |         |    |         |     |          |    |              |     |         |     |        |     |          |    |         |     |     |    |    |     |         |    |    |    |    |   |   |   | 
|--------------------------------------------------- | --------------------------- | ------------------------------- | ----------------------------- | --------------------------------- | -- | ------------ | --- | ------- | -- | ------- | --- | -------- | -- | ------------ | --- | ------- | --- | ------ | --- | -------- | -- | ------- | --- | --- | -- | -- | --- | ------- | -- | -- | -- | -- | - | - | - | 
|                                                    |                             |                                 |                               |                                   |    | Q1 2004      |     | Q1 2003
|                                                    |                             |                                 |                               |                                   |    |              |     |        
|                                                    |                             |                                 |                               |                                   |    |              |     |         |    | Trading |     |          |    |              |     | Network |     |        |     |          |    | Trading |     |     |    |    |     | Network
|                                                    |                             |                                 |                               |                                   |    | Consolidated |     | Systems |    | I.T.S.  |     | Services |    | Consolidated |     | Systems |     | I.T.S. |     | Services
|                                                    |                             |                                 |                               |                                   |    |              |     |         |    |         |     |          |    |              |     |         |     |        |     |         
|Revenue:                                            |                             |                                 |                               |                                   |    |              |     |         |    |         |     |          |    |              |     |         |     |        |     |          |    |         |     |     |    |    |     |         |    |    |    |   
|                                                    |                             | Product sales and installations |                               |                                   | 47 | %            |     |         | 47 | %       |     |          | 89 | %            |     |         | 0   | %      |     |          | 49 | %       |     |     | 49 | %  |     |         | 47 | %  |    |    |  |  
|                                                    |                             | Service                         |                               |                                   | 53 | %            |     |         | 53 | %       |     |          | 11 | %            |     |         | 100 | %      |     |          | 51 | %       |     |     | 51 | %  |     |         | 53 | %  |    |    |  |  
|                                                    |                             |                                 |                               |                                   |    |              |     |         |    |         |     |          |    |              |     |         |     |        |     |          |    |         |     |     |    |    |     |         |    |    |    |   
|                                                    |                             |                                 | 100                           | %                                 |    |              | 100 | %       |    |         | 100 | %        |    |              | 100 | %       |     |        | 100 | %        |    |         | 100 | %   |    |    | 100 | %       |    |    |   |   
|                                                    |                             |                                 |                               |                                   |    |              |     |         |    |         |     |          |    |              |     |         |     |        |     |          |    |         |     |     |    |    |     |         |    |    |    |   
|Cost of goods sold (depreciation shown
separately): |                             |                                 |                               |                                   |    |              |     |         |    |         |     |          |    |              |     |         |     |        |     |          |    |         |     |     |    |    |     |         |    |    |    |   
|                                                    |                             | Product sales and installations |                               |                                   | 29 | %            |     |         | 24 | %       |     |          | 82 | %            |     |         | 0   | %      |     |          | 25 | %       |     |     | 22 | %  |     |         | 44 | %  |    |    |  |  
|                                                    |                             | Service                         |                               |                                   | 28 | %            |     |         | 24 | %       |     |          | 16 | %            |     |         | 65  | %      |     |          | 27 | %       |     |     | 24 | %  |     |         | 51 | %  |    |    |  |  
|                                                    |                             | Depreciation and amortization   |                               |                                   | 1  | %            |     |         | 1  | %       |     |          | 0  | %            |     |         | 6   | %      |     |          | 1  | %       |     |     | 1  | %  |     |         | 0  | %  |    |    |  |  
|                                                    |                             |                                 |                               |                                   |    |              |     |         |    |         |     |          |    |              |     |         |     |        |     |          |    |         |     |     |    |    |     |         |    |    |    |   
|                                                    |                             |                                 | 58                            | %                                 |    |              | 49  | %       |    |         | 98  | %        |    |              | 71  | %       |     |        | 53  | %        |    |         | 47  | %   |    |    | 95  | %       |    |    |   |   
|                                                    |                             |                                 |                               |                                   |    |              |     |         |    |         |     |          |    |              |     |         |     |        |     |          |    |         |     |     |    |    |     |         |    |    |    |   
|Gross profit                                        |                             |                                 | 42                            | %                                 |    |              | 51  | %       |    |         | 2   | %        |    |              | 29  | %       |     |        | 47  | %        |    |         | 53  | %   |    |    | 5   | %       |    |    |   |   
|Research and development                            |                             |                                 | 6                             | %                                 |    |              | 8   | %       |    |         | 0   | %        |    |              | 0   | %       |     |        | 6   | %        |    |         | 6   | %   |    |    | 0   | %       |    |    |   |   
|Selling, general and administrative expense         |                             |                                 | 22                            | %                                 |    |              | 24  | %       |    |         | 5   | %        |    |              | 28  | %       |     |        | 18  | %        |    |         | 20  | %   |    |    | 9   | %       |    |    |   |   
|Depreciation and amortization                       |                             |                                 | 8                             | %                                 |    |              | 11  | %       |    |         | 1   | %        |    |              | 1   | %       |     |        | 9   | %        |    |         | 11  | %   |    |    | 1   | %       |    |    |   |   
|                                                    |                             |                                 |                               |                                   |    |              |     |         |    |         |     |          |    |              |     |         |     |        |     |          |    |         |     |     |    |    |     |         |    |    |    |   
|                                                    |                             |                                 | Income (loss) from operations |                                   |    | 6            | %   |         |    | 8       | %   |          |    | (4           | %)  |         |     | 0      | %   |          |    | 14      | %   |     |    | 16 | %   |         |    | (5 | %) |    |   |  |  
|                                                    |                             |                                 |                               |                                   |    |              |     |         |    |         |     |          |    |              |     |         |     |        |     |          |    |         |     |     |    |    |     |         |    |    |    |   
|Other income (expense):                             |                             |                                 |                               |                                   |    |              |     |         |    |         |     |          |    |              |     |         |     |        |     |          |    |         |     |     |    |    |     |         |    |    |    |   
|                                                    | Interest expense, net       |                                 |                               | (9                                | %) |              |     | (12     | %) |         |     | 0        | %  |              |     | 0       | %   |        |     | (13      | %) |         |     | (14 | %) |    |     | 0       | %  |    |    |   |  
|                                                    | Other income (expense), net |                                 |                               | 1                                 | %  |              |     | 1       | %  |         |     | 0        | %  |              |     | (1      | %)  |        |     | 1        | %  |         |     | 1   | %  |    |     | 0       | %  |    |    |   |  
|                                                    |                             |                                 |                               |                                   |    |              |     |         |    |         |     |          |    |              |     |         |     |        |     |          |    |         |     |     |    |    |     |         |    |    |    |    |   |  
|                                                    |                             |                                 |                               | Income (loss) before income taxes |    |              | (2  | %)      |    |         | (3  | %)       |    |              | (4  | %)      |     |        | (1  | %)       |    |         | 2   | %   |    |    | 3   | %       |    |    | (5 | %) |   |   |  | 
|Income tax expense (benefit)                        |                             |                                 | 1                             | %                                 |    |              | 0   | %       |    |         | 0   | %        |    |              | 2   | %       |     |        | 2   | %        |    |         | 3   | %   |    |    | 0   | %       |    |    |   |   
|                                                    |                             |                                 |                               |                                   |    |              |     |         |    |         |     |          |    |              |     |         |     |        |     |          |    |         |     |     |    |    |     |         |    |    |    |   
|Net income (loss)                                   |                             |                                 | (3                            | %)                                |    |              | (3  | %)      |    |         | (4  | %)       |    |              | (3  | %)      |     |        | 0   | %        |    |         | 0   | %   |    |    | (5  | %)      |    |    |   |   
|                                                    |                             |                                 |                               |                                   |    |              |     |         |    |         |     |          |    |              |     |         |     |        |     |          |    |         |     |     |    |    |     |         |    |    |    |    |   |  

