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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, 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 June 30, 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 July 31, 2003
|                              |  |                             
|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 OPERATIONS     
|                                               |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                               |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                                               | Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                               | Item 3. Quantitative and Qualitative Disclosure About Market Risk                            
|                                               | Item 4. Controls and Procedures                                                              
|Part II  Other Information:                  
|                                               | Item 1. Legal Proceedings                                                                    
|                                               | Item 2. Changes in Securities and Use of Proceeds                                            
|                                               | Item 3. Defaults Upon Senior Securities                                                      
|                                               | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                               | Item 5. Other Information                                                                    
|                                               | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                                     
|EX-10.1 EMPLOYMENT AGREEMENT                  
|EX-10.2 SHARE PURCHASE AGREEMENT              
|EX-10.3 CALL OPTION DEED                      
|EX-31.1 CERTIFICATE OF CHIEF EXECUTIVE OFFICER
|EX-31.2 CERTIFICATE OF CHIEF FINANCIAL OFFICER
|EX-32.1 CERTIFICATE OF CHIEF EXECUTIVE OFFICER
|EX-32.2 CERTIFICATE OF CHIEF FINANCIAL OFFICER



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##### Table of Contents



IPC ACQUISITION CORP.

INDEX

|                               |                                                                                               |           |    |                                                                                                                                                                                                                                                                                       |    |      |   | 
|------------------------------ | --------------------------------------------------------------------------------------------- | --------- | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -- | ---- | - | 
|                               |                                                                                               |           |    |                                                                                                                                                                                                                                                                                       |    | Page
|                               |                                                                                               |           |    |                                                                                                                                                                                                                                                                                       |    |     
|Part I. Financial Information: |                                                                                               |           |    |                                                                                                                                                                                                                                                                                      
|                               |                                                                                               |           |    |                                                                                                                                                                                                                                                                                      
|                               | Item 1. Financial Statements                                                                  |           |    |                                                                                                                                                                                                                                                                                       |   
|                               |                                                                                               |           |    |                                                                                                                                                                                                                                                                                      
|                               |                                                                                               |           | A) | Condensed Consolidated Balance Sheets as of September 30, 2002 and June 30, 2003                                                                                                                                                                                                      |    |      | 1 | 
|                               |                                                                                               |           |    |                                                                                                                                                                                                                                                                                      
|                               |                                                                                               |           | B) | Condensed Consolidated Statements of Operations for the Three Months Ended June
30, 2002 and 2003, the period from October 1, 2001 to December 20, 2001, the
period from November 15, 2001 (date of initial capitalization) to June 30,
2002, and the Nine Months ended June 30, 2003 |    |      | 2 | 
|                               |                                                                                               |           |    |                                                                                                                                                                                                                                                                                      
|                               |                                                                                               |           | C) | Condensed Consolidated Statements of Cash Flows for the period from October 1,
2001 to December 20, 2001, the period from November 15, 2001 (date of initial
capitalization) to June 30, 2002, and the Nine Months ended June 30, 2003                                                |    |      | 3 | 
|                               |                                                                                               |           |    |                                                                                                                                                                                                                                                                                      
|                               |                                                                                               |           | D) | Notes to Condensed Consolidated Financial Statements                                                                                                                                                                                                                                  |    |      | 4 | 
|                               |                                                                                               |           |    |                                                                                                                                                                                                                                                                                      
|                               | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |           |    | 24                                                                                                                                                                                                                                                                                    |   
|                               |                                                                                               |           |    |                                                                                                                                                                                                                                                                                      
|                               | Item 3. Quantitative and Qualitative Disclosure About Market Risk                             |           |    | 40                                                                                                                                                                                                                                                                                    |   
|                               |                                                                                               |           |    |                                                                                                                                                                                                                                                                                      
|                               | Item 4. Controls and Procedures                                                               |           |    | 40                                                                                                                                                                                                                                                                                    |   
|                               |                                                                                               |           |    |                                                                                                                                                                                                                                                                                      
|Part II. Other Information:    |                                                                                               |           |    |                                                                                                                                                                                                                                                                                      
|                               |                                                                                               |           |    |                                                                                                                                                                                                                                                                                      
|                               | Item 1. Legal Proceedings                                                                     |           |    | 41                                                                                                                                                                                                                                                                                    |   
|                               |                                                                                               |           |    |                                                                                                                                                                                                                                                                                      
|                               | Item 2. Changes in Securities and Use of Proceeds                                             |           |    | 41                                                                                                                                                                                                                                                                                    |   
|                               |                                                                                               |           |    |                                                                                                                                                                                                                                                                                      
|                               | Item 3. Defaults Upon Senior Securities                                                       |           |    | 41                                                                                                                                                                                                                                                                                    |   
|                               |                                                                                               |           |    |                                                                                                                                                                                                                                                                                      
|                               | Item 4. Submission of Matters to a Vote of Security Holders                                   |           |    | 41                                                                                                                                                                                                                                                                                    |   
|                               |                                                                                               |           |    |                                                                                                                                                                                                                                                                                      
|                               | Item 5. Other Information                                                                     |           |    | 41                                                                                                                                                                                                                                                                                    |   
|                               |                                                                                               |           |    |                                                                                                                                                                                                                                                                                      
|                               | Item 6. Exhibits and Reports on Form 8-K                                                      |           |    | 41                                                                                                                                                                                                                                                                                    |   
|                               |                                                                                               |           |    |                                                                                                                                                                                                                                                                                      
|                               |                                                                                               | Signature |    |                                                                                                                                                                                                                                                                                       | 43 |     





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##### Table of Contents






Part I  Financial Information:




Item 1. Financial Statements




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

|                                     |                                                                                                                                                                            |                                            |   |               |         |          |   |         |         | 
|------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | - | ------------- | ------- | -------- | - | ------- | ------- | 
|                                     |                                                                                                                                                                            |                                            |   | September 30, |         | June 30,
|                                     |                                                                                                                                                                            |                                            |   | 2002          |         | 2003    
|                                     |                                                                                                                                                                            |                                            |   |               |         |         
|Assets                               |                                                                                                                                                                            |                                            |   |               |         |          |   |        
|Assets:                              |                                                                                                                                                                            |                                            |   |               |         |          |   |        
|                                     | Cash                                                                                                                                                                       |                                            | $ | 25,294        |         |          | $ | 21,016  |        
|                                     | Restricted cash                                                                                                                                                            |                                            |   | 7,272         |         |          |   |        |        
|                                     | Accounts receivable, net of allowance of $1,245 and $1,201, respectively                                                                                                   |                                            |   | 52,468        |         |          |   | 52,548  |        
|                                     | Inventories, net                                                                                                                                                           |                                            |   | 22,218        |         |          |   | 43,367  |        
|                                     | Prepaid and other current assets                                                                                                                                           |                                            |   | 4,614         |         |          |   | 5,583   |        
|                                     |                                                                                                                                                                            |                                            |   |               |         |          |   |        
|                                     |                                                                                                                                                                            | Total current assets                       |   |               | 111,866 |          |   |         | 122,514 | 
|                                     | Property, plant and equipment, net                                                                                                                                         |                                            |   | 21,004        |         |          |   | 22,817  |        
|                                     | Goodwill                                                                                                                                                                   |                                            |   | 72,279        |         |          |   | 80,192  |        
|                                     | Intangible assets, net                                                                                                                                                     |                                            |   | 209,132       |         |          |   | 200,800 |        
|                                     | Deferred financing costs, net                                                                                                                                              |                                            |   | 15,116        |         |          |   | 13,410  |        
|                                     | Other assets                                                                                                                                                               |                                            |   | 835           |         |          |   | 811     |        
|                                     |                                                                                                                                                                            |                                            |   |               |         |          |   |        
|                                     |                                                                                                                                                                            | Total assets                               |   | $             | 430,232 |          |   | $       | 440,544 | 
|                                     |                                                                                                                                                                            |                                            |   |               |         |          |   |        
|Liabilities and Stockholders Equity |                                                                                                                                                                            |                                            |   |               |         |          |   |        
|Liabilities:                         |                                                                                                                                                                            |                                            |   |               |         |          |   |        
|                                     | Current portion of long term debt                                                                                                                                          |                                            | $ | 6,460         |         |          | $ | 5,827   |        
|                                     | Accounts payable                                                                                                                                                           |                                            |   | 4,530         |         |          |   | 4,953   |        
|                                     | Accrued expenses and other current liabilities                                                                                                                             |                                            |   | 23,562        |         |          |   | 21,359  |        
|                                     | Current portion of deferred compensation                                                                                                                                   |                                            |   | 633           |         |          |   | 633     |        
|                                     | Income taxes payable                                                                                                                                                       |                                            |   | 2,373         |         |          |   | 3,758   |        
|                                     | Customer advances on installation contracts                                                                                                                                |                                            |   | 11,232        |         |          |   | 36,856  |        
|                                     | Deferred revenue on maintenance contracts                                                                                                                                  |                                            |   | 12,261        |         |          |   | 12,694  |        
|                                     | Current portion of guarantees on former parent obligations                                                                                                                 |                                            |   |              |         |          |   | 1,353   |        
|                                     | Deferred purchase consideration                                                                                                                                            |                                            |   |              |         |          |   | 3,128   |        
|                                     | Deferred purchase price obligation                                                                                                                                         |                                            |   | 7,272         |         |          |   |        |        
|                                     |                                                                                                                                                                            |                                            |   |               |         |          |   |        
|                                     |                                                                                                                                                                            | Total current liabilities                  |   |               | 68,323  |          |   |         | 90,561  | 
|                                     | Term loan                                                                                                                                                                  |                                            |   | 64,602        |         |          |   | 46,619  |        
|                                     | Senior subordinated notes                                                                                                                                                  |                                            |   | 150,000       |         |          |   | 150,000 |        
|                                     | Deferred taxes, net                                                                                                                                                        |                                            |   | 7,190         |         |          |   | 4,657   |        
|                                     | Deferred compensation                                                                                                                                                      |                                            |   | 3,119         |         |          |   | 3,049   |        
|                                     | Guarantees on former parent obligations                                                                                                                                    |                                            |   |              |         |          |   | 1,561   |        
|                                     |                                                                                                                                                                            |                                            |   |               |         |          |   |        
|                                     |                                                                                                                                                                            | Total liabilities                          |   |               | 293,234 |          |   |         | 296,447 | 
|                                     |                                                                                                                                                                            |                                            |   |               |         |          |   |        
|Commitments and Contingencies        |                                                                                                                                                                            |                                            |   |               |         |          |   |        
|Stockholders equity:                |                                                                                                                                                                            |                                            |   |               |         |          |   |        
|                                     | Common stock, $0.01 par value, 25,000,000 shares authorized; 14,060,000
and 14,724,380 shares issued and outstanding at September 30, 2002 and
June 30, 2003, respectively |                                            |   | 141           |         |          |   | 147     |        
|                                     | Paid in capital                                                                                                                                                            |                                            |   | 140,159       |         |          |   | 145,846 |        
|                                     | Notes receivable for purchases of common stock                                                                                                                             |                                            |   | (383          | )       |          |   | (392    | )      
|                                     | Accumulated deficit                                                                                                                                                        |                                            |   | (9,200        | )       |          |   | (10,980 | )      
|                                     | Accumulated other comprehensive income                                                                                                                                     |                                            |   | 6,281         |         |          |   | 9,476   |        
|                                     |                                                                                                                                                                            |                                            |   |               |         |          |   |        
|                                     |                                                                                                                                                                            | Total stockholders equity                 |   |               | 136,998 |          |   |         | 144,097 | 
|                                     |                                                                                                                                                                            |                                            |   |               |         |          |   |        
|                                     |                                                                                                                                                                            | Total liabilities and stockholders equity |   | $             | 430,232 |          |   | $       | 440,544 | 
|                                     |                                                                                                                                                                            |                                            |   |               |         |          |   |        