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Revenue

The following table sets forth our consolidated revenue and revenue as
reported for our three major operating divisions.

|                                |       |         |              |         |  |          |        |          |  |   |       |        |  |  |    |    |  
|------------------------------- | ----- | ------- | ------------ | ------- |  | -------- | ------ | -------- |  | - | ----- | ------ |  |  | -- | -- | -
|                                |       |         | Consolidated
|                                |       |         |             
|(dollars in thousands)          |       | Q1 2004 |              | Q1 2003 |  | $ Change |        | % Change
|                                |       |         |              |         |  |          |        |         
|Product sales and installations |       | $       | 28,104       |         |  | $        | 23,751 |          |  | $ | 4,353 |        |  |  | 18 | % 
|Service                         |       |         | 32,063       |         |  |          | 24,632 |          |  |   | 7,431 |        |  |  | 30 | % 
|                                |       |         |              |         |  |          |        |          |  |   |       |        |  |  |    |   
|                                | Total |         | $            | 60,167  |  |          | $      | 48,383   |  |   | $     | 11,784 |  |  |    | 24 | %
|                                |       |         |              |         |  |          |        |          |  |   |       |        |  |  |    |   

|                                |       |         |                 |         |  |          |        |          |  |   |       |       |  |  |    |   |  
|------------------------------- | ----- | ------- | --------------- | ------- |  | -------- | ------ | -------- |  | - | ----- | ----- |  |  | -- | - | -
|                                |       |         | Trading Systems
|                                |       |         |                
|(dollars in thousands)          |       | Q1 2004 |                 | Q1 2003 |  | $ Change |        | % Change
|                                |       |         |                 |         |  |          |        |         
|Product sales and installations |       | $       | 21,458          |         |  | $        | 21,009 |          |  | $ | 449   |       |  |  | 2  | %
|Service                         |       |         | 23,992          |         |  |          | 21,516 |          |  |   | 2,476 |       |  |  | 12 | %
|                                |       |         |                 |         |  |          |        |          |  |   |       |       |  |  |    |  
|                                | Total |         | $               | 45,450  |  |          | $      | 42,525   |  |   | $     | 2,925 |  |  |    | 7 | %
|                                |       |         |                 |         |  |          |        |          |  |   |       |       |  |  |    |  

|                                |       |         |        |         |  |          |       |          |  |   |        |       |  |  |     |    |  
|------------------------------- | ----- | ------- | ------ | ------- |  | -------- | ----- | -------- |  | - | ------ | ----- |  |  | --- | -- | -
|                                |       |         | I.T.S.
|                                |       |         |       
|(dollars in thousands)          |       | Q1 2004 |        | Q1 2003 |  | $ Change |       | % Change
|                                |       |         |        |         |  |          |       |         
|Product sales and installations |       | $       | 6,646  |         |  | $        | 2,742 |          |  | $ | 3,904  |       |  |  | 142 | % 
|Service                         |       |         | 827    |         |  |          | 3,116 |          |  |   | (2,289 | )     |  |  | (73 | %)
|                                |       |         |        |         |  |          |       |          |  |   |        |       |  |  |     |   
|                                | Total |         | $      | 7,473   |  |          | $     | 5,858    |  |   | $      | 1,615 |  |  |     | 28 | %
|                                |       |         |        |         |  |          |       |          |  |   |        |       |  |  |     |   

|                                |       |         |                  |         |  |          |   |          |  |   |       |       |  |  |   |   | 
|------------------------------- | ----- | ------- | ---------------- | ------- |  | -------- | - | -------- |  | - | ----- | ----- |  |  | - | - | 
|                                |       |         | Network Services
|                                |       |         |                 
|(dollars in thousands)          |       | Q1 2004 |                  | Q1 2003 |  | $ Change |   | % Change
|                                |       |         |                  |         |  |          |   |         
|Product sales and installations |       | $       |                 |         |  | $        |  |          |  | $ |      |       |  |  |  |  
|Service                         |       |         | 7,244            |         |  |          |  |          |  |   | 7,244 |       |  |  |  |  
|                                |       |         |                  |         |  |          |   |          |  |   |       |       |  |  |   |  
|                                | Total |         | $                | 7,244   |  |          | $ |         |  |   | $     | 7,244 |  |  |   |  | 
|                                |       |         |                  |         |  |          |   |          |  |   |       |       |  |  |   |  

Comparison of Q1 2004 to Q1 2003

Consolidated

We believe 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 into the 2004 fiscal year, there can be no
certainty as to the degree or duration of this trend. We expect our fiscal year
2004 total consolidated revenues to be approximately $300 million; however, the
actual total consolidated revenues could be lower.

Product Sales and Installations.The increase in product sales and
installation revenue of $4.4 million in Q1 2004 from Q1 2003 was primarily due
to changes to an existing contract related to one large (greater than $2.0
million) installation project completed in Q1 2004 for approximately $3.9
million in our I.T.S. division. Additionally, in our Trading Systems division,
a greater number of small (less than $1.0 million) installation projects were
completed in Q1 2004 compared to Q1 2003. This increase in product
sales and installation revenue was partially offset by a smaller volume
of large and medium (between $1.0 million and $2.0 million) projects completed
in Q1 2004 compared to Q1 2003. There were three large and medium installation
projects totaling $5.2 million and small installation
projects totalling $16.3 million in Q1 2004 as compared to three large and medium
installation projects totaling $6.3 million and small installation projects
aggregating $14.7 million which were completed in Q1 2003.

We expect our fiscal year 2004 product sales and installation revenue to
be approximately $160.0 million. However, customer commitments could be delayed
due to budgetary constraints, changes to real estate planning, merger and
acquisitions activity in our customer base, a decrease in our customers
headcount or changes in our customers technology needs. As a result, actual
product sales and installation revenue in the 2004 fiscal year could be lower.