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

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

|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |         |         |         |   |         |         |        | 
|--------------------------------------------------- | ------------------------------- | --------------------------------- | ------ | ------------ | ------ | ------------ | ------ | ------------ | ------ | ------------ | ------- | ----------- | ------- | ----------- | ------- | ------- | ------- | - | ------- | ------- | ------ | 
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         | Predecessor |         |             |         |         |         |   |         |        
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |         |         |         |   |         |        
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         | Period from |         | Period from |         |         |         |  
|                                                    |                                 |                                   |        | Three Months |        | Three Months |        | October 1,   |        | November 15, |         | Nine Months
|                                                    |                                 |                                   |        | Ended        |        | Ended        |        | 2001 to      |        | 2001 to      |         | Ended      
|                                                    |                                 |                                   |        | June 30,     |        | June 30,     |        | December 20, |        | June 30,     |         | June 30,   
|                                                    |                                 |                                   |        | 2002         |        | 2003         |        | 2001         |        | 2002         |         | 2003       
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |            
|Revenue:                                            |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |         |         |         |   |         |        
|                                                    | Product sales and installations |                                   | $      | 37,087       |        |              | $      | 32,654       |        |              | $       | 35,691      |         |             | $       | 104,416 |         |   | $       | 89,224  |       
|                                                    | Service                         |                                   |        | 25,721       |        |              |        | 28,338       |        |              |         | 23,089      |         |             |         | 50,926  |         |   |         | 76,456  |       
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |         |         |         |   |         |        
|                                                    |                                 |                                   | 62,808 |              |        |              | 60,992 |              |        |              | 58,780  |             |         |             | 155,342 |         |         |   | 165,680 |        
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |         |         |         |   |         |        
|Cost of goods sold (depreciation shown
separately): |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |         |         |         |   |         |        
|                                                    | Product sales and installations |                                   |        | 30,322       |        |              |        | 23,374       |        |              |         | 18,869      |         |             |         | 89,774  |         |   |         | 55,308  |       
|                                                    | Service                         |                                   |        | 13,617       |        |              |        | 14,488       |        |              |         | 13,953      |         |             |         | 28,675  |         |   |         | 39,417  |       
|                                                    | Depreciation and amortization   |                                   |        | 248          |        |              |        | 556          |        |              |         | 216         |         |             |         | 535     |         |   |         | 1,152   |       
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |         |         |         |   |         |        
|                                                    |                                 |                                   | 44,187 |              |        |              | 38,418 |              |        |              | 33,038  |             |         |             | 118,984 |         |         |   | 95,877  |        
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |         |         |         |   |         |        
|                                                    |                                 | Gross profit                      |        |              | 18,621 |              |        |              | 22,574 |              |         |             | 25,742  |             |         |         | 36,358  |   |         |         | 69,803 | 
|                                                   
|Research and development                            |                                 |                                   | 3,847  |              |        |              | 2,784  |              |        |              | 3,519   |             |         |             | 7,962   |         |         |   | 8,447   |        
|Selling, general and administrative expense         |                                 |                                   | 10,352 |              |        |              | 11,384 |              |        |              | 17,110  |             |         |             | 21,247  |         |         |   | 30,856  |        
|Depreciation and amortization                       |                                 |                                   | 4,535  |              |        |              | 4,738  |              |        |              | 10,521  |             |         |             | 9,414   |         |         |   | 14,267  |        
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |         |         |         |   |         |        
|                                                    |                                 | Income (loss) from operations     |        |              | (113   | )            |        |              | 3,668  |              |         |             | (5,408  | )           |         |         | (2,265  | ) |         |         | 16,233 | 
|Other income (expense):                             |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |         |         |         |   |         |        
|                                                    | Interest expense, net           |                                   |        | (6,894       | )      |              |        | (6,008       | )      |              |         | (5,987      | )       |             |         | (14,678 | )       |   |         | (18,690 | )     
|                                                    | Other income (expense), net     |                                   |        | (92          | )      |              |        | 2,012        |        |              |         | 49          |         |             |         | (64     | )       |   |         | 3,339   |       
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |         |         |         |   |         |        
|                                                    |                                 | Income (loss) before income taxes |        |              | (7,099 | )            |        |              | (328   | )            |         |             | (11,346 | )           |         |         | (17,007 | ) |         |         | 882    | 
|Income tax expense (benefit)                        |                                 |                                   | (1,714 | )            |        |              | 639    |              |        |              | (318    | )           |         |             | (4,930  | )       |         |   | 2,662   |        
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |         |         |         |   |         |        
|Net loss                                            |                                 | $                                 | (5,385 | )            |        | $            | (967   | )            |        | $            | (11,028 | )           |         | $           | (12,077 | )       |         | $ | (1,780  | )      
|                                                    |                                 |                                   |        |              |        |              |        |              |        |              |         |             |         |             |         |         |         |   |         |        

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

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##### Table of Contents






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

|                                                                                                      |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |         |         |  
|----------------------------------------------------------------------------------------------------- | ---------------------------------------- | --------------------------------------------------- | ------- | ------------------ | ------- | ----------------- | --------- | ------------- | -------- | - | ------- | ------- | ------- | -
|                                                                                                      |                                          |                                                     |         | Predecessor        |         |                   |           |               |          |   |         |        
|                                                                                                      |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        
|                                                                                                      |                                          |                                                     |         | Period from        |         | Period from       |           | Nine Months  
|                                                                                                      |                                          |                                                     |         | October 1, 2001 to |         | November 15, 2001 |           | Ended        
|                                                                                                      |                                          |                                                     |         | December 20, 2001  |         | to June 30, 2002  |           | June 30, 2003
|                                                                                                      |                                          |                                                     |         |                    |         |                   |           |              
|Cash flows from operating activities:                                                                 |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        
|Net loss                                                                                              |                                          | $                                                   | (11,028 | )                  |         | $                 | (12,077   | )             |          | $ | (1,780  | )      
|Adjustments to reconcile net loss to net cash provided by operating activities:                       |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        
|                                                                                                      | Depreciation and amortization            |                                                     |         | 1,393              |         |                   |           | 2,474         |          |   |         | 4,683   |        
|                                                                                                      | Amortization of intangibles              |                                                     |         | 9,344              |         |                   |           | 7,475         |          |   |         | 10,736  |        
|                                                                                                      | Amortization of deferred financing costs |                                                     |         |                   |         |                   |           | 1,564         |          |   |         | 2,016   |        
|                                                                                                      | Provision for doubtful accounts          |                                                     |         | 1,018              |         |                   |           | 445           |          |   |         | 248     |        
|                                                                                                      | Deferred income taxes                    |                                                     |         | (4,761             | )       |                   |           | (8,368        | )        |   |         | (2,533  | )      
|                                                                                                      | Employee deferred compensation charge    |                                                     |         | (19                | )       |                   |           | (46           | )        |   |         | (70     | )      
|Changes in operating assets and liabilities:                                                          |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        
|                                                                                                      | Accounts receivables                     |                                                     |         | 4,702              |         |                   |           | 25,223        |          |   |         | 2,146   |        
|                                                                                                      | Inventories                              |                                                     |         | 1,823              |         |                   |           | 43,771        |          |   |         | (21,149 | )      
|                                                                                                      | Prepaids and other current assets        |                                                     |         | (281               | )       |                   |           | (545          | )        |   |         | (1,594  | )      
|                                                                                                      | Other assets                             |                                                     |         | 322                |         |                   |           | (16           | )        |   |         | 36      |        
|                                                                                                      | Accounts payable and accrued expenses    |                                                     |         | 7,019              |         |                   |           | (9,520        | )        |   |         | (9,049  | )      
|                                                                                                      | Income taxes payable                     |                                                     |         | (988               | )       |                   |           | 3,221         |          |   |         | 1,305   |        
|                                                                                                      | Customer advances and deferred revenue   |                                                     |         | 9,326              |         |                   |           | (26,885       | )        |   |         | 26,057  |        
|                                                                                                      | Other liabilities                        |                                                     |         | (2,623             | )       |                   |           |              |          |   |         | (9      | )      
|                                                                                                      |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        
|                                                                                                      |                                          | Net cash provided by operating activities           |         |                    | 15,247  |                   |           |               | 26,716   |   |         |         | 11,043  |  
|                                                                                                      |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        
|Cash flows from investing activities:                                                                 |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        
|Capital expenditures                                                                                  |                                          |                                                     | (1,902  | )                  |         |                   | (2,785    | )             |          |   | (3,851  | )      
|Proceeds from restricted cash account and other amounts in connection with
Global Crossing settlement |                                          |                                                     |        |                    |         |                   |          |               |          |   | 9,419   |        
|Cash payments in connection with Global Crossing settlement                                           |                                          |                                                     |        |                    |         |                   |          |               |          |   | (5,200  | )      
|Cash
payments for acquisitions                                                                        |                                          |                                                     |        |                    |         |                   | (345,746) |               |          |   |        |        
|Cash
acquired as a result of acquisitions                                                             |                                          |                                                     |        |                    |         |                   |          |               |          |   | 4,087   |        
|                                                                                                      |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        
|                                                                                                      |                                          | Net cash provided by (used in) investing activities |         |                    | (1,902  | )                 |           |               | (348,531 | ) |         |         | 4,455   |  
|                                                                                                      |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        
|Cash flows from financing activities:                                                                 |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        
|Repayments of intercompany borrowings                                                                 |                                          |                                                     | (15,134 | )                  |         |                   |          |               |          |   |        |        
|Principal repayments on term loan                                                                     |                                          |                                                     |        |                    |         |                   | (2,625    | )             |          |   | (18,616 | )      
|Debt issuance costs for term loan amendment                                                           |                                          |                                                     |        |                    |         |                   |          |               |          |   | (310    | )      
|Proceeds from term loan, net of issuance costs                                                        |                                          |                                                     |        |                    |         |                   | 98,600    |               |          |   |        |        
|Proceeds from senior subordinated notes, net of issuance costs                                        |                                          |                                                     |        |                    |         |                   | 136,600   |               |          |   |        |        
|Proceeds from equity issuance, net                                                                    |                                          |                                                     |        |                    |         |                   | 139,700   |               |          |   |        |        
|                                                                                                      |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        
|                                                                                                      |                                          | Net cash provided by (used in) financing activities |         |                    | (15,134 | )                 |           |               | 372,275  |   |         |         | (18,926 | )
|                                                                                                      |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        
|Effect of exchange rate changes on cash                                                               |                                          |                                                     | (1,996  | )                  |         |                   | 1,180     |               |          |   | (850    | )      
|                                                                                                      |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        
|                                                                                                      |                                          | Net increase (decrease) in cash                     |         |                    | (3,785  | )                 |           |               | 51,640   |   |         |         | (4,278  | )
|Cash, beginning of period                                                                             |                                          |                                                     | 4,536   |                    |         |                   |          |               |          |   | 25,294  |        
|                                                                                                      |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        
|Cash, end of period                                                                                   |                                          | $                                                   | 751     |                    |         | $                 | 51,640    |               |          | $ | 21,016  |        
|                                                                                                      |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        
|Supplemental disclosures of cash flow information:                                                    |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        
|Cash paid during the periods for:                                                                     |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        
|                                                                                                      | Income taxes                             |                                                     | $       | 1,338              |         |                   | $         | 234           |          |   | $       | 4,320   |        
|                                                                                                      |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        
|                                                                                                      | Interest                                 |                                                     | $       | 66                 |         |                   | $         | 12,830        |          |   | $       | 21,403  |        
|                                                                                                      |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        
|Supplemental disclosures of non-cash investing activities:                                            |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        
|Value of common stock issued for the Gains acquisition                                                |                                          |                                                     |         |                    |         |                   |           |               |          | $ | 5,693   |        
|                                                                                                      |                                          |                                                     |         |                    |         |                   |           |               |          |   |         |        

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)
June 30, 2003



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

The accompanying unaudited condensed consolidated financial statements
include the accounts of IPC Acquisition Corp. (the Company) and its wholly
owned subsidiaries. The unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States for interim financial reporting and the requirements of
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
certain information and footnote disclosures required by accounting principles
generally accepted in the United States for annual financial reporting and
should be read in conjunction with the audited consolidated financial
statements included in the Companys Form 10-K/A amendment for the fiscal year
ended September 30, 2002, as filed with the Securities and Exchange Commission
on June 6, 2003.

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

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

The unaudited condensed consolidated financial statements for the period
from November 15, 2001 (date of initial capitalization) to June 30, 2002 and
the three and nine months ended June 30, 2003 include the accounts of the
Company and its wholly owned subsidiaries. The principal activity of the
Company consists of the December 20, 2001 acquisition of the Predecessor (the
IPC Information Systems Acquisition), and the results of operations of the
acquired business from such date through June 30, 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 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 newly
acquired Gains International (US) Inc. and Gains International (Europe) Limited
division (collectively Gains), 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 is usually 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. For the period from October 1, 2001 to
December 20, 2001, goodwill was amortized on a straight-line basis over the
periods benefited, principally 10 years, and resulted in amortization of $4.7
million for such period.

The Company adopted Statement of Financial Accounting Standards No. 142
(SFAS No. 142) Goodwill and Other Intangible Assets effective upon the IPC
Information Systems Acquisition and, in accordance with SFAS No. 142, there is
no amortization of goodwill and intangible assets that have indefinite useful
lives for the period from November 15, 2001 to June 30, 2002 and the three and
nine months ended June 30, 2003. However, such assets are tested for impairment
at least annually using the two-step process specifically provided in the
statement. Other intangible assets are carried at cost. Technology and customer
lists are amortized over the estimated useful lives of 7 and 20 years,
respectively. Trade name has been deemed to have an indefinite life and will
not be subject to amortization expense, but instead is subject to annual
impairment tests in accordance with the provisions of SFAS No. 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 its market leading position in the
turret

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
June 30, 2003

business, 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 horizon.

The Company believes the recorded values of goodwill and trade name at
June 30, 2003 in the amounts of $80.2 million and $18.8 million, respectively,
are fully recoverable. The Companys annual impairment test is performed in the
fourth quarter of each fiscal year.

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 June 30, 2003 and June 30, 2002:
weighted-average risk-free interest rate of 2.1% and 3.5%, respectively; no
dividends; weighted-average volatility factor of the expected market price of
the Companys common stock of 90% and 74.2%, respectively, and a
weighted-average expected life of the options of 4 and 5 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 and
nine months ended June 30, 2003 was $4.62. The Companys pro forma net loss for
all periods are shown below. These amounts may not necessarily be indicative of
the pro forma effect of SFAS 123 for future periods in which options may be
granted.

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

|                                                                                                                                  |  |              |        |              |  |              |        |              |  |             |         |             |  |   |         |   |  |   |        |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------ | ------------ |  | ------------ | ------ | ------------ |  | ----------- | ------- | ----------- |  | - | ------- | - |  | - | ------ | -
|                                                                                                                                  |  |              |        |              |  |              |        |              |  | Predecessor |         |             |  |   |         |   |  |  
|                                                                                                                                  |  |              |        |              |  |              |        |              |  |             |         |             |  |   |         |   |  |  
|                                                                                                                                  |  |              |        |              |  |              |        |              |  | Period from |         | Period from |  |   |         |  
|                                                                                                                                  |  | Three Months |        | Three Months |  | October 1,   |        | November 15, |  | Nine Months
|                                                                                                                                  |  | Ended        |        | Ended        |  | 2001 to      |        | 2001 to      |  | Ended      
|                                                                                                                                  |  | June 30,     |        | June 30,     |  | December 20, |        | June 30,     |  | June 30,   
|(dollars in thousands)                                                                                                            |  | 2002         |        | 2003         |  | 2001         |        | 2002         |  | 2003       
|                                                                                                                                  |  |              |        |              |  |              |        |              |  |            
|Reported net loss                                                                                                                 |  | $            | (5,385 | )            |  | $            | (967   | )            |  | $           | (11,028 | )           |  | $ | (12,077 | ) |  | $ | (1,780 | )
|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 fair value based method for all awards, net
of tax effect |  |              | (140   | )            |  |              | (160   | )            |  |             |        |             |  |   | (140    | ) |  |   | (531   | )
|                                                                                                                                  |  |              |        |              |  |              |        |              |  |             |         |             |  |   |         |   |  |   |        |  
|Net loss, pro forma                                                                                                               |  | $            | (5,525 | )            |  | $            | (1,127 | )            |  | $           | (11,028 | )           |  | $ | (12,217 | ) |  | $ | (2,311 | )
|                                                                                                                                  |  |              |        |              |  |              |        |              |  |             |         |             |  |   |         |   |  |   |        |  

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
June 30, 2003

Effects of Recently Issued Accounting Standards

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

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

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

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities (SFAS 146) which nullified EITF
Issue No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring) (EITF No. 94-3). SFAS 146 requires that a liability for
a cost associated with an exit or disposal activity be recognized when the
liability is incurred, whereas EITF No. 94-3 had recognized the liability at
the commitment date to an exit plan. The Company is required to adopt the
provisions of SFAS 146 effective for exit or disposal activities initiated
after December 31, 2002. The Company adopted SFAS 146 on January 1, 2003. The
adoption of this standard did not have a material impact on the Companys
condensed consolidated financial statements.

In November 2002, the EITF reached a consensus on Issue 00-21,
Multiple-Deliverable Revenue Arrangements (EITF 00-21). EITF 00-21
addresses how to account for arrangements that may involve the delivery or
performance of multiple products, services, and/or rights to use assets. The
consensus mandates how to identify whether goods or services or both which are
to be delivered separately in a bundled sales arrangement should be accounted
for separately because they are separate units of accounting. The guidance
can affect the timing of revenue recognition for such arrangements, even though
it does not change rules governing the timing or pattern of revenue recognition
of individual items accounted for separately. The final consensus will be
applicable to agreements entered into in fiscal 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 Company is still assessing the impact
of the adoption of EITF 00-21, but does not believe it will have a material
impact on its condensed 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

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
June 30, 2003

periods ending after December 15, 2002, and the Company has adopted those requirements for its financial
statements included in this Form 10-Q. The initial recognition and initial
measurement requirements of FIN 45 are effective prospectively for guarantees
issued or modified after December 31, 2002. The Company applied FIN 45 in
connection with the March 13, 2003 settlement and rejection agreement with
Global Crossing (see Note 2). The Company has reflected the fair value of
guarantees on behalf of Global Crossing in its June 30, 2003 condensed
consolidated financial statements.

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

In January 2003, the FASB issued FASB Interpretation No. 46,
Consolidation of Variable Interest Entities (FIN 46), which requires
variable interest entities (commonly referred to as SPEs) to be consolidated
by the primary beneficiary of the entity if certain criteria are met. FIN 46 is
effective immediately for all new variable interest entities created or
acquired after January 31, 2003. For variable interest entities created or
acquired before February 1, 2003, the provisions of FIN 46 become effective for
the Company during the fourth quarter of the Companys 2003 fiscal year. For variable interest entities
acquired prior to February 1, 2003, any difference between the net amount added
to the balance sheet and the amount of any previously recognized interest in
the variable interest entity will be recognized as a cumulative effect of an
accounting change. We are currently evaluating the provisions of FIN 46, but do
not believe the adoption will have a significant impact on the Companys
condensed consolidated financial statements. In connection with the
Purple Voice transaction (see Note 12), the guidance in
FIN 46 will require the Company to consolidate Purple Voice into
the condensed consolidated financial statements starting August 1, 2003.

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 No. 133, Accounting for Derivative Instruments and Hedging
Activities (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 is not expected to have a
material impact on the Companys condensed consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity
(SFAS 150). SFAS 150 establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both liabilities
and equity. SFAS 150 applies specifically to a number of financial instruments
that companies have historically presented within their financial statements
either as equity or between the liabilities section and the equity section,
rather than as liabilities. SFAS 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. The
adoption of SFAS 150 is not expected to have an impact on the Companys
condensed consolidated financial statements.

Comprehensive Loss

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

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
June 30, 2003

|                                   |  |              |        |              |  |              |       |              |  |               |         |             |  |   |         |   |  |   |        |  
|---------------------------------- |  | ------------ | ------ | ------------ |  | ------------ | ----- | ------------ |  | ------------- | ------- | ----------- |  | - | ------- | - |  | - | ------ | -
|                                   |  |              |        |              |  |              |       |              |  | Predecessor   |         |             |  |   |         |   |  |  
|                                   |  |              |        |              |  |              |       |              |  |               |         |             |  |   |         |   |  |  
|                                   |  |              |        |              |  |              |       |              |  | Period from   |         | Period from |  |   |         |  
|                                   |  | Three Months |        | Three Months |  | October 1,   |       | November 15, |  |               |         |            
|                                   |  | Ended        |        | Ended        |  | 2001 to      |       | 2001 to      |  | Nine Months  
|                                   |  | June 30,     |        | June 30,     |  | December 20, |       | June 30,     |  | Ended        
|(dollars in thousands)             |  | 2002         |        | 2003         |  | 2001         |       | 2002         |  | June 30, 2003
|                                   |  |              |        |              |  |              |       |              |  |              
|Reported net loss                  |  | $            | (5,385 | )            |  | $            | (967  | )            |  | $             | (11,028 | )           |  | $ | (12,077 | ) |  | $ | (1,780 | )
|Translation adjustment, net of tax |  |              | 1,395  |              |  |              | 1,857 |              |  |               | (1,238  | )           |  |   | 743     |   |  |   | 2,013  |  
|                                   |  |              |        |              |  |              |       |              |  |               |         |             |  |   |         |   |  |   |        |  
|Total comprehensive (loss) income  |  | $            | (3,990 | )            |  | $            | 890   |              |  | $             | (12,266 | )           |  | $ | (11,334 | ) |  | $ | 233    |  
|                                   |  |              |        |              |  |              |       |              |  |               |         |             |  |   |         |   |  |   |        |  



|2. |  | Acquisitions
|-- |  | ------------

The IPC Information Systems Acquisition

The
Company was formed in November 2001 by a group led by Goldman
Sachs Capital Partners 2000, or 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. The Company
did not have any assets or operations prior to its acquisition of IPC Information
Systems. On December 20, 2001, the Company purchased 100% of the common stock
of IPC Information Systems, Inc. and 100% of the ordinary shares of Asia Global
Crossing IPC Trading Systems Australia Pty. Ltd. from Global Crossing and Asia
Global Crossing, Ltd. and various of their affiliates. In addition, the Company
acquired various assets owned by affiliates of Global Crossing and Asia Global
Crossing related to the operation of these businesses. Under the purchase
agreement, the total purchase price for the shares and assets was $360.0
million, subject to various adjustments for working capital and customer
advances. As a result of the IPC Information Systems Acquisition, the
Company owns the leader in the turret industry, based on its base of
approximately 110,000 turrets and related equipment installed in trading positions
worldwide.

The following table summarizes the fair value of the assets acquired and
the liabilities assumed at the date of the IPC Information Systems Acquisition.
The purchase price on the date of the IPC Information Systems Acquisition
exceeded the fair market value of the net assets acquired by approximately
$77.3 million and was recorded as goodwill on the consolidated balance sheet.
The factors that contributed to a purchase price that resulted in the
recognition of goodwill include the market leading position of IPC Information
Systems, Inc. in the turret industry and its ability to generate significant
income from operations and cash flows from operating activities.

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

The IPC Information Systems Acquisition was accounted for using the
purchase method of accounting in accordance with FASB Statement No. 141,
Business Combinations (SFAS 141). The following represents the allocation of the excess of the purchase price over the historical cost of the
net tangible assets acquired at the date of the purchase:

8



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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
June 30, 2003

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

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

In connection with the settlement and rejection agreement with Global
Crossing, the goodwill account has been reduced by $2.1 million from the amount
recorded at September 30, 2002. This reduction to the goodwill account reflects
the transfer of $7.3 million of restricted cash to cash and tax refunds in the
amount of $2.2 million received from Global Crossing pursuant to the settlement
and rejection agreement aggregating $9.5 million and $0.9 million of other net
items and are partially offset by the payment of $5.2 million cash to a new
escrow account pursuant to the settlement and rejection agreement and the
assumption of $3.2 million of liabilities associated with pre-existing
guarantees of real estate obligations that the Company may be required to pay
if Global Crossing fails to do so. As a result of the settlement and rejection
agreement, the Company may no longer offset any payments relating to those
guarantees from the payment by the Company to Global Crossing of any portion of
the deferred purchase price. The September 30, 2002 goodwill balance of $72.3
million decreased $5.0 million from the amount initially recorded at December
20, 2001 of $77.3 million, primarily due to working capital adjustments to the
purchase price and a reduction of certain estimated assumed and contingent
liabilities, which were offset by the acquisition of the Hitachi Ltd. customer
base and related assets on March 29, 2002 and foreign exchange adjustments
related to the allocation of goodwill to the Companys foreign operating units.

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

The IPC Information Systems Acquisition was financed with the net proceeds
from the issuance of the outstanding senior subordinated notes, borrowings
under the senior secured credit facilities and a common equity contribution of
$140.0 million by a group led by GSCP 2000 and its affiliates. Under the terms
of the purchase agreement, approximately $20.8 million of the purchase price
was not paid to Global Crossing at the closing. A portion of these deferred
amounts was used to offset the

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
June 30, 2003

Companys payment of contingent equipment lease liabilities of former affiliates that the Company guaranteed. Through March 13,
2003, the Company had paid approximately $13.5 million of these contingent
liabilities. On March 13, 2003, in connection with the settlement and rejection
agreement that the Company entered into with Global Crossing, the Company was
relieved of any obligation to make deferred purchase price payments to Global
Crossing.

Prior to the completion of the IPC Information Systems Acquisition, the
Company leased six floors at 67-73 Worship Street, London, England at an annual
rate of approximately £565,000, or $932,000, assuming an exchange rate of £1 to
$1.6503. 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 June 30, 2003, Global Crossings
affiliate has made all of its required sublease payments.

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

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

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

On March 13, 2003, the Company entered into a settlement and rejection
agreement with Global Crossing. Pursuant to the settlement and rejection
agreement, all of the remaining obligations under the purchase agreement
relating to the IPC Information Systems Acquisition were terminated, including
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.

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

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

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
June 30, 2003

IPC Information Systems, Inc. and its subsidiaries for
periods prior to and including the date of the IPC Information Systems
Acquisition. Therefore, in the event that any tax liabilities are imposed, as a
result of an audit or otherwise, on IPC Information Systems, Inc. and/or its
subsidiaries for periods prior to and including the date of the IPC Information
Systems Acquisition, the Company may be required to pay those taxes and is no
longer able to seek indemnification from Global Crossing. As of the date of
this filing, the aggregate amount of taxes for which the Company has received
notices of taxes due from various jurisdictions and recognized as tax
liabilities under purchase accounting is approximately $6.5 million. The
Company estimates that the range of its exposure for additional tax liabilities
is from $0 to $36 million. In computing its estimated range of potential tax
liabilities, the Company took into account tax returns in certain jurisdictions
where the statutes of limitations have not yet expired. Under those tax returns
as filed, the remaining liability is zero. Although the Company believes that
all those tax returns have been filed correctly, such returns may be audited
and additional taxes may be assessed (or refunds may be granted). Payment by
the Company of a significant amount of these potential tax liabilities could
have a material adverse effect on the Companys financial condition and results
of operations, requiring the Company to seek additional financing. In that
event, the Company cannot assure you 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 a second amendment to the network
services, channel sales and transition services agreement. Under the
second amendment, the Company no longer has any obligation to market or resell
Global Crossings channel network services to its customers. In addition, the
restrictions on the Companys ability to compete with Global Crossing will
terminate on June 20, 2004 (instead of December 20, 2004), or, on June 20, 2003
(instead of December 20, 2003) in connection with a business combination
transaction with an unrelated third party that is or becomes a competitor of
Global Crossing. Finally, pursuant to the settlement and rejection agreement,
the Company will be permitted to use any other provider of network services for
its own internal purposes provided its aggregate annual payments to Global
Crossing and their subsidiaries is at least $48,000. Neither this second
amendment nor the first amendment to the network services, channel sales and
transition services agreement was signed by Asia Global Crossing Asia Pacific
Commercial, Ltd., a former Global Crossing affiliate that was an original
signatory to this agreement. Accordingly, with respect to Asia Global Crossing
Asia Pacific Commercial, Ltd., the non-compete restrictions contained in the
original network services, channel sales and transition services agreement have
not been suspended and the Companys ability to engage in certain new lines of
business activities in Asia is restricted.