Service.The increase in service revenue of $7.4 million in Q1 2004 from
Q1 2003 was substantially all due to the addition of our Network Services
division, which was created following the acquisition of the Gains US and UK
entities in April 2003. We generated no revenue from our Network Services
division in Q1 2003.

We expect our fiscal year 2004 consolidated service revenue to be
approximately $140.0 million. However, customer commitments could be delayed
due to budgetary constraints, changes to real estate planning, merger and
acquisition activity in our customer base, a decrease in our customers
headcount or technology needs. As a result, the actual service revenue in the
2004 fiscal year could be lower.

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Trading Systems

Product Sales and Installations.The increase in product sales and
installation revenue of $0.4 million in Q1 2004 from Q1 2003 was primarily due
to a greater number of small installation projects completed in Q1 2004
compared to Q1 2003, partially offset by a smaller volume of large and medium
projects completed in Q1 2004 compared to Q1 2003. There were three large and
medium installation projects totaling $5.2 million and the small installation
projects completed in Q1 2004 aggregated $16.3 million, as compared to three
large and medium installation projects totaling $6.3 million and
small installation projects aggregating $14.7 million completed in Q1 2003.

Service.The increase in service revenue of $2.5 million in Q1 2004 from
Q1 2003 was primarily due to a higher volume of contract maintenance revenue
totaling $2.1 million and non-contract MAC revenue totaling $0.4 million in Q1
2004. The increase in contract maintenance revenue in Q1 2004 was primarily due
to the expiration of warranties for installation contracts completed in Q1
2003. The increase in non-contract MAC revenue was primarily due to increased
service revenue generated by new branch locations in Germany, Italy, and Japan
for Q1 2004 compared to Q1 2003.

I.T.S.

Product Sales and Installations.The increase in product sales and
installation revenue of $3.9 million in Q1 2004 from Q1 2003 was primarily due
to changes to an existing contract associated with one large installation
project completed in Q1 2004.

Service.The decrease in service revenue of $2.3 million in Q1 2004 from
Q1 2003 was primarily due to the loss of a large service customer in Q1 2004,
resulting in a $2.0 million decrease in revenue when compared to Q1 2003, as
well as a decrease in service revenue from our customer base.

Network Services

Service.Service revenue for our Network Services division was $7.2
million in Q1 2004. We generated no revenue from our Network Services division
in Q1 2003 as it was created following the acquisition of the Gains US and UK
entities in April 2003.

Cost of Revenue

The following table sets forth our consolidated cost of revenue and our
cost of revenue as reported for our three major operating divisions. Cost of
revenue for our Trading Systems and I.T.S. divisions includes the 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 our Network Services division includes
the costs to lease local and long distance circuits and depreciation of
equipment.

|                                |       |         |              |        |  |         |      |      |   |        |        |        |      |  |    |    |   |  |    |    |  
|------------------------------- | ----- | ------- | ------------ | ------ |  | ------- | ---- | ---- | - | ------ | ------ | ------ | ---- |  | -- | -- | - |  | -- | -- | -
|                                |       |         | Consolidated
|                                |       |         |             
|                                |       |         |              |        |  |         | % of |      |   |        |        |        | % of |  | % 
|(dollars in thousands)          |       | Q1 2004 |              | Rev.   |  | Q1 2003 |      | Rev. |   | Change
|                                |       |         |              |        |  |         |      |      |   |       
|Product sales and installations |       | $       | 17,267       |        |  |         | 61   | %    |   | $      | 12,254 |        |      |  | 52 | %  |   |  | 9  | % 
|Service                         |       |         | 16,726       |        |  |         | 52   | %    |   |        | 13,035 |        |      |  | 53 | %  |   |  | (1 | %)
|Depreciation and amortization   |       |         | 742          |        |  |         | 1    | %    |   |        | 297    |        |      |  | 1  | %  |   |  | 0  | % 
|                                |       |         |              |        |  |         |      |      |   |        |        |        |      |  |    |    |   |  |    |   
|                                | Total |         | $            | 34,735 |  |         |      | 58   | % |        | $      | 25,586 |      |  |    | 53 | % |  |    | 5  | %
|                                |       |         |              |        |  |         |      |      |   |        |        |        |      |  |    |    |   |  |    |   

|                                |       |         |                 |        |  |         |      |      |   |        |        |        |      |  |    |    |   |  |    |    |  
|------------------------------- | ----- | ------- | --------------- | ------ |  | ------- | ---- | ---- | - | ------ | ------ | ------ | ---- |  | -- | -- | - |  | -- | -- | -
|                                |       |         | Trading Systems
|                                |       |         |                
|                                |       |         |                 |        |  |         | % of |      |   |        |        |        | % of |  | % 
|(dollars in thousands)          |       | Q1 2004 |                 | Rev.   |  | Q1 2003 |      | Rev. |   | Change
|                                |       |         |                 |        |  |         |      |      |   |       
|Product sales and installations |       | $       | 11,138          |        |  |         | 52   | %    |   | $      | 9,679  |        |      |  | 46 | %  |   |  | 6  | % 
|Service                         |       |         | 10,852          |        |  |         | 45   | %    |   |        | 10,065 |        |      |  | 47 | %  |   |  | (2 | %)
|Depreciation and amortization   |       |         | 285             |        |  |         | 1    | %    |   |        | 297    |        |      |  | 1  | %  |   |  | 0  | % 
|                                |       |         |                 |        |  |         |      |      |   |        |        |        |      |  |    |    |   |  |    |   
|                                | Total |         | $               | 22,275 |  |         |      | 49   | % |        | $      | 20,041 |      |  |    | 47 | % |  |    | 2  | %
|                                |       |         |                 |        |  |         |      |      |   |        |        |        |      |  |    |    |   |  |    |   

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|                                |       |         |        |       |  |         |      |      |   |        |       |       |      |  |    |    |   |  |    |    |  
|------------------------------- | ----- | ------- | ------ | ----- |  | ------- | ---- | ---- | - | ------ | ----- | ----- | ---- |  | -- | -- | - |  | -- | -- | -
|                                |       |         | I.T.S.
|                                |       |         |       
|                                |       |         |        |       |  |         | % of |      |   |        |       |       | % of |  | % 
|(dollars in thousands)          |       | Q1 2004 |        | Rev.  |  | Q1 2003 |      | Rev. |   | Change
|                                |       |         |        |       |  |         |      |      |   |       
|Product sales and installations |       | $       | 6,129  |       |  |         | 92   | %    |   | $      | 2,575 |       |      |  | 94 | %  |   |  | (2 | %)
|Service                         |       |         | 1,185  |       |  |         | 143  | %    |   |        | 2,970 |       |      |  | 95 | %  |   |  | 48 | % 
|Depreciation and amortization   |       |         |       |       |  |         | 0    | %    |   |        |      |       |      |  | 0  | %  |   |  | 0  | % 
|                                |       |         |        |       |  |         |      |      |   |        |       |       |      |  |    |    |   |  |    |   
|                                | Total |         | $      | 7,314 |  |         |      | 98   | % |        | $     | 5,545 |      |  |    | 95 | % |  |    | 3  | %
|                                |       |         |        |       |  |         |      |      |   |        |       |       |      |  |    |    |   |  |    |   