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

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

The unaudited pro forma combined financial information gives effect to (a)
the IPC Information Systems Acquisition (b) the offering of the outstanding
senior subordinated notes, (c) term loan borrowings under the Companys senior
secured credit facilities, (d) the purchase accounting adjustments associated
with the IPC Information Systems Acquisition, (e) the common equity
contribution and (f) the related fees and expenses. The unaudited pro forma
financial information of the Company does not include various one-time costs
for operating expenses and capital expenditures associated with establishing
the Company as a stand-alone entity.

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

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
June 30, 2003

Gains Acquisition

On April 30, 2003, the Company exercised its option to purchase 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 earn-out commitments up to a maximum
of approximately $9.9 million dollars based on current exchange rates. With the
acquisition of Gains, the Company will now offer voice and data services to the
financial services community. This transaction follows the
simultaneous completion of a transaction involving the sale of Gains
International (US) Inc., Gains International (Europe) Limited and
Gains International Asia Holdings Limited to entities formed by GSCP
2000, and its affiliates.

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 $8.7 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
Gains to generate income from operations and cash flows from operating
activities in the future.

|                                               |                           |   |       |        | 
|---------------------------------------------- | ------------------------- | - | ----- | ------ | 
|Condensed Balance Sheet (dollars in thousands)
|Current assets                                 |                           | $ | 6,280 |       
|Property, plant and equipment                  |                           |   | 2,645 |       
|Goodwill                                       |                           |   | 8,715 |       
|Other long-term assets                         |                           |   | 12    |       
|                                               |                           |   |       |       
|                                               | Total assets acquired     |   |       | 17,652 | 
|                                               |                           |   |       |       
|Current liabilities                            |                           |   | 8,831 |       
|Deferred
purchase consideration                |                           |   | 3,128 |       
|                                               |                           |   |       |       
|                                               | Total liabilities assumed |   |       | 11,959 | 
|                                               |                           |   |       |       
|                                               | Net assets acquired       |   | $     | 5,693  | 
|                                               |                           |   |       |       

The acquisition of Gains was accounted for as a purchase and accordingly,
the Companys results of operations include the operating results of Gains from
the date of purchase. The following table represents the preliminary 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 consideration                            |                                                                    |   | 3,128  |      
|Estimated transaction costs                                |                                                                    |   | 1,703  |      
|                                                           |                                                                    |   |        |      
|Total consideration                                        |                                                                    |   | 10,524 |      
|Historical cost of net tangible assets acquired            |                                                                    |   | (1,809 | )    
|                                                           |                                                                    |   |        |      
|Excess of purchase price over net tangible assets acquired |                                                                    | $ | 8,715  |      
|                                                           |                                                                    |   |        |      
|Allocation of excess purchase price:                       |                                                                    |   |        |      
|                                                           | Goodwill
(subject to adjustment based upon appraisal and earn-out) |   | $      | 8,715 | 
|                                                           |                                                                    |   |        |      

Set forth below is the unaudited pro forma combined results of operations
of the Company for the three months ended June 30, 2002 and 2003, the period
from October 1, 2001 to December 20, 2001, the period from November 15, 2001 to
June 30, 2002 and the nine months ended June 30, 2003, respectively, assuming
the Gains acquisition occurred as of the beginning of each period.

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

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
June 30, 2003

|                       |  |              |        |              |  |              |        |              |  |             |         |             |  |   |         |   |  |   |         |  
|---------------------- |  | ------------ | ------ | ------------ |  | ------------ | ------ | ------------ |  | ----------- | ------- | ----------- |  | - | ------- | - |  | - | ------- | -
|                       |  |              |        |              |  |              |        |              |  | Predecessor |         |             |  |   |         |   |  |  
|                       |  |              |        |              |  |              |        |              |  |             |         |             |  |   |         |   |  |  
|                       |  |              |        |              |  |              |        |              |  | Period from |         | Period from |  |   |         |  
|                       |  | Three Months |        | Three Months |  | October 1,   |        | November 15, |  | Nine Months
|                       |  | Ended        |        | Ended        |  | 2001 to      |        | 2001 to      |  | Ended      
|                       |  | June 30,     |        | June 30,     |  | December 20, |        | June 30,     |  | June 30,   
|(dollars in thousands) |  | 2002         |        | 2003         |  | 2001         |        | 2002         |  | 2003       
|                       |  |              |        |              |  |              |        |              |  |            
|Revenue                |  | $            | 66,533 |              |  | $            | 62,940 |              |  | $           | 61,648  |             |  | $ | 162,530 |   |  | $ | 178,221 |  
|Net loss               |  | $            | (6,187 | )            |  | $            | (1,020 | )            |  | $           | (11,464 | )           |  | $ | (13,638 | ) |  | $ | (2,853  | )



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

|                                                  |  |               |        |          |  |   |        | 
|------------------------------------------------- |  | ------------- | ------ | -------- |  | - | ------ | 
|                                                  |  | September 30, |        | June 30,
|(dollars in thousands)                            |  | 2002          |        | 2003    
|                                                  |  |               |        |         
|Components and manufacturing work in process      |  | $             | 6,091  |          |  | $ | 7,749  | 
|Inventory on customer sites awaiting installation |  |               | 8,025  |          |  |   | 28,493 | 
|Parts and maintenance supplies                    |  |               | 8,102  |          |  |   | 7,125  | 
|                                                  |  |               |        |          |  |   |        | 
|                                                  |  | $             | 22,218 |          |  | $ | 43,367 | 
|                                                  |  |               |        |          |  |   |        | 



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

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

|                                           |  |              |        |              |  |              |      |              |  |             |         |             |  |   |         |   |  |   |        |  
|------------------------------------------ |  | ------------ | ------ | ------------ |  | ------------ | ---- | ------------ |  | ----------- | ------- | ----------- |  | - | ------- | - |  | - | ------ | -
|                                           |  |              |        |              |  |              |      |              |  | Predecessor |         |             |  |   |         |   |  |  
|                                           |  |              |        |              |  |              |      |              |  |             |         |             |  |   |         |   |  |  
|                                           |  |              |        |              |  |              |      |              |  | Period from |         | Period from |  |   |         |  
|                                           |  | Three Months |        | Three Months |  | October 1,   |      | November 15, |  | Nine Months
|                                           |  | Ended        |        | Ended        |  | 2001 to      |      | 2001 to      |  | Ended      
|                                           |  | June 30,     |        | June 30,     |  | December 20, |      | June 30,     |  | June 30,   
|(dollars in thousands)                     |  | 2002         |        | 2003         |  | 2001         |      | 2002         |  | 2003       
|                                           |  |              |        |              |  |              |      |              |  |            
|Reported net loss                          |  | $            | (5,385 | )            |  | $            | (967 | )            |  | $           | (11,028 | )           |  | $ | (12,077 | ) |  | $ | (1,780 | )
|Add back goodwill amortization, net of tax |  |              |       |              |  |              |     |              |  |             | 2,978   |             |  |   |        |   |  |   |       |  
|Add back indefinite lived intangible       |  |              |        |              |  |              |      |              |  |             |         |             |  |   |         |   |  |   |        |  
|assets amortization, net of tax            |  |              |       |              |  |              |     |              |  |             | 950     |             |  |   |        |   |  |   |       |  
|                                           |  |              |        |              |  |              |      |              |  |             |         |             |  |   |         |   |  |   |        |  
|Adjusted net loss                          |  | $            | (5,385 | )            |  | $            | (967 | )            |  | $           | (7,100  | )           |  | $ | (12,077 | ) |  | $ | (1,780 | )
|                                           |  |              |        |              |  |              |      |              |  |             |         |             |  |   |         |   |  |   |        |  

The
following table reflects the changes in goodwill for the nine months
ended June 30, 2003:

|                           |  |                  |   |        |          |        |  
|-------------------------- |  | ---------------- | - | ------ | -------- | ------ | -
|                           |  |                  |   |        | June 30, |       
|(dollars in thousands)     |  | 2003             |  
|                           |  |                  |   |        |          |       
|Balance
at October 1, 2002 |  |                  | $ | 72,279 |          |        |  
|                           |  | Additions        |   |        |          | 8,715  |  
|                           |  | Write-offs       |   |        |          |       |  
|                           |  | Foreign
exchange |   |        |          | 1,641  |  
|                           |  | Reductions       |   |        |          | (2,443 | )
|                           |  |                  |   |        |          |       
|Balance
at June 30, 2003   |  |                  | $ | 80,192 |          |        |  
|                           |  |                  |   |        |          |       

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

|                       |                                  |                                                 |                     |      |               |         |          |   |         |         | 
|---------------------- | -------------------------------- | ----------------------------------------------- | ------------------- | ---- | ------------- | ------- | -------- | - | ------- | ------- | 
|                       |                                  |                                                 |                     |      | September 30, |         | June 30,
|(dollars in thousands) |                                  | 2002                                            |                     | 2003
|                       |                                  |                                                 |                     |      |               |         |         
|Intangible assets:     |                                  |                                                 |                     |      |               |         |          |  
|                       | Amortized intangible assets:     |                                                 |                     |      |               |         |          |   |        
|                       |                                  | Technology                                      |                     | $    | 45,000        |         |          | $ | 45,000  |        
|                       |                                  | Customer relationships                          |                     |      | 154,030       |         |          |   | 154,030 |        
|                       |                                  | Effect of currency translation adjustments      |                     |      | 2,754         |         |          |   | 4,793   |        
|                       |                                  | Accumulated amortization-technology             |                     |      | (5,014        | )       |          |   | (9,835  | )      
|                       |                                  | Accumulated amortization-customer relationships |                     |      | (6,100        | )       |          |   | (12,015 | )      
|                       |                                  |                                                 |                     |      |               |         |          |  
|                       |                                  |                                                 | Net carrying amount |      | $             | 190,670 |          |   | $       | 181,973 | 
|                       |                                  |                                                 |                     |      |               |         |          |  
|                       | Non-amortized intangible assets: |                                                 |                     |      |               |         |          |   |        
|                       |                                  | Goodwill                                        |                     | $    | 70,636        |         |          | $ | 76,908  |        
|                       |                                  | Trade name                                      |                     |      | 18,000        |         |          |   | 18,000  |        
|                       |                                  | Effect of currency translation adjustments      |                     |      | 2,105         |         |          |   | 4,111   |        
|                       |                                  |                                                 |                     |      |               |         |          |  
|                       |                                  |                                                 | Net carrying amount |      | $             | 90,741  |          |   | $       | 99,019  | 
|                       |                                  |                                                 |                     |      |               |         |          |  

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
June 30, 2003

Amortization expense for those intangible assets required to be amortized
under SFAS No.142 was $3.5 million, $3.6 million, $7.5 million, and $10.7
million for the three months ended June 30, 2002 and 2003, the period from
November 15, 2001 to June 30, 2002 and the nine months ended June 30, 2003,
respectively.

Amortization expense prior to the adoption of SFAS No.142 was $9.3 million
for the period from October 1, 2001 to December 20, 2001.

Estimated annual amortization expense for fiscal year 2003 and each of the
four succeeding fiscal years for identifiable intangible assets required to be
amortized under SFAS 142 are as follows:

|                        |  |   |        | 
|----------------------- |  | - | ------ | 
|(dollars in thousands):
|2003                    |  | $ | 14,344 | 
|2004                    |  |   | 14,344 | 
|2005                    |  |   | 14,344 | 
|2006                    |  |   | 14,344 | 
|2007                    |  |   | 14,344 | 



|5. |  | Accrued Expenses and Other Current Liabilities
|-- |  | ----------------------------------------------

|                                  |  |               |        |          |  |   |        | 
|--------------------------------- |  | ------------- | ------ | -------- |  | - | ------ | 
|                                  |  | September 30, |        | June 30,
|(dollars in thousands)            |  | 2002          |        | 2003    
|                                  |  |               |        |         
|Accrued compensation and benefits |  | $             | 7,719  |          |  | $ | 5,091  | 
|Warranty reserves                 |  |               | 2,159  |          |  |   | 1,400  | 
|Sales taxes payable               |  |               | 1,267  |          |  |   | 1,533  | 
|Job accruals                      |  |               | 1,867  |          |  |   | 2,476  | 
|Accrued transaction costs         |  |               | 651    |          |  |   | 1,162  | 
|Accrued interest                  |  |               | 5,072  |          |  |   | 760    | 
|Accrued carrier costs             |  |               |       |          |  |   | 3,301  | 
|Other accruals                    |  |               | 4,827  |          |  |   | 5,636  | 
|                                  |  |               |        |          |  |   |        | 
|                                  |  | $             | 23,562 |          |  | $ | 21,359 | 
|                                  |  |               |        |          |  |   |        | 



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

Senior Secured Credit Facilities

On December 20, 2001, the Company entered into the senior secured credit
facilities with a group of lenders comprised of (i) a $105.0 million term loan
with a variable interest rate (7.5% at June 30, 2003) and (ii) a $15.0 million
revolving credit facility. The maturity date of the loans is December 31, 2006.
The senior secured credit facilities are guaranteed by the Companys domestic
subsidiaries. These subsidiary guarantees are both full and unconditional, as
well as joint and several. The Company had no outstanding borrowings under the
revolving credit facility at June 30, 2003. However, the amount available to
the Company at June 30, 2003 under the revolving credit facility is reduced by
outstanding letters of credit of $4.3 million, thereby reducing the amount
available for borrowing under the revolving credit facility to $10.7 million.