|                                |       |         |                  |       |  |         |      |      |   |        |   |   |      |  |   |   |   |  |   |   |  
|------------------------------- | ----- | ------- | ---------------- | ----- |  | ------- | ---- | ---- | - | ------ | - | - | ---- |  | - | - | - |  | - | - | -
|                                |       |         | Network Services
|                                |       |         |                 
|                                |       |         |                  |       |  |         | % of |      |   |        |   |   | % of |  | %
|(dollars in thousands)          |       | Q1 2004 |                  | Rev.  |  | Q1 2003 |      | Rev. |   | Change
|                                |       |         |                  |       |  |         |      |      |   |       
|Product sales and installations |       | $       |                 |       |  |         | 0    | %    |   | $      |  |   |      |  | 0 | % |   |  | 0 | %
|Service                         |       |         | 4,689            |       |  |         | 65   | %    |   |        |  |   |      |  | 0 | % |   |  | 0 | %
|Depreciation and amortization   |       |         | 457              |       |  |         | 6    | %    |   |        |  |   |      |  | 0 | % |   |  | 0 | %
|                                |       |         |                  |       |  |         |      |      |   |        |   |   |      |  |   |   |   |  |   |  
|                                | Total |         | $                | 5,146 |  |         |      | 71   | % |        | $ |  |      |  |   | 0 | % |  |   | 0 | %
|                                |       |         |                  |       |  |         |      |      |   |        |   |   |      |  |   |   |   |  |   |  

Comparison of Q1 2004 to Q1 2003

Consolidated

We expect our fiscal year 2004 total consolidated cost of revenue to be
approximately $175 million; however, pricing changes and more competitive
bidding for our customers could cause the actual total consolidated cost of
revenue to be higher.

Product Sales and Installations.The increase in product sales and
installations cost of revenue of 9% as a percentage of product sales and
installation revenue in Q1 2004 from Q1 2003 was primarily due to a higher
percentage of I.T.S. installations and third party products sold compared to
Trading System manufactured products sold in Q1 2004. I.T.S. and third party
products have a higher cost of revenue than Trading Systems manufactured
products.

Service.The decrease in service cost of revenue of 1% as a percentage of
service revenue in Q1 2004 from Q1 2003 was primarily due to an increase in
Trading Systems contract maintenance services in Q1 2004, which have a lower
cost of revenue than non-contract MAC services, partially offset by cost of
revenue from our Network Services division, which is higher as a percentage of
revenue than our Trading Systems division, and the adverse impact on our I.T.S.
division from the loss of a large contract maintenance customer in Q1 2004.

Trading Systems

Product Sales and Installations.The increase in product sales and
installations cost of revenue of 6% as a percentage of product sales and
installation revenue in Q1 2004 from Q1 2003 was primarily due to a higher
volume of third party products sold in Q1 2004 when compared to Q1 2003. Third
party products generally have a higher cost of revenue than products
manufactured by the Trading Systems division. In addition, the three large and
medium installation projects that were completed in Q1 2003 had higher margins
than those completed in Q1 2004.

Service.The decrease in service cost of revenue of 2% as a percentage of
service revenue in Q1 2004 from Q1 2003 was primarily due to an increase in
contract maintenance services in Q1 2004, which have a lower cost of revenue
than non-contract MAC services.

I.T.S.

Product Sales and Installations.The decrease in product sales and
installations cost of revenue of 2% as a percentage of product sales and
installation revenue in Q1 2004 from Q1 2003 was primarily due to a higher
profit margin recognized for one large installation project as a result of
changes from the original contract order.

Service.The increase in service cost of revenue of 48% as a percentage of
service revenue in Q1 2004 from Q1 2003 was primarily due to the loss of a
larger service customer in Q1 2004. As a result of the lost service volume and
generally competitive market conditions, our fixed costs currently represent a
more significant portion of our total costs for this line of business. We
expect our variable cost of revenue to decrease and show positive margins for
the remainder of the 2004 fiscal year; however, actual cost of
revenue in the 2004 fiscal year could be higher.

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Network Services

Service.Service cost of revenue for our Network Services division as a
percentage of service revenue was 65% in Q1 2004. We incurred no cost of
revenue from our Network Services division in Q1 2003 as it was created
following the acquisition of the Gains US and UK entities in April 2003.

Research and Development Expense

|                                 |  |              |       |         |  |          |       |          |  |   |     |  |  |  |    |  
|-------------------------------- |  | ------------ | ----- | ------- |  | -------- | ----- | -------- |  | - | --- |  |  |  | -- | -
|                                 |  | Consolidated
|                                 |  |             
|(dollars in thousands)           |  | Q1 2004      |       | Q1 2003 |  | $ Change |       | % Change
|                                 |  |              |       |         |  |          |       |         
|Research and development expense |  | $            | 3,409 |         |  | $        | 2,735 |          |  | $ | 674 |  |  |  | 25 | %

Research and development efforts are principally focused on the next
generation of the Trading Systems products, applications, and enhancements of
our current product lines. We expect our research and development expenses in
fiscal year 2004 to be approximately $13 million; however, the actual research
and development expenses could be higher.

Comparison of Q1 2004 to Q1 2003

Research and development expenses increased by $0.7 million in Q1 2004
from Q1 2003, reflecting additional resources added to our product development
group.

Selling, General and Administrative Expense

|                                            |  |              |        |         |  |          |       |          |  |   |       |  |  |  |    |  
|------------------------------------------- |  | ------------ | ------ | ------- |  | -------- | ----- | -------- |  | - | ----- |  |  |  | -- | -
|                                            |  | Consolidated
|                                            |  |             
|(dollars in thousands)                      |  | Q1 2004      |        | Q1 2003 |  | $ Change |       | % Change
|                                            |  |              |        |         |  |          |       |         
|Selling, general and administrative
expense |  | $            | 13,288 |         |  | $        | 8,730 |          |  | $ | 4,558 |  |  |  | 52 | %

Comparison of Q1 2004 to Q1 2003

Selling, general and administrative expenses increased by $4.6 million for
Q1 2004 from Q1 2003, primarily due to increased
professional fees, employee related costs (compensation, severance, bonuses and
benefits) and for new foreign office locations
totaling $2.6 million in Q1 2004 compared to Q1 2003 as well as the inclusion of
expenses for our Network Services division, which totaled $2.0 million in Q1
2004.

We expect our selling, general and administrative expenses in fiscal year
2004 to be approximately $53 million; however the actual selling, general and
administrative expenses could be higher. We believe the anticipated increase in
selling, general and administrative expenses for the 2004 fiscal year will
primarily result from the inclusion of our Network Services division for the
full fiscal year.

Depreciation and Amortization

|                              |  |              |       |         |  |          |       |          |  |   |     |  |  |  |   |  
|----------------------------- |  | ------------ | ----- | ------- |  | -------- | ----- | -------- |  | - | --- |  |  |  | - | -
|                              |  | Consolidated
|                              |  |             
|(dollars in thousands)        |  | Q1 2004      |       | Q1 2003 |  | $ Change |       | % Change
|                              |  |              |       |         |  |          |       |         
|Depreciation and amortization |  | $            | 5,167 |         |  | $        | 4,731 |          |  | $ | 436 |  |  |  | 9 | %

Comparison of Q1 2004 to Q1 2003

Depreciation and amortization expense increased by $0.4 million in Q1 2004
from Q1 2003 primarily due to increased capital expenditures in our Trading
Systems division, as well as the addition of depreciable fixed assets and
amortizable assets from our Network Services division in Q1 2004.

Interest Expense, net

|                       |  |              |       |         |  |          |       |          |  |   |      |   |  |  |     |   
|---------------------- |  | ------------ | ----- | ------- |  | -------- | ----- | -------- |  | - | ---- | - |  |  | --- | --
|                       |  | Consolidated
|                       |  |             
|(dollars in thousands) |  | Q1 2004      |       | Q1 2003 |  | $ Change |       | % Change
|                       |  |              |       |         |  |          |       |         
|Interest expense, net  |  | $            | 5,522 |         |  | $        | 6,205 |          |  | $ | (683 | ) |  |  | (11 | %)

Comparison of Q1 2004 to Q1 2003

Interest expense, net decreased by $0.7 million in Q1 2004 from Q1 2003,
primarily due to the reduction of principal and a reduction of the interest
rate on our outstanding senior secured credit facilities. A voluntary
prepayment of $14.0 million was made in March 2003 on our senior secured credit
facilities and the interest rate was reduced by approximately 2.4% (from 7.5%
to 5.12%) when the senior secured credit facilities were amended and restated
in September 2003.

Provision for Income Taxes

Our effective tax rates for Q1 2003 and Q1 2004 were 121.9% and (17.1%),
respectively. Our effective tax rates reflect our foreign, federal and state
taxes, the non-deductibility of foreign losses for federal tax purposes, the
non-deductibility of certain

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expenses and taxable income at several of our foreign subsidiaries, which,
as compared to the absolute amount of pre-tax earnings (or loss), has a significant impact on our
effective tax rates.

Net Loss

|                       |  |              |        |         |  |          |      |          |  |   |        |   |  |  |     |  
|---------------------- |  | ------------ | ------ | ------- |  | -------- | ---- | -------- |  | - | ------ | - |  |  | --- | -
|                       |  | Consolidated
|                       |  |             
|(dollars in thousands) |  | Q1 2004      |        | Q1 2003 |  | $ Change |      | % Change
|                       |  |              |        |         |  |          |      |         
|Net loss               |  | $            | (1,764 | )       |  | $        | (202 | )        |  | $ | (1,562 | ) |  |  | 773 | %

Comparison of Q1 2004 to Q1 2003

Net loss increased by $1.6 million in Q1 2004 from Q1 2003 due to the
increase in research and development expense of $0.7 million, the increase in
selling, general and administrative expense of $4.6 million, and an increase in
depreciation and amortization of $0.4 million, offset by the increase in our
gross profit of $2.6 million, the decrease in income taxes of $0.9 million and
the decrease in interest expense of $0.6 million. The decrease in earnings from
our Trading Systems division of $1.4 million in Q1 2004 compared to Q1 2003 was
the primary reason for the increase in consolidated net loss.

We expect to have net income for the entire 2004 fiscal year that is
comparable to the $4.0 million earnings in the 2003 fiscal year. However, the
actual amount may be lower.

Liquidity and Capital Resources

Historically, we have satisfied our operating cash requirements through
cash provided by operations, capital loans, financing and bank lines of credit.
Our principal uses of cash were to fund working capital requirements, operating
losses, capital expenditures and repayment of borrowings.

During Q1 2004, we made three large non-recurring cash payments: a
settlement payment totaling $12.3 million in October 2003 which
consisted of
the deferred purchase price and earn-out consideration totaling $6.8 million
related to the April 2003 acquisition of Gains International (US) and Gains
International (Europe), a $5.5 million advance payment for the acquisition of
Gains Asia and a dividend payment of $1.22 per share, or approximately $18.0
million, of which $17.9 million was paid on December 31, 2003.

The Q1 2004 cash uses for the non-recurring Gains related payments and the
payment of the special cash dividend, combined with our mandatory interest
payment due under our senior subordinated notes of $8.6 million paid on
December 15, 2003, which were partially funded by our cash provided by
operating activities, reduced the amount of cash on our balance sheet from
$25.8 million at September 30, 2003 to $13.3 million at December 31, 2003.

Our short term uses of cash include the remaining cash portion of the
purchase price for Gains International Asia Holdings Limited totaling $11.7
million, which was paid in January 2004. The cash portion of the purchase price
was partially funded by operating cash and by a $7.0 million draw on our
revolving credit facility in January 2004. We expect to repay the $7.0 million
draw on our revolving credit facility during the second quarter of the 2004
fiscal year. The repayment of borrowed funds will be financed by operating cash
flow. We do not currently anticipate any other short term non-recurring uses of
cash in the near future.

The Senior Secured Credit Facilities

On December 20, 2001, we entered into the senior secured credit facilities
comprised of a $105.0 million term loan and a $15.0 million revolving credit
facility. On September 2, 2003, we amended and restated our senior secured
credit facilities. The amended and restated senior secured credit facilities
consist of a $25.0 million revolving credit facility and a $55.0 million term
loan; provided, however, that we can increase the committed amount under these
facilities by up to $25.0 million so long as one or more lenders agrees to
provide this incremental commitment and other customary conditions are
satisfied. The term loan was borrowed in full at closing, but through December
31, 2003, we had not borrowed against the revolving credit facility. As of
December 31, 2003, the amount available under the revolving credit facility was
reduced by outstanding letters of credit of $4.3 million. In January 2004, we
borrowed $7.0 million from the revolving credit facility and used the proceeds
to fund a portion of the purchase of Gains International Asia Holdings Limited.
As of January 31, 2004, we had $13.7 million of remaining availability under
the revolving credit facility.

Mandatory prepayments of the amended and restated senior secured credit
facilities are required upon the occurrence of certain events, including
certain asset sales, equity issuances and debt issuances, as well as 50% of
excess cash flow in FY 2004 and thereafter. Excess cash flow is defined in our
amended and restated credit agreement, 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 an amendment
of the then existing credit

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agreement, certain restructuring expenses and
prepayment premiums in connection with prepayment of loans under the then
existing credit agreement, plus (2) a working capital adjustment less (3)
scheduled repayments of debt, capital expenditures, cash interest expense and
provisions for taxes based on income.