As required under the terms of the senior secured credit facilities, the
Company made mandatory excess free cash flow repayments of $30.0 million and
$0.8 million on September 30, 2002 and December 29, 2002, respectively, based
upon 75% of the Companys excess cash flow for the period ended September 30,
2002. Excess cash flow is defined in the Companys credit agreement, as
amended, as: (1) the sum of net income, interest expense, provisions for taxes,
depreciation expense, amortization expense, other non-cash items affecting net
income, and to the extent included in calculating net income, expenses incurred
by the Company in connection with the first amendment to the credit agreement,
plus (2) a working capital adjustment, less (3) repayments of debt, capital
expenditures, cash interest expense and provisions for taxes based on
income. There is no required amortization on the revolving credit
facility, and no amounts are outstanding on such facility at
June 30, 2003.

In addition to customary affirmative covenants, the senior secured credit
facilities require the Company to enter into interest-rate hedging agreements
to the extent necessary for 50% of the total outstanding consolidated
indebtedness to be at a fixed rate. The senior secured credit facilities
include negative covenants that, among other things, restrict the Companys and
its subsidiaries ability to: incur additional indebtedness (including
guarantees of certain obligations); engage in mergers,

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
June 30, 2003

consolidations, liquidations and dissolutions; sell assets; enter into capital leases; pay
dividends or make other payments in respect of capital stock; make
acquisitions; make investments, loans and advances; make payments with respect
to or modify subordinated debt instruments; and enter into agreements with
negative pledge clauses or clauses restricting subsidiary distributions.

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

On March 3, 2003, the Company voluntarily prepaid $14.0 million of its
term loan under the senior secured credit facilities. In addition, the Company
completed an amendment to its senior secured credit facilities that modifies
the senior secured leverage, total leverage, interest coverage and capital
expenditures covenants in the credit agreement to less restrictive amounts and
secures consent from the Companys lenders for the acquisition of the shares of
Gains International (US) Inc. and Gains International (Europe) Limited (see
Note 2).

As of June 30, 2003, the remaining annual principal payments required
under the term loan (excluding mandatory prepayments of 75% of any future excess free cash flow amounts), by
fiscal year, are as follows (in thousands):

|     |  |   |        | 
|---- |  | - | ------ | 
|2003 |  | $ | 1,457  | 
|2004 |  |   | 5,827  | 
|2005 |  |   | 5,827  | 
|2006 |  |   | 29,865 | 
|2007 |  |   | 9,470  | 
|     |  |   |        | 
|     |  | $ | 52,446 | 
|     |  |   |        | 

Senior Subordinated Notes

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

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

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



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

2002 Stock Option Plan

In February 2002, the Company adopted the 2002 Stock Option Plan. The
option plan provides for the grant of options to purchase shares of the
Companys common stock to selected employees, officers, consultants and
directors. The purpose of the option plan is to provide an incentive to
employees, officers, consultants and directors to devote their abilities and
industry to the Companys success. The maximum number of shares that may be
made the subject of options granted under the option plan is

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
June 30, 2003

1,150,000. The Company granted 769,550 stock options in May 2002 and an additional 288,650
stock options in April 2003 with an option price of $10 per share.
For each of the grant dates, the fair value of the Companys
common stock was the same or below the option price. The
Company accounts for these options pursuant to APB Opinion No. 25 Accounting
for Stock Options Issued to Employees. Accordingly, no compensation expense
was recognized for these grants.

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

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

Stock option transactions for the period from October 1, 2002 to June 30,
2003 are as follows:

|                                  |           |  |           |         |                  |   |       |       | 
|--------------------------------- | --------- |  | --------- | ------- | ---------------- | - | ----- | ----- | 
|                                  |           |  | Number of |         | Weighted Average
|                                  |           |  | Shares    |         | Exercise Price  
|                                  |           |  |           |         |                 
|Outstanding at September 30, 2002 |           |  | 751,025   |         |                  | $ | 10.00 |      
|                                  | Granted   |  |           | 288,650 |                  |   | $     | 10.00 | 
|                                  | Exercised |  |           |        |                  |   |       |      | 
|                                  | Cancelled |  |           | (54,894 | )                |   | $     | 10.00 | 
|                                  |           |  |           |         |                  |   |       |      
|Outstanding at June 30, 2003      |           |  | 984,781   |         |                  | $ | 10.00 |      
|                                  |           |  |           |         |                  |   |       |      

Of the total stock options outstanding, 174,033 stock options were
exercisable at June 30, 2003. The amount of additional stock options available
to be granted pursuant to the option plan was 165,219 at June 30, 2003.

Key Employee Equity Investment Plan

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



|8. |  | Commitments and Contingencies
|-- |  | -----------------------------

Warranties

The Company records a reserve for future warranty costs based on current
unit sales, historical experience and managements judgment regarding
anticipated rates of warranty claims and cost per claim. The adequacy of the
recorded

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
June 30, 2003

warranty liabilities is assessed each quarter and adjustments are made
as necessary. The specific terms and conditions of the warranties vary
depending on the products sold and the countries in which the Company does
business. Changes in the warranty liability during the period are as follows:

|                              |                          |   |       |        |  
|----------------------------- | ------------------------ | - | ----- | ------ | -
|(dollars in thousands)        |                          |   |       |       
|Balance at September 30, 2002 |                          | $ | 2,159 |       
|                              | Warranty accrual         |   |       | 1,186  |  
|                              | Material and labor usage |   |       | (1,945 | )
|                              |                          |   |       |       
|Balance at June 30, 2003      |                          | $ | 1,400 |       
|                              |                          |   |       |       

Guarantees

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

The Company remains a guarantor of certain real estate lease obligations
on behalf of Global Crossing including the sublease for office space at 67-73
Worship Street in London, England. These guaranties will expire in
November 2004 and December 2005. These obligations were entered as a result of
Global Crossings ownership of the Company and the Company is responsible for
any payments if Global Crossing fails to make the required payments under the
lease agreements. However, under the settlement and rejection agreement, $2.0
million has been placed in an escrow account pending the issuance of an
irrevocable letter of credit from Global Crossing to the Company as beneficiary
in the event that Global Crossing fails to make the required payments under the
Worship Street sublease. The fair value of these guaranties is $4.9 million,
reduced by the $2.0 million escrow amount, and such amount has been recorded on
the Companys consolidated balance sheet. The maximum potential future payments
the Company could be required to make under these obligations is $5.2 million.
Through June 30, 2003, Global Crossings affiliate has made all of the required
Worship Street sublease payments.

Litigation

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

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



|9. |  | Income Taxes
|-- |  | ------------

The Companys effective tax rates for the three and nine month periods
ended June 30, 2003 were (194.8%) and 301.8%, respectively, compared to 24.1%,
2.8% and 29.0% for the three months ended June 30, 2002, the period from
October 1, 2001 to December 20, 2001 and the period from November 15, 2001 to
June 30, 2002, respectively.

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

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
June 30, 2003

As of June 30, 2003, the Company has recognized deferred tax assets
related to its US federal and state net operating loss carryforwards of
approximately $9.3 million. In determining whether it is more likely than not
that the Company will realize the benefits of the net deferred tax assets from
US operations, 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 (which, as a result of the Internal Revenue
Code Section 338(h)(10) tax election, jointly made by the Company and Global
Crossing, also generate deductions for income tax purposes); (2) US results of
operations for 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 June 30, 2003, no circumstances have arisen that would require
the Company to change such conclusion.

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



|10. |  | Business Segment Information
|--- |  | ----------------------------

The Companys operations include the Trading Systems, Information
Transport Systems, or I.T.S., and the Gains 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 Gains
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 is usually one year, as Service. The Companys
primary measures to evaluate performance are direct margin and
income from operations. For the period from November 15, 2001 to June 30,
2002, goodwill and total assets have been reclassified from prior
filings to reflect the final purchase accounting allocation of goodwill between
the Trading Systems and I.T.S. divisions.

|                                                 |                                 |               |        |                        |        |              |       |       |        |  |        |        |        | 
|------------------------------------------------ | ------------------------------- | ------------- | ------ | ---------------------- | ------ | ------------ | ----- | ----- | ------ |  | ------ | ------ | ------ | 
|                                                 |                                 |               |        | Predecessor           
|                                                 |                                 |               |        |                       
|                                                 |                                 |               |        | Trading                |        |              |       |       |        |  |        |       
|Period from October 1, 2001 to December 20, 2001 |                                 | Systems       |        | I.T.S.                 |        | Consolidated
|                                                 |                                 |               |        |                        |        |             
|                                                 |                                 |               |        | (dollars in thousands)
|Revenue:                                         |                                 |               |        |                        |        |              |       |       |        |  |        |       
|                                                 | Product sales and installations |               | $      | 27,444                 |        |              | $     | 8,247 |        |  | $      | 35,691 |       
|                                                 | Service                         |               |        | 18,795                 |        |              |       | 4,294 |        |  |        | 23,089 |       
|                                                 |                                 |               |        |                        |        |              |       |       |        |  |        |       
|                                                 |                                 | Total revenue |        |                        | 46,239 |              |       |       | 12,541 |  |        |        | 58,780 | 
|Direct margin                                    |                                 |               | 28,690 |                        |        |              | 2,734 |       |        |  | 31,424 |       
|Depreciation and amortization                    |                                 |               | 10,729 |                        |        |              | 8     |       |        |  | 10,737 |       
|Income (loss) from operations                    |                                 |               | (6,498 | )                      |        |              | 1,090 |       |        |  | (5,408 | )     
|Interest income (expense), net                   |                                 |               | (5,987 | )                      |        |              |      |       |        |  | (5,987 | )     

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
June 30, 2003

|                                                         |  |                        |         |        |  |              |        |  |  |   |         |  
|-------------------------------------------------------- |  | ---------------------- | ------- | ------ |  | ------------ | ------ |  |  | - | ------- | -
|                                                         |  | Predecessor           
|                                                         |  |                       
|                                                         |  | Trading                |         |        |  |              |        |  |  |  
|Period from October 1,
2001 to December 20, 2001 (cont.) |  | Systems                |         | I.T.S. |  | Consolidated
|                                                         |  |                        |         |        |  |             
|                                                         |  | (dollars in thousands)
|Other income (expense), net                              |  |                        | 49      |        |  |              |       |  |  |   | 49      |  
|Income (loss) before income taxes                        |  |                        | (12,436 | )      |  |              | 1,090  |  |  |   | (11,346 | )
|Income tax benefit                                       |  |                        | (318    | )      |  |              |       |  |  |   | (318    | )
|Goodwill, net                                            |  | $                      | 180,328 |        |  | $            |       |  |  | $ | 180,328 |  
|Total assets                                             |  | $                      | 350,787 |        |  | $            | 29,179 |  |  | $ | 379,966 |  
|Capital expenditures                                     |  | $                      | 1,897   |        |  | $            | 5      |  |  | $ | 1,902   |  

|                                               |                                 |               |         |                        |         |              |        |        |        |   |         |         |         | 
|---------------------------------------------- | ------------------------------- | ------------- | ------- | ---------------------- | ------- | ------------ | ------ | ------ | ------ | - | ------- | ------- | ------- | 
|                                               |                                 |               |         | Trading                |         |              |        |        |        |   |         |        
|Period from November 15, 2001 to June 30, 2002 |                                 | Systems       |         | I.T.S.                 |         | Consolidated
|                                               |                                 |               |         |                        |         |             
|                                               |                                 |               |         | (dollars in thousands)
|Revenue:                                       |                                 |               |         |                        |         |              |        |        |        |   |         |        
|                                               | Product sales and installations |               | $       | 88,512                 |         |              | $      | 15,904 |        |   | $       | 104,416 |        
|                                               | Service                         |               |         | 44,348                 |         |              |        | 6,578  |        |   |         | 50,926  |        
|                                               |                                 |               |         |                        |         |              |        |        |        |   |         |        
|                                               |                                 | Total revenue |         |                        | 132,860 |              |        |        | 22,482 |   |         |         | 155,342 | 
|Direct margin                                  |                                 |               | 46,326  |                        |         |              | 4,013  |        |        |   | 50,339  |        
|Depreciation and amortization                  |                                 |               | 9,733   |                        |         |              | 216    |        |        |   | 9,949   |        
|Income (loss) from operations                  |                                 |               | (2,635  | )                      |         |              | 370    |        |        |   | (2,265  | )      
|Interest income (expense), net                 |                                 |               | (14,678 | )                      |         |              |       |        |        |   | (14,678 | )      
|Other income (expense), net                    |                                 |               | (64     | )                      |         |              |       |        |        |   | (64     | )      
|Income (loss) before income taxes              |                                 |               | (17,377 | )                      |         |              | 370    |        |        |   | (17,007 | )      
|Income tax benefit                             |                                 |               | (4,930  | )                      |         |              |       |        |        |   | (4,930  | )      
|Goodwill                                       |                                 | $             | 70,731  |                        |         | $            | 1,408  |        |        | $ | 72,139  |        
|Total assets                                   |                                 | $             | 444,727 |                        |         | $            | 22,024 |        |        | $ | 466,751 |        
|Capital expenditures                           |                                 | $             | 2,766   |                        |         | $            | 19     |        |        | $ | 2,785   |        