As required under the terms of our senior secured credit facilities, we
made mandatory excess cash flow repayments of $30.0 million and $0.8 million on
September 30, 2002 and December 29, 2002, respectively, based upon 75% of our
excess cash flow for the period ended September 30, 2002. On March 3, 2003, we
also voluntarily prepaid $14.0 million in debt on our then existing senior
secured credit facilities. For the year ended September 30, 2003, we were not
required to make a mandatory excess cash flow repayment under the terms of the
amended and restated senior secured credit facilities.

Obligations under the amended and restated senior secured credit
facilities are secured by a first priority security interest in substantially
all of our assets and the assets of our domestic subsidiaries and by a pledge
of 100% of the shares of domestic subsidiaries and 65% of the shares of direct
foreign subsidiaries. Our domestic subsidiaries have unconditionally guaranteed
our obligations under the amended and restated senior secured credit
facilities.

The amended and restated senior secured credit facilities contain
customary affirmative covenants as well as negative covenants that, among other
things, restrict our and our subsidiaries ability to: incur additional
indebtedness (including guarantees of certain obligations); create liens;
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; enter
into transactions with affiliates; make payments with respect to or modify
subordinated debt instruments; enter into sale and leaseback transactions;
change the fiscal year or lines of business; and enter into agreements with
negative pledge clauses or clauses restricting subsidiary distributions.

The amended and restated senior secured credit facilities also contain
minimum interest coverage and fixed charge coverage ratios and maximum senior
secured and total leverage ratios as well as a restriction on the amount of
capital expenditures we can incur in a fiscal year.

The Senior Subordinated Notes

On December 20, 2001 we issued $150.0 million in aggregate principal
amount of 11.50% senior subordinated notes to fund a portion of the
consideration for the acquisition of IPC Information Systems. Under the terms
of the indenture governing the notes, we may, subject to certain restrictions,
issue additional notes up to a maximum aggregate principal amount of $250.0
million. The notes mature on December 15, 2009. The notes are general unsecured
obligations, are subordinated in right of payment to all existing and future
senior debt, including the amended and restated senior secured credit
facilities, are pari passu in right of payment with any future senior
subordinated indebtedness, and are unconditionally guaranteed by certain of our
domestic restricted subsidiaries. Interest on the notes accrue at the rate of
11.50% per annum and is payable semi-annually in arrears on June 15 and
December 15, the first of which occurred on June 15, 2002.

The indenture governing the notes contains covenants that impose
significant restrictions on us. These restrictions include limitations on our
ability to: incur indebtedness or issue preferred shares; pay dividends or make
distributions in respect of capital stock or to 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
our assets; enter into transactions with affiliates; and designate subsidiaries
as unrestricted subsidiaries.

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
acquisition of IPC Information Systems were terminated. 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 an escrow account.
Global Crossing received $3.2 million from the escrow account upon the filing
of certain tax returns for periods prior to and including the date of the
acquisition of IPC Information Systems. 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 a 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 acquisition of IPC Information Systems have now been
filed. These returns consist of

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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 acquisition of IPC Information Systems.
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 acquisition of IPC
Information Systems, we may be required to pay those taxes and are no longer
able to recover indemnification from Global Crossing. As of December 31, 2003,
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 and, as of December 31, 2003, we have
made settlement payments in the aggregate of $0.8 million. We estimate that the
range of our exposure for additional tax liabilities is from $0.0 to $36.0
million. In computing the 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 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 acquisition
of IPC Information Systems. 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.

Comparison of Q1 2004 to Q1 2003

Cash provided by operating activities was $19.5 million for Q1 2004
compared to $16.1 million for Q1 2003. This increase of $3.4 million was
primarily due to the decrease in our accounts receivable balances during Q1
2004, partially offset by a larger net loss in Q1 2004 compared to Q1 2003. The
decrease in accounts receivable balances during Q1 2004 was attributable to the
collection of amounts due from large jobs completed during our fourth quarter
of the 2003 fiscal year.

Cash used in investing activities was $14.0 million for Q1 2004 compared
to $1.0 million for Q1 2003. Q1 2004 cash used for investing
activities consisted of $1.7
million of capital expenditures, a $5.5 million advance payment for the Gains
Asia acquisition and a $6.8 million payment related to the deferred purchase
price and earn-out consideration for the April 2003 Gains US and UK
acquisition. In Q1 2003, cash used in investing activities of $1.0 million was
exclusively for capital expenditures.

Cash used in financing activities was $18.0 million for Q1 2004 compared
to $1.7 million for Q1 2003. Cash used in financing activities of $1.7 million
in Q1 2003 was for principal payments under our senior secured credit
facilities. These payments amounted to $0.1 million in Q1 2004. The remainder
of cash used in financing activities in Q1 2004 of $17.8 million related to the
special cash dividend of $1.22 per share declared and paid to holders of record
on December 31, 2003.

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 virtually no change in Q1 2004 compared to an increase of $0.1
million in Q1 2003. Currently our largest currency exposures are to the British
Pound and the Canadian Dollar, although we have additional exposures, to a
lesser extent, to the Euro, Australian Dollar, Japanese Yen, Hong Kong Dollar
and Singapore Dollar.

Capital Resources and Expenditures

We expect that our capital expenditures for fiscal year 2004 will be
approximately $10.0 million; however, actual capital expenditures for the 2004
fiscal year may be greater. We are limited in our capital expenditures in any
fiscal year by the capital expenditure covenant in our amended and restated
credit agreement. This limits us to capital expenditures in any fiscal year to
$12.0 million plus 50% of the unused amount from the immediately preceding
fiscal year. For fiscal year 2004, the amount of capital expenditures
permitted by this covenant is approximately $12.2 million. We have no off
balance sheet financing arrangements or other relationships with unconsolidated
affiliates.

Our primary future uses of cash will be to fund interest expense and
principal repayments on our debt, capital expenditures, research and
development efforts, working capital and 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,

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market exchanges, mutual and hedge fund companies, asset managers and
insurance companies, as well as voice and data services to the financial
community and, if necessary, borrowings under the revolving credit facility.

During the course of the year, our short-term liquidity is impacted by our
mandatory payment obligations of principal and interest under both our amended
and restated senior secured credit facilities and our senior subordinated
notes. The mandatory interest and principal payments under the amended and
restated senior secured credit facilities are due at the end of each quarter.
The interest payments required by the senior subordinated notes of $8.6 million
due in June and December of each year negatively impact our liquidity during
those particular months. Additionally, in any such year that we generate excess
cash flow, the mandatory prepayment required under our amended and restated
senior secured credit facilities must be made within 90 days of our fiscal year
end. For the year ended September 30, 2003, we were not required to make a
mandatory excess cash flow repayment under the terms of the amended and
restated senior secured credit facilities.

At December 31, 2003, we had $13.3 million of unrestricted cash and had
additional liquidity available to us of $20.7 million through the $25.0 million
revolving credit facility, under which there were no amounts outstanding at
December 31, 2003 ($25.0 million revolving credit facility reduced by
outstanding letters of credit of $4.3 million). In January 2004, we borrowed
$7.0 million from our revolving credit facility to fund a portion of the Gains
Asia acquisition. As of January 31, 2004, we had approximately
$9.8 million of
unrestricted cash and $13.7 million of remaining availability under the
revolving credit facility.

Our ability to make payments on our indebtedness, including the senior
subordinated notes, and to fund planned capital expenditures, research and
development efforts and payment of dividends to our shareholders 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 acquisition of IPC Information Systems, our cash generated from
the operations of the business has been sufficient to meet substantially all of
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 for at least the next few years. 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 notes, or to fund our other liquidity needs. We may
need to refinance all or a portion of our indebtedness, including the notes, on
or before maturity. We cannot assure you that we will be able to refinance any
of our indebtedness, including the notes, on commercially reasonable terms, or
at all.

Contractual Obligations and Other Commercial Commitments

The following summarizes our contractual obligations at December 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 |                                    | $                      | 5,124   |         |  | $         | 703   |        |  | $     | 1,031  |         |  | $ | 949    |        |  | $ | 2,441   |        
|Network Carrier Commitments      |                                    |                        | 4,686   |         |  |           | 4,686 |        |  |       |       |         |  |   |       |        |  |   |        |        
|Long-Term Debt                   |                                    |                        | 204,863 |         |  |           | 550   |        |  |       | 1,100  |         |  |   | 53,213 |        |  |   | 150,000 |        
|Operating Leases                 |                                    |                        | 36,956  |         |  |           | 6,778 |        |  |       | 11,263 |         |  |   | 9,636  |        |  |   | 9,279   |        
|                                 |                                    |                        |         |         |  |           |       |        |  |       |        |         |  |   |        |        |  |   |         |        
|                                 | Total Contractual Cash Obligations |                        | $       | 251,629 |  |           | $     | 12,717 |  |       | $      | 13,394  |  |   | $      | 63,798 |  |   | $       | 161,720 | 
|                                 |                                    |                        |         |         |  |           |       |        |  |       |        |         |  |   |        |        |  |   |         |        

|                                          |                              |           |                                            |        |           |       |       |       |     |       |        |       |  |   |   |   |  |   |   |   | 
|----------------------------------------- | ---------------------------- | --------- | ------------------------------------------ | ------ | --------- | ----- | ----- | ----- | --- | ----- | ------ | ----- |  | - | - | - |  | - | - | - | 
|                                          |                              |           | 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 |                              |           | 4,101                                      |        |           |       | 2,173 |       |     |       | 1,928  |       |  |   |  |   |  |   |  |  
|                                          |                              |           |                                            |        |           |       |       |       |     |       |        |       |  |   |   |   |  |   |   |  
|                                          | Total Commercial Commitments |           | $                                          | 8,351  |           |       | $     | 6,423 |     |       | $      | 1,928 |  |   | $ |  |  |   | $ |  | 
|                                          |                              |           |                                            |        |           |       |       |       |     |       |        |       |  |   |   |   |  |   |   |  

Recent Accounting Pronouncements

In November 2002, the Emerging Issues Task Force 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

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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 periods 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 adoption of this standard did not have a material
impact on our consolidated financial statements.

In November 2002, the 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 in our condensed consolidated financial
statements. The initial recognition and initial measurement requirements of FIN
45 are effective prospectively for guarantees issued or modified after December
31, 2002. We have applied FIN 45 in connection with the March 13, 2003
settlement and rejection agreement with Global Crossing and have reflected the
fair value of guarantees on behalf of Global Crossing in our consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities (FIN 46), which requires variable interest
entities (commonly referred to as SPEs) to be consolidated by the primary
beneficiary of the entity if certain criteria are met. The required adoption
date of FIN 46 was deferred during 2003, and an amended interpretation was
issued in December 2003. The amended provisions of FIN 46 are effective for us
during the first calendar quarter of 2004. We have determined that our
investment in Purple Voice meets the criteria of a variable interest entity,
however, pursuant to the deferrals of the required adoption date of FIN 46
during 2003, we were not required to apply FIN 46 in our fiscal year 2003 or
first quarter of fiscal year 2004 financial statements. Notwithstanding the
deferral of FIN 46, we have consolidated Purple Voice in accordance with the
requirements of Accounting Research Bulletin No. 51 Consolidated Financial
Statements because we have voting control over Purple Voice. Accordingly,
because Purple Voice has been consolidated for financial reporting purposes,
when we adopt FIN 46 in the second quarter of our 2004 fiscal year, there will
be no further impact upon our consolidated financial statements.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities. SFAS 149 amends and
clarifies financial reporting for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities
under SFAS No. 133. SFAS 149 clarifies under what circumstances a contract with
an initial net investment meets the characteristic of a derivative, clarifies
when a derivative contains a financing component, amends the definition of an
underlying to conform it to language used in FIN 45, and amends certain other
existing pronouncements. SFAS 149 is effective for contracts entered into or
modified after June 30, 2003, and should be applied prospectively, with the
exception of certain SFAS No. 133 implementation issues that were effective for
all fiscal quarters prior to June 15, 2003. Any such implementation issues
should continue to be applied in accordance with their respective effective
dates. The adoption of SFAS 149 did not have a material impact on our consolidated financial statements.

Summary of Critical Accounting Policies

The discussion and analysis of our financial condition and results of
operations are based upon our condensed 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 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 installations is recognized upon completion
of the installation or, for contracts that are completed in stages and include
contract specified milestones, upon achieving such contract milestones, and
delivery and customer acceptance of a fully functional system. Revenue from
sales to distributors is recognized upon shipment. Customers are generally
progress-billed prior to the completion of the installations. The revenue
related to these advance payments is deferred until the system installations
are completed or specified milestones are attained. Costs incurred on
uncompleted contracts and stages are accumulated and recorded as inventory
awaiting installation. In addition, contracts for annual recurring turret and
I.T.S.

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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. Revenue from our
Network Services division is billed in advance and recorded ratably (on a
monthly basis) over the contractual period, which generally ranges from three
months to one year.

Allowance for Doubtful Accounts

We evaluate the collectibility of our accounts receivable based on a
combination of factors. Where we are aware of circumstances that may impair a
specific customers ability to meet its financial obligations to us, we record
a specific allowance against amounts due to us and thereby reduce the net
receivable to the amount we reasonably believe is likely to be collected. For
all other customers, we recognize allowances for doubtful accounts based on the
length of time the receivables are outstanding, industry and geographic
concentrations, the current business environment and our historical experience.
If the financial condition of our customers deteriorates or if economic
conditions worsen, additional allowances may be required.