|                                        |                                 |               |         |         |         |       |        |                        |        |   |        |       |       |   |         |        |         | 
|--------------------------------------- | ------------------------------- | ------------- | ------- | ------- | ------- | ----- | ------ | ---------------------- | ------ | - | ------ | ----- | ----- | - | ------- | ------ | ------- | 
|                                        |                                 |               |         | Trading |         |       |        |                        |        |   |        |       |       |   |         |       
|For the Nine Months Ended June 30, 2003 |                                 | Systems       |         | I.T.S.  |         | Gains |        | Consolidated          
|                                        |                                 |               |         |         |         |       |        |                       
|                                        |                                 |               |         |         |         |       |        | (dollars in thousands) |        |   |        |      
|Revenue:                                |                                 |               |         |         |         |       |        |                        |        |   |        |       |       |   |         |       
|                                        | Product sales and installations |               | $       | 63,068  |         |       | $      | 26,156                 |        |   | $      |      |       |   | $       | 89,224 |        
|                                        | Service                         |               |         | 65,056  |         |       |        | 7,400                  |        |   |        | 4,000 |       |   |         | 76,456 |        
|                                        |                                 |               |         |         |         |       |        |                        |        |   |        |       |       |   |         |       
|                                        |                                 | Total revenue |         |         | 128,124 |       |        |                        | 33,556 |   |        |       | 4,000 |   |         |        | 165,680 | 
|Direct margin                           |                                 |               | 80,096  |         |         |       | 4,431  |                        |        |   | 1,760  |       |       |   | 86,287  |       
|Depreciation and amortization           |                                 |               | 14,985  |         |         |       | 180    |                        |        |   | 254    |       |       |   | 15,419  |       
|Income (loss) from operations           |                                 |               | 16,557  |         |         |       | 17     |                        |        |   | (341   | )     |       |   | 16,233  |       
|Interest income (expense), net          |                                 |               | (18,695 | )       |         |       |       |                        |        |   | 5      |       |       |   | (18,690 | )     
|Other income (expense), net             |                                 |               | 3,331   |         |         |       |       |                        |        |   | 8      |       |       |   | 3,339   |       
|Income (loss) before income taxes       |                                 |               | 1,193   |         |         |       | 17     |                        |        |   | (328   | )     |       |   | 882     |       
|Income tax provision                    |                                 |               | 2,604   |         |         |       |       |                        |        |   | 58     |       |       |   | 2,662   |       
|Goodwill                                |                                 | $             | 70,362  |         |         | $     | 971    |                        |        | $ | 8,859  |       |       | $ | 80,192  |       
|Total assets                            |                                 | $             | 392,348 |         |         | $     | 29,352 |                        |        | $ | 18,844 |       |       | $ | 440,544 |       
|Capital expenditures                    |                                 | $             | 3,475   |         |         | $     | 19     |                        |        | $ | 357    |       |       | $ | 3,851   |       



|11. |  | Guarantor Subsidiaries Financial Information
|--- |  | ---------------------------------------------

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

19



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##### Table of Contents



IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
June 30, 2003

|                                                    |              |             |   |              |  |               |         |              |  |          |        |       |  |   |        |     |   |   |         |        | 
|--------------------------------------------------- | ------------ | ----------- | - | ------------ |  | ------------- | ------- | ------------ |  | -------- | ------ | ----- |  | - | ------ | --- | - | - | ------- | ------ | 
|Condensed Combining Statement of Operations         |              | IPC         |   | Guarantor    |  | Non-Guarantor |         |              |  |          |        |       |  |  
|For the Period October 1, 2001 to December 20, 2001 |              | Acquisition |   | Subsidiaries |  | Subsidiaries  |         | Eliminations |  | Combined
|                                                    |              |             |   |              |  |               |         |              |  |         
|Revenue                                             |              | $           |  |              |  | $             | 52,098  |              |  | $        | 13,777 |       |  | $ | (7,095 | )   |   | $ | 58,780  |       
|Cost of goods sold                                  |              |             |  |              |  |               | 30,826  |              |  |          | 9,226  |       |  |   | (7,014 | )   |   |   | 33,038  |       
|                                                    |              |             |   |              |  |               |         |              |  |          |        |       |  |   |        |     |   |   |         |       
|                                                    | Gross profit |             |   |             |  |               |         | 21,272       |  |          |        | 4,551 |  |   |        | (81 | ) |   |         | 25,742 | 
|Other operating expenses                            |              |             |  |              |  |               | 28,211  |              |  |          | 2,939  |       |  |   |       |     |   |   | 31,150  |       
|                                                    |              |             |   |              |  |               |         |              |  |          |        |       |  |   |        |     |   |   |         |       
|Income (loss) from operations                       |              |             |  |              |  |               | (6,939  | )            |  |          | 1,612  |       |  |   | (81    | )   |   |   | (5,408  | )     
|Interest income (expense) and other, net            |              |             |  |              |  |               | (6,218  | )            |  |          | 280    |       |  |   |       |     |   |   | (5,938  | )     
|Income tax provision (benefit)                      |              |             |  |              |  |               | 639     |              |  |          | (957   | )     |  |   |       |     |   |   | (318    | )     
|                                                    |              |             |   |              |  |               |         |              |  |          |        |       |  |   |        |     |   |   |         |       
|Net income (loss)                                   |              | $           |  |              |  | $             | (13,796 | )            |  | $        | 2,849  |       |  | $ | (81    | )   |   | $ | (11,028 | )     
|                                                    |              |             |   |              |  |               |         |              |  |          |        |       |  |   |        |     |   |   |         |       

|                                                    |  |             |   |              |  |               |         |              |  |          |        |   |  |   |   |  |  |   |         |  
|--------------------------------------------------- |  | ----------- | - | ------------ |  | ------------- | ------- | ------------ |  | -------- | ------ | - |  | - | - |  |  | - | ------- | -
|Condensed Combining Statement of Cash Flows         |  | IPC         |   | Guarantor    |  | Non-Guarantor |         |              |  |          |        |   |  |  
|For the Period October 1, 2001 to December 20, 2001 |  | Acquisition |   | Subsidiaries |  | Subsidiaries  |         | Eliminations |  | Combined
|                                                    |  |             |   |              |  |               |         |              |  |         
|Net cash provided by (used in) operating activities |  | $           |  |              |  | $             | 19,702  |              |  | $        | (4,455 | ) |  | $ |  |  |  | $ | 15,247  |  
|Capital expenditures                                |  |             |  |              |  |               | (1,875  | )            |  |          | (27    | ) |  |   |  |  |  |   | (1,902  | )
|                                                    |  |             |   |              |  |               |         |              |  |          |        |   |  |   |   |  |  |   |         |  
|Net cash used in investing activities               |  |             |  |              |  |               | (1,875  | )            |  |          | (27    | ) |  |   |  |  |  |   | (1,902  | )
|Repayment of intercompany borrowings                |  |             |  |              |  |               | (16,428 | )            |  |          | 1,294  |   |  |   |  |  |  |   | (15,134 | )
|                                                    |  |             |   |              |  |               |         |              |  |          |        |   |  |   |   |  |  |   |         |  
|Net cash (used in) provided by financing activities |  |             |  |              |  |               | (16,428 | )            |  |          | 1,294  |   |  |   |  |  |  |   | (15,134 | )
|Effect of exchange rate changes on cash             |  |             |  |              |  |               | (1,076  | )            |  |          | (920   | ) |  |   |  |  |  |   | (1,996  | )
|                                                    |  |             |   |              |  |               |         |              |  |          |        |   |  |   |   |  |  |   |         |  
|Net increase (decrease) in cash                     |  |             |  |              |  |               | 323     |              |  |          | (4,108 | ) |  |   |  |  |  |   | (3,785  | )
|Cash at beginning of period                         |  |             |  |              |  |               | (703    | )            |  |          | 5,239  |   |  |   |  |  |  |   | 4,536   |  
|                                                    |  |             |   |              |  |               |         |              |  |          |        |   |  |   |   |  |  |   |         |  
|Cash at end of period                               |  | $           |  |              |  | $             | (380    | )            |  | $        | 1,131  |   |  | $ |  |  |  | $ | 751     |  
|                                                    |  |             |   |              |  |               |         |              |  |          |        |   |  |   |   |  |  |   |         |  

|                                                  |              |             |         |              |  |               |         |              |  |              |        |        |  |   |         |        |   |   |         |        | 
|------------------------------------------------- | ------------ | ----------- | ------- | ------------ |  | ------------- | ------- | ------------ |  | ------------ | ------ | ------ |  | - | ------- | ------ | - | - | ------- | ------ | 
|Condensed Consolidated Statement of Operations    |              | IPC         |         | Guarantor    |  | Non-Guarantor |         |              |  |              |        |        |  |  
|For the Period November 15, 2001 to June 30, 2002 |              | Acquisition |         | Subsidiaries |  | Subsidiaries  |         | Eliminations |  | Consolidated
|                                                  |              |             |         |              |  |               |         |              |  |             
|Revenue                                           |              | $           |        |              |  | $             | 133,922 |              |  | $            | 36,064 |        |  | $ | (14,644 | )      |   | $ | 155,342 |       
|Cost of goods sold                                |              |             |        |              |  |               | 109,158 |              |  |              | 23,386 |        |  |   | (13,560 | )      |   |   | 118,984 |       
|                                                  |              |             |         |              |  |               |         |              |  |              |        |        |  |   |         |        |   |   |         |       
|                                                  | Gross profit |             |         |             |  |               |         | 24,764       |  |              |        | 12,678 |  |   |         | (1,084 | ) |   |         | 36,358 | 
|Other operating expenses                          |              |             |        |              |  |               | 32,053  |              |  |              | 6,570  |        |  |   |        |        |   |   | 38,623  |       
|                                                  |              |             |         |              |  |               |         |              |  |              |        |        |  |   |         |        |   |   |         |       
|Income (loss) from operations                     |              |             |        |              |  |               | (7,289  | )            |  |              | 6,108  |        |  |   | (1,084  | )      |   |   | (2,265  | )     
|Interest income (expense) and other, net          |              |             | (14,720 | )            |  |               | (168    | )            |  |              | 146    |        |  |   |        |        |   |   | (14,742 | )     
|Income tax provision (benefit)                    |              |             |        |              |  |               | (6,196  | )            |  |              | 1,266  |        |  |   |        |        |   |   | (4,930  | )     
|                                                  |              |             |         |              |  |               |         |              |  |              |        |        |  |   |         |        |   |   |         |       
|Net income (loss)                                 |              | $           | (14,720 | )            |  | $             | (1,261  | )            |  | $            | 4,988  |        |  | $ | (1,084  | )      |   | $ | (12,077 | )     
|                                                  |              |             |         |              |  |               |         |              |  |              |        |        |  |   |         |        |   |   |         |       

20



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##### Table of Contents



IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
June 30, 2003

|                                                                               |  |             |          |              |  |               |        |              |  |              |        |   |  |   |      |   |  |   |          |  
|------------------------------------------------------------------------------ |  | ----------- | -------- | ------------ |  | ------------- | ------ | ------------ |  | ------------ | ------ | - |  | - | ---- | - |  | - | -------- | -
|Condensed Consolidated Statement of Cash Flows                                 |  | IPC         |          | Guarantor    |  | Non-Guarantor |        |              |  |              |        |   |  |  
|For the Period November 15, 2001 to June 30, 2002                              |  | Acquisition |          | Subsidiaries |  | Subsidiaries  |        | Eliminations |  | Consolidated
|                                                                               |  |             |          |              |  |               |        |              |  |             
|Net cash provided by (used in) operating activities                            |  | $           | (2,772   | )            |  | $             | 1,767  |              |  | $            | 27,721 |   |  | $ |     |   |  | $ | 26,716   |  
|Capital expenditures                                                           |  |             |         |              |  |               | (1,819 | )            |  |              | (966   | ) |  |   |     |   |  |   | (2,785   | )
|Payment for acquisitions, net of cash acquired and
working capital adjustments |  |             | (350,246 | )            |  |               | 3,806  |              |  |              | (57    | ) |  |   | 751  |   |  |   | (345,746 | )
|                                                                               |  |             |          |              |  |               |        |              |  |              |        |   |  |   |      |   |  |   |          |  
|Net cash provided by (used in) investing activities                            |  |             | (350,246 | )            |  |               | 1,987  |              |  |              | (1,023 | ) |  |   | 751  |   |  |   | (348,531 | )
|Proceeds from debt, net of issuance costs                                      |  |             | 235,200  |              |  |               |       |              |  |              |       |   |  |   |     |   |  |   | 235,200  |  
|Principal payments on debt                                                     |  |             | (2,625   | )            |  |               |       |              |  |              |       |   |  |   |     |   |  |   | (2,625   | )
|Proceeds from equity issuances, net                                            |  |             | 139,700  |              |  |               |       |              |  |              |       |   |  |   |     |   |  |   | 139,700  |  
|                                                                               |  |             |          |              |  |               |        |              |  |              |        |   |  |   |      |   |  |   |          |  
|Net cash provided by financing activities                                      |  |             | 372,275  |              |  |               |       |              |  |              |       |   |  |   |     |   |  |   | 372,275  |  
|Effect of exchange rate changes on cash                                        |  |             |         |              |  |               |       |              |  |              | 1,180  |   |  |   |     |   |  |   | 1,180    |  
|                                                                               |  |             |          |              |  |               |        |              |  |              |        |   |  |   |      |   |  |   |          |  
|Net increase in cash                                                           |  |             | 19,257   |              |  |               | 3,754  |              |  |              | 27,878 |   |  |   | 751  |   |  |   | 51,640   |  
|Cash at beginning of period                                                    |  |             |         |              |  |               | (380   | )            |  |              | 1,131  |   |  |   | (751 | ) |  |   |         |  
|                                                                               |  |             |          |              |  |               |        |              |  |              |        |   |  |   |      |   |  |   |          |  
|Cash at end of period                                                          |  | $           | 19,257   |              |  | $             | 3,374  |              |  | $            | 29,009 |   |  | $ |     |   |  | $ | 51,640   |  
|                                                                               |  |             |          |              |  |               |        |              |  |              |        |   |  |   |      |   |  |   |          |  