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
definite lived 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 to
date.

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.

We adopted SFAS 142 effective upon the acquisition of IPC Information
Systems and, in accordance with SFAS 142, there is no amortization of goodwill
and intangible assets that have indefinite useful lives. However, such assets
are tested for impairment annually using the two-step process specifically
provided in SFAS 142. Other intangible assets are carried at cost. Technology
is amortized over its estimated useful life of between 3 to 7 years, customer
relationships are amortized over their estimated useful lives of 8 to 20 years,
and proprietary software is amortized over its estimated useful life of 7
years. Trade name has been deemed to have an indefinite life and is not subject
to amortization expense, but instead is subject to annual impairment tests
in accordance with the provisions of SFAS 142. In determining that the trade
name has an indefinite life, we considered the following factors: the ongoing
active use of our trade name, which is directly associated with our leading
position in turret solutions, the lack of any legal, regulatory or contractual
provisions that may limit the useful life of the trade name, the lack of any
substantial costs to maintain the asset, the positive impact on our trade name
generated by our other ongoing business activities (including marketing and
development of new technology and new products) and our commitment to products
branded with our trade name over our 30 year history.

We completed the required annual impairment test as of July 1, 2003 (the
first day of the fourth quarter of the 2003 fiscal year), and concluded that
there was no impairment to our recorded goodwill or trade name. There have been
no indicators of impairment during the three months ended December 31, 2003
that would require us to perform an impairment test for this period. We believe
the recorded values of goodwill and trade name in the amounts of $84.9 million
and $19.3 million, respectively, at December 31, 2003 are fully recoverable.

StockBased Compensation

As
permitted by SFAS 123, we have elected to follow APB Opinion 25 and
related interpretations in accounting for our 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
fixed on the date of the grant.

Income Taxes

In accordance with SFAS No. 109, Accounting for Income Taxes, or SFAS
109, 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

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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.

Business Combinations

During the 2003 fiscal year, the acquisition of Gains International (US),
Inc. and Gains International (UK) Ltd. required certain estimates and judgments
related to the fair value of assets acquired and liabilities assumed. Certain
of the liabilities are subjective in nature. These liabilities have been
reflected in the purchase accounting based upon the most recent information
available, and principally include Federal and state payroll taxes, state sales
taxes, state income taxes, value added tax, or VAT, and income taxes in several
foreign countries. The ultimate settlement of such liabilities may be for
amounts which are different from the amounts presently recorded.

Other Matters

We do not have any off balance sheet financial arrangements.




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 or foreign currency 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.

|                      |               |                                                                                               |  |               |       |      |  |                           |     |      |  |      |     |            |  |       |     |  |  |   |     |  |  |   |      |  |  |   |       |  |  |   |       | 
|--------------------- | ------------- | --------------------------------------------------------------------------------------------- |  | ------------- | ----- | ---- |  | ------------------------- | --- | ---- |  | ---- | --- | ---------- |  | ----- | --- |  |  | - | --- |  |  | - | ---- |  |  | - | ----- |  |  | - | ----- | 
|                      |               |                                                                                               |  |               |       |      |  | Future Principal Payments
|                      |               |                                                                                               |  | Fair Value on |       |     
|(Dollars in millions) |               | December 31, 2003                                                                             |  | 2004          |       | 2005 |  | 2006                      |     | 2007 |  | 2008 |     | Thereafter |  | Total
|                      |               |                                                                                               |  |               |       |      |  |                           |     |      |  |      |     |            |  |      
|Long-Term Debt:       |               |                                                                                               |  |               |       |      |  |                           |     |      |  |      |     |            |  |       |     |  |  |   |     |  |  |   |      |  |  |   |       |  |  |  
|                      | Fixed Rate    |                                                                                               |  |               |       |      |  |                           |     |      |  |      |     |            |  |       |     |  |  |   |     |  |  |   |      |  |  |   |       |  |  |   |      
|                      |               | Senior
Subordinated
Notes,
interest
payable at
11.50%,
maturing 2009                          |  | $             | 159.0 |      |  | $                         |    |      |  | $    |    |            |  | $     |    |  |  | $ |    |  |  | $ |     |  |  | $ | 150.0 |  |  | $ | 150.0 | 
|                      |               |                                                                                               |  |               |       |      |  |                           |     |      |  |      |     |            |  |       |     |  |  |   |     |  |  |   |      |  |  |   |       |  |  |  
|                      | Variable Rate |                                                                                               |  |               |       |      |  |                           |     |      |  |      |     |            |  |       |     |  |  |   |     |  |  |   |      |  |  |   |       |  |  |   |      
|                      |               | Senior Secured
Credit
Facilities 
Term Loan
(interest
payable at
5.12% at
December 31,
2003) |  | $             | 55.4  |      |  | $                         | 0.4 |      |  | $    | 0.5 |            |  | $     | 0.5 |  |  | $ | 0.6 |  |  | $ | 52.8 |  |  | $ |      |  |  | $ | 54.8  | 
|                      |               |                                                                                               |  |               |       |      |  |                           |     |      |  |      |     |            |  |       |     |  |  |   |     |  |  |   |      |  |  |   |       |  |  |  




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.

As of the end of the period covered by 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-15(e)
and 15d-15(e). 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.

During the Companys most recent fiscal quarter, there have been no
significant changes in the Companys internal controls that has materially
affected, or is reasonably likely to materially affect, the Companys internal
controls over financial reporting.

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Part II  Other Information:




Item 1. Legal Proceedings

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 $75.0 million.

On September 8, 2003, an action was brought against several defendants,
including IPC Information Systems, Inc. and its President, in the United States
District Court for the Eastern District of New York by Advance Relocation &
Storage Co., Inc., a moving company. The complaint alleges that IPC Information
Systems, Inc. and 23 other defendants violated the Racketeer Influenced and
Corrupt Organizations Act and engaged in tortious interference with prospective
business advantage by preventing the plaintiff from obtaining work as a mover
in jobs performed in large commercial buildings in New York City. The Company
believes the suit is without merit and intends to vigorously defend against all
claims alleged against it in the complaint. Plaintiffs are seeking injunctive
relief and damages from the defendants, jointly and severally, in an aggregate
amount of approximately $7.0 million.




Item 2. Changes in Securities and Use of Proceeds

None




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

10.1 Amendment No. 1 to Amended and Restated Credit and Guaranty Agreement dated December 12, 2003.

31.1 Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certificate of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certificate of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(B) REPORTS ON FORM 8-K

None

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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: February 13, 2004 |  | By:                   |  | /s/ TIMOTHY WHELAN                  
|                         |  |                       |  |                                     
|                         |  |                       |  | Timothy Whelan                      
|                         |  |                       |  | Chief Financial Officer             
|                         |  |                       |  | (Principal Financial and Accounting 
|                         |  |                       |  | Officer and Duly Authorized Officer)

33