|                                                            |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |         |         | 
|----------------------------------------------------------- | ---------------------------------------------------------------- | ------------------------- | - | ------------ | ------- | ------------ | - | ------------- | ------- | ------------ | - | ------- | ------ |  | - | -------- | -------- | - | - | ------- | ------- | 
|                                                            |                                                                  |                           |   | IPC          |         | Guarantor    |   | Non-Guarantor |         |              |   |         |        |  |   |         
|Condensed Consolidating Balance Sheet at September 30, 2002 |                                                                  | Acquisition               |   | Subsidiaries |         | Subsidiaries |   | Eliminations  |         | Consolidated
|                                                            |                                                                  |                           |   |              |         |              |   |               |         |              |   |        
|Assets:                                                     |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |        
|                                                            | Cash                                                             |                           | $ | 6,123        |         |              | $ | (1,610        | )       |              | $ | 20,781  |        |  | $ |         |          |   | $ | 25,294  |        
|                                                            | Restricted cash                                                  |                           |   | 7,272        |         |              |   |              |         |              |   |        |        |  |   |         |          |   |   | 7,272   |        
|                                                            | Accounts receivable, net                                         |                           |   |             |         |              |   | 32,900        |         |              |   | 19,568  |        |  |   |         |          |   |   | 52,468  |        
|                                                            | Inventories, net                                                 |                           |   |             |         |              |   | 20,089        |         |              |   | 5,518   |        |  |   | (3,389   | )        |   |   | 22,218  |        
|                                                            | Prepaid and other current assets                                 |                           |   |             |         |              |   | 1,658         |         |              |   | 2,956   |        |  |   |         |          |   |   | 4,614   |        
|                                                            | Due from affiliate                                               |                           |   | (20,023      | )       |              |   | 67,819        |         |              |   | (47,796 | )      |  |   |         |          |   |   |        |        
|                                                            |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |        
|                                                            |                                                                  | Total current assets      |   |              | (6,628  | )            |   |               | 120,856 |              |   |         | 1,027  |  |   |          | (3,389   | ) |   |         | 111,866 | 
|                                                            | Investment in subsidiaries                                       |                           |   | 369,106      |         |              |   |              |         |              |   |        |        |  |   | (369,106 | )        |   |   |        |        
|                                                            | Property, plant and equipment, net                               |                           |   |             |         |              |   | 18,988        |         |              |   | 2,016   |        |  |   |         |          |   |   | 21,004  |        
|                                                            | Goodwill and intangibles, net                                    |                           |   |             |         |              |   | 205,298       |         |              |   | 76,113  |        |  |   |         |          |   |   | 281,411 |        
|                                                            | Deferred financing costs, net                                    |                           |   | 15,116       |         |              |   |              |         |              |   |        |        |  |   |         |          |   |   | 15,116  |        
|                                                            | Other assets                                                     |                           |   |             |         |              |   | 662           |         |              |   | 173     |        |  |   |         |          |   |   | 835     |        
|                                                            |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |        
|                                                            |                                                                  | Total assets              |   | $            | 377,594 |              |   | $             | 345,804 |              |   | $       | 79,329 |  |   | $        | (372,495 | ) |   | $       | 430,232 | 
|                                                            |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |        
|Liabilities and stockholders equity:                       |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |        
|                                                            | Current portion of long-term debt                                |                           | $ | 6,460        |         |              | $ |              |         |              | $ |        |        |  | $ |         |          |   | $ | 6,460   |        
|                                                            | Accounts payable, accrued expenses and other current liabilities |                           |   | 5,072        |         |              |   | 15,196        |         |              |   | 10,830  |        |  |   |         |          |   |   | 31,098  |        
|                                                            | Customer advances and deferred revenue                           |                           |   |             |         |              |   | 17,116        |         |              |   | 6,377   |        |  |   |         |          |   |   | 23,493  |        
|                                                            | Deferred purchase price obligation                               |                           |   | 7,272        |         |              |   |              |         |              |   |        |        |  |   |         |          |   |   | 7,272   |        
|                                                            |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |        
|                                                            |                                                                  | Total current liabilities |   |              | 18,804  |              |   |               | 32,312  |              |   |         | 17,207 |  |   |          |         |   |   |         | 68,323  | 
|                                                            | Long-term debt                                                   |                           |   | 214,602      |         |              |   |              |         |              |   |        |        |  |   |         |          |   |   | 214,602 |        
|                                                            | Other long-term liabilities                                      |                           |   | 7,190        |         |              |   | 3,119         |         |              |   |        |        |  |   |         |          |   |   | 10,309  |        
|                                                            |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |        
|                                                            |                                                                  | Total liabilities         |   |              | 240,596 |              |   |               | 35,431  |              |   |         | 17,207 |  |   |          |         |   |   |         | 293,234 | 
|                                                            |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |        
|                                                            | Total stockholders equity                                       |                           |   | 136,998      |         |              |   | 310,373       |         |              |   | 62,122  |        |  |   | (372,495 | )        |   |   | 136,998 |        
|                                                            |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |        
|                                                            | Total liabilities and stockholders equity                       |                           | $ | 377,594      |         |              | $ | 345,804       |         |              | $ | 79,329  |        |  | $ | (372,495 | )        |   | $ | 430,232 |        
|                                                            |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |        

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
June 30, 2003

|                                                       |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |         |         | 
|------------------------------------------------------ | ---------------------------------------------------------------- | ------------------------- | - | ------------ | ------- | ------------ | - | ------------- | ------- | ------------ | - | ------- | ------ |  | - | -------- | -------- | - | - | ------- | ------- | 
|                                                       |                                                                  |                           |   | IPC          |         | Guarantor    |   | Non-Guarantor |         |              |   |         |        |  |   |         
|Condensed Consolidating Balance Sheet at June 30, 2003 |                                                                  | Acquisition               |   | Subsidiaries |         | Subsidiaries |   | Eliminations  |         | Consolidated
|                                                       |                                                                  |                           |   |              |         |              |   |               |         |              |   |        
|Assets:                                                |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |        
|                                                       | Cash                                                             |                           | $ | 3,984        |         |              | $ | 2,747         |         |              | $ | 14,285  |        |  | $ |         |          |   | $ | 21,016  |        
|                                                       | Accounts receivable, net                                         |                           |   |             |         |              |   | 39,635        |         |              |   | 12,913  |        |  |   |         |          |   |   | 52,548  |        
|                                                       | Inventories, net                                                 |                           |   |             |         |              |   | 39,249        |         |              |   | 8,590   |        |  |   | (4,472   | )        |   |   | 43,367  |        
|                                                       | Prepaid and other current assets                                 |                           |   | 62           |         |              |   | 1,956         |         |              |   | 3,565   |        |  |   |         |          |   |   | 5,583   |        
|                                                       | Due from affiliate                                               |                           |   | (60,459      | )       |              |   | 90,252        |         |              |   | (29,793 | )      |  |   |         |          |   |   |        |        
|                                                       |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |        
|                                                       |                                                                  | Total current assets      |   |              | (56,413 | )            |   |               | 173,839 |              |   |         | 9,560  |  |   |          | (4,472   | ) |   |         | 122,514 | 
|                                                       | Investment in subsidiaries                                       |                           |   | 394,963      |         |              |   | 10,524        |         |              |   |        |        |  |   | (405,487 | )        |   |   |        |        
|                                                       | Property, plant and equipment, net                               |                           |   |             |         |              |   | 19,414        |         |              |   | 3,403   |        |  |   |         |          |   |   | 22,817  |        
|                                                       | Goodwill and intangibles, net                                    |                           |   |             |         |              |   | 197,097       |         |              |   | 83,895  |        |  |   |         |          |   |   | 280,992 |        
|                                                       | Deferred financing costs, net                                    |                           |   | 13,410       |         |              |   |              |         |              |   |        |        |  |   |         |          |   |   | 13,410  |        
|                                                       | Other assets                                                     |                           |   |             |         |              |   | 631           |         |              |   | 180     |        |  |   |         |          |   |   | 811     |        
|                                                       |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |        
|                                                       |                                                                  | Total assets              |   | $            | 351,960 |              |   | $             | 401,505 |              |   | $       | 97,038 |  |   | $        | (409,959 | ) |   | $       | 440,544 | 
|                                                       |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |        
|Liabilities and stockholders equity:                  |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |        
|                                                       | Current portion of long-term debt                                |                           | $ | 5,827        |         |              | $ |              |         |              | $ |        |        |  | $ |         |          |   | $ | 5,827   |        
|                                                       | Accounts payable, accrued expenses and other current liabilities |                           |   | 760          |         |              |   | 16,129        |         |              |   | 15,167  |        |  |   |         |          |   |   | 32,056  |        
|                                                       | Customer advances and deferred revenue                           |                           |   |             |         |              |   | 37,809        |         |              |   | 11,741  |        |  |   |         |          |   |   | 49,550  |        
|                                                       | Deferred
purchase consideration                                  |                           |   |             |         |              |   | 3,128         |         |              |   |        |        |  |   |         |          |   |   | 3,128   |        
|                                                       |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |        
|                                                       |                                                                  | Total current liabilities |   |              | 6,587   |              |   |               | 57,066  |              |   |         | 26,908 |  |   |          |         |   |   |         | 90,561  | 
|                                                       | Long-term debt                                                   |                           |   | 196,619      |         |              |   |              |         |              |   |        |        |  |   |         |          |   |   | 196,619 |        
|                                                       | Other long-term liabilities                                      |                           |   | 4,657        |         |              |   | 4,610         |         |              |   |        |        |  |   |         |          |   |   | 9,267   |        
|                                                       |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |        
|                                                       |                                                                  | Total liabilities         |   |              | 207,863 |              |   |               | 61,676  |              |   |         | 26,908 |  |   |          |         |   |   |         | 296,447 | 
|                                                       |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |        
|                                                       | Total stockholders equity                                       |                           |   | 144,097      |         |              |   | 339,829       |         |              |   | 70,130  |        |  |   | (409,959 | )        |   |   | 144,097 |        
|                                                       |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |        
|                                                       | Total liabilities and stockholders equity                       |                           | $ | 351,960      |         |              | $ | 401,505       |         |              | $ | 97,038  |        |  | $ | (409,959 | )        |   | $ | 440,544 |        
|                                                       |                                                                  |                           |   |              |         |              |   |               |         |              |   |         |        |  |   |          |          |   |   |        

|                                               |              |             |         |              |  |               |         |              |  |              |        |        |  |   |         |        |   |   |         |        | 
|---------------------------------------------- | ------------ | ----------- | ------- | ------------ |  | ------------- | ------- | ------------ |  | ------------ | ------ | ------ |  | - | ------- | ------ | - | - | ------- | ------ | 
|Condensed Consolidated Statement of Operations |              | IPC         |         | Guarantor    |  | Non-Guarantor |         |              |  |              |        |        |  |  
|For the Nine Months Ended June 30, 2003        |              | Acquisition |         | Subsidiaries |  | Subsidiaries  |         | Eliminations |  | Consolidated
|                                               |              |             |         |              |  |               |         |              |  |              |       
|Revenue                                        |              | $           |        |              |  | $             | 137,819 |              |  | $            | 39,253 |        |  | $ | (11,392 | )      |   | $ | 165,680 |       
|Cost of goods sold                             |              |             |        |              |  |               | 82,482  |              |  |              | 23,704 |        |  |   | (10,309 | )      |   |   | 95,877  |       
|                                               |              |             |         |              |  |               |         |              |  |              |        |        |  |   |         |        |   |   |         |       
|                                               | Gross profit |             |         |             |  |               |         | 55,337       |  |              |        | 15,549 |  |   |         | (1,083 | ) |   |         | 69,803 | 
|Other operating expenses                       |              |             |        |              |  |               | 41,473  |              |  |              | 12,097 |        |  |   |        |        |   |   | 53,570  |       
|                                               |              |             |         |              |  |               |         |              |  |              |        |        |  |   |         |        |   |   |         |       
|Income (loss) from operations                  |              |             |        |              |  |               | 13,864  |              |  |              | 3,452  |        |  |   | (1,083  | )      |   |   | 16,233  |       
|Interest income (expense) and other, net       |              |             | (18,750 | )            |  |               | 123     |              |  |              | 3,276  |        |  |   |        |        |   |   | (15,351 | )     
|Income tax provision (benefit)                 |              |             |        |              |  |               | (1,161  | )            |  |              | 3,823  |        |  |   |        |        |   |   | 2,662   |       
|                                               |              |             |         |              |  |               |         |              |  |              |        |        |  |   |         |        |   |   |         |       
|Net income (loss)                              |              | $           | (18,750 | )            |  | $             | 15,148  |              |  | $            | 2,905  |        |  | $ | (1,083  | )      |   | $ | (1,780  | )     
|                                               |              |             |         |              |  |               |         |              |  |              |        |        |  |   |         |        |   |   |         |       

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IPC ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)
June 30, 2003

|                                                                                                      |  |             |         |              |  |               |        |              |  |              |        |   |  |   |   |  |  |   |         |  
|----------------------------------------------------------------------------------------------------- |  | ----------- | ------- | ------------ |  | ------------- | ------ | ------------ |  | ------------ | ------ | - |  | - | - |  |  | - | ------- | -
|Condensed Consolidated Statement of Cash Flows                                                        |  | IPC         |         | Guarantor    |  | Non-Guarantor |        |              |  |              |        |   |  |  
|For the Nine Months Ended June 30, 2003                                                               |  | Acquisition |         | Subsidiaries |  | Subsidiaries  |        | Eliminations |  | Consolidated
|                                                                                                      |  |             |         |              |  |               |        |              |  |             
|Net cash provided by (used in) operating activities                                                   |  | $           | 16,787  |              |  | $             | 2,904  |              |  | $            | (8,648 | ) |  | $ |  |  |  | $ | 11,043  |  
|                                                                                                     
|Capital expenditures                                                                                  |  |             |        |              |  |               | (3,051 | )            |  |              | (800   | ) |  |   |  |  |  |   | (3,851  | )
|Cash
acquired in acquisitions                                                                         |  |             |        |              |  |               | 1,135  |              |  |              | 2,952  |   |  |   |  |  |  |   | 4,087   |  
|Proceeds from restricted cash account and other amounts in
connection with Global Crossing settlement |  |             |        |              |  |               | 9,419  |              |  |              |       |   |  |   |  |  |  |   | 9,419   |  
|Cash payments in connection with Global Crossing settlement                                           |  |             |        |              |  |               | (5,200 | )            |  |              |       |   |  |   |  |  |  |   | (5,200  | )
|                                                                                                      |  |             |         |              |  |               |        |              |  |              |        |   |  |   |   |  |  |   |         |  
|Net cash provided by (used in) investing activities                                                   |  |             |        |              |  |               | 2,303  |              |  |              | 2,152  |   |  |   |  |  |  |   | 4,455   |  
|Debt issue costs                                                                                      |  |             | (310    | )            |  |               |       |              |  |              |       |   |  |   |  |  |  |   | (310    | )
|Principal payments on term loan                                                                       |  |             | (18,616 | )            |  |               |       |              |  |              |       |   |  |   |  |  |  |   | (18,616 | )
|                                                                                                      |  |             |         |              |  |               |        |              |  |              |        |   |  |   |   |  |  |   |         |  
|Net cash used in financing activities                                                                 |  |             | (18,926 | )            |  |               |       |              |  |              |       |   |  |   |  |  |  |   | (18,926 | )
|Effect of exchange rate changes on cash                                                               |  |             |        |              |  |               | (850   | )            |  |              |       |   |  |   |  |  |  |   | (850    | )
|                                                                                                      |  |             |         |              |  |               |        |              |  |              |        |   |  |   |   |  |  |   |         |  
|Net increase (decrease) in cash                                                                       |  |             | (2,139  | )            |  |               | 4,357  |              |  |              | (6,496 | ) |  |   |  |  |  |   | (4,278  | )
|Cash at beginning of period                                                                           |  |             | 6,123   |              |  |               | (1,610 | )            |  |              | 20,781 |   |  |   |  |  |  |   | 25,294  |  
|                                                                                                      |  |             |         |              |  |               |        |              |  |              |        |   |  |   |   |  |  |   |         |  
|Cash at end of period                                                                                 |  | $           | 3,984   |              |  | $             | 2,747  |              |  | $            | 14,285 |   |  | $ |  |  |  | $ | 21,016  |  
|                                                                                                      |  |             |         |              |  |               |        |              |  |              |        |   |  |   |   |  |  |   |         |  



|12. |  | Subsequent Events
|--- |  | -----------------

IPC UK
Holdings Limited (IPC UK), a subsidiary of the Company, entered into a series of transactions
with Purple Voice Holdings Limited (Purple Voice), a
business-to-business Internet Protocol (IP) software company that provides
Voice-over-IP, or VoIP, solutions to the financial community. VoIP is
the method by which voice communications are sent from one computer
to another over the Internet. As a result of these
transactions, which closed on August 1, 2003: (i) IPC UK acquired approximately
40% of the currently outstanding common shares (calculated on a non-diluted basis), together with a warrant
for additional shares, from certain minority shareholders of Purple
Voice for approximately $120,000; (ii) 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; (iii) 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 (iv) 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. The Company will consolidate Purple Voice starting August 1, 2003.

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

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

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

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

Overview

Our primary business is the design, manufacture, installation and service
of turret systems for the trading operations of the financial community, which
consists of investment and commercial banks, foreign exchange and commodity
brokers and dealers, market exchanges, mutual and hedge fund companies, asset
managers, and insurance companies. Turrets are specialized telephone systems
that are designed for high reliability and provide users instant access to
hundreds of dedicated telephone lines that are directly connected to other
trading partners and customers. Traders, brokers and salespersons occupy desks
known as trading positions from which they trade various financial instruments
including stocks, bonds, currencies and futures using turrets. We are the
leader in the turret industry, based on our base of approximately 110,000
turrets 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 a result of our acquisition of
Gains on April 30, 2003, we now have a third major operating
unit. Gains sells
voice and data services to customers within the financial community.

Our major operating units are Trading Systems, Information Transport
Systems, or I.T.S. and Gains. Trading Systems reports (1) sales of turret
systems to distributors and direct sales and installations of turret systems as
Product sales and installation, and (2) revenue from turret system
maintenance, including annual and multi-year service contracts, and from moves,
additions and changes, commonly known as MACs, to existing turret system
installations as Service. I.T.S. reports (1) revenue from 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 installation and (2)
revenue from on-site maintenance of customer cable infrastructures and from the
provision of outsourcing services for the support, expansion and upgrading of
existing customer networks as Service. Gains records the sale of voice and
data services as Service.

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 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
Gains unit, 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 is usually one year.

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

Our revenues and operating results could fluctuate significantly from
period to period. Given the relatively large sales price of our trading systems
and our recognition of revenue only upon completion of installations 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

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addition, our customers are concentrated in the global financial, trading
and exchange trading industries and our revenues may decline during periods of
economic downturn that impact those sectors.

Impact of the IPC Information Systems Acquisition

During the period that we were owned by Global Crossing, we provided
services to Global Crossing at cost and Global Crossing performed certain
administrative services on our behalf and allocated a charge for those services
to us. Since December 20, 2001, any services we provide to Global Crossing or
that Global Crossing provides to us have been on an arms-length basis. Since
the acquisition of IPC Information Systems was accounted for as an asset
purchase, the book value of our assets was adjusted to reflect the allocation
of the excess of the purchase price over the net book value of the assets
acquired. As a result, our historical results of operations and financial
condition are not necessarily indicative of our future results of operations or
financial condition. The amounts presented below for the nine months ended June
30, 2002 represent the sum of the amounts separately reported for the
pre-acquisition period from October 1, 2001 to December 20, 2001 and the
post-acquisition period from December 21, 2001 to June 30, 2002.

Gains Acquisition

On April 30, 2003, we exercised our option to purchase Gains International
(US) Inc. and Gains International (Europe) Limited from GSCP 2000 and other
private equity funds affiliated with Goldman, Sachs & Co., who own
substantially all of our common stock, for 664,380 shares of our common stock valued at
approximately $5.7 million plus the assumption of deferred consideration of
$3.1 million and earn-out commitments up to a maximum of approximately $9.9
million based on current exchange rates. With the acquisition of
Gains, we will now offer voice and data services to the financial
services community. This transaction follows the
simultaneous completion of a transaction involving the sale of Gains
International (US) Inc., Gains International (Europe) Limited, and Gains
International Asia Holdings Limited to entities formed by GSCP 2000, and its
affiliates.

Recent Events

IPC UK
Holdings Limited (IPC UK), a subsidiary of the company, entered into a series of transactions
with Purple Voice Holdings Limited (Purple Voice), a
business-to-business Internet Protocol (IP) software company that provides
Voice-over-IP, or VoIP, solutions to the financial community. VoIP is
the method by which voice communications are sent from one computer
to another over the Internet. As a result of these
transactions, which closed on August 1, 2003: (i) IPC UK acquired approximately
40% of the currently outstanding common shares (calculated on a non-diluted basis), together with a warrant
for additional shares, from certain minority shareholders of Purple
Voice for approximately $120,000; (ii) 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; (iii) 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 (iv) IPC Information
Systems, Inc. and Purple Voice Limited entered into an agreement under which
IPC Information Systems, Inc. has been appointed Purple Voices exclusive
reseller worldwide. We will consolidate Purple Voice
starting August 1, 2003.

Comparison of the Three Months
(Q3 2003) and Nine Months (YTD 2003) Ended June 30, 2003 to the Three Months (Q3 2002) and Nine Months (YTD 2002) Ended June 30, 2002.

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

|                                                    |         |                                 |         |   |    |              |     |         |    |         |     |       |    |              |     |         |     |        |     |       |    |   |     |         |    |   |     |   |    |   |   |  |   |  |  | 
|--------------------------------------------------- | ------- | ------------------------------- | ------- | - | -- | ------------ | --- | ------- | -- | ------- | --- | ----- | -- | ------------ | --- | ------- | --- | ------ | --- | ----- | -- | - | --- | ------- | -- | - | --- | - | -- | - | - |  | - |  |  | 
|                                                    | Q3 2003 |                                 | Q3 2002
|                                                    |         |                                 |        
|                                                    |         |                                 |         |   |    |              |     |         |    | Trading |     |       |    |              |     |         |     |        |     |       |    |   |     | Trading |    |   |     |   |    |   |   | 
|                                                    |         |                                 |         |   |    | Consolidated |     | Systems |    | I.T.S.  |     | Gains |    | Consolidated |     | Systems |     | I.T.S. |     | Gains
|                                                    |         |                                 |         |   |    |              |     |         |    |         |     |       |    |              |     |         |     |        |     |      
|Revenue:                                            |         |                                 |         |   |    |              |     |         |    |         |     |       |    |              |     |         |     |        |     |       |    |   |     |         |    |   |     |   |    |   |   | 
|                                                    |         | Product sales and installations |         |   | 54 | %            |     |         | 45 | %       |     |       | 88 | %            |     |         | 0   | %      |     |       | 59 | % |     |         | 59 | % |     |   | 62 | % |   |  |  | 
|                                                    |         | Service                         |         |   | 46 | %            |     |         | 55 | %       |     |       | 12 | %            |     |         | 100 | %      |     |       | 41 | % |     |         | 41 | % |     |   | 38 | % |   |  |  | 
|                                                    |         |                                 |         |   |    |              |     |         |    |         |     |       |    |              |     |         |     |        |     |       |    |   |     |         |    |   |     |   |    |   |   | 
|                                                    |         |                                 | 100     | % |    |              | 100 | %       |    |         | 100 | %     |    |              | 100 | %       |     |        | 100 | %     |    |   | 100 | %       |    |   | 100 | % |    |   |  | 
|                                                    |         |                                 |         |   |    |              |     |         |    |         |     |       |    |              |     |         |     |        |     |       |    |   |     |         |    |   |     |   |    |   |   | 
|Cost of goods sold (depreciation shown
separately): |         |                                 |         |   |    |              |     |         |    |         |     |       |    |              |     |         |     |        |     |       |    |   |     |         |    |   |     |   |    |   |   | 
|                                                    |         | Product sales and installations |         |   | 38 | %            |     |         | 25 | %       |     |       | 80 | %            |     |         | 0   | %      |     |       | 48 | % |     |         | 47 | % |     |   | 57 | % |   |  |  | 
|                                                    |         | Service                         |         |   | 24 | %            |     |         | 26 | %       |     |       | 12 | %            |     |         | 56  | %      |     |       | 22 | % |     |         | 20 | % |     |   | 32 | % |   |  |  | 
|                                                    |         | Depreciation and amortization   |         |   | 1  | %            |     |         | 1  | %       |     |       | 0  | %            |     |         | 6   | %      |     |       | 0  | % |     |         | 0  | % |     |   | 0  | % |   |  |  | 
|                                                    |         |                                 |         |   |    |              |     |         |    |         |     |       |    |              |     |         |     |        |     |       |    |   |     |         |    |   |     |   |    |   |   | 

25



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##### Table of Contents



|                                            |                             |  |                                   |     |    |              |    |         |    |         |    |       |   |              |    |         |   |        |    |       |    |     |     |         |    |     |    |   |   |   |   |   |  |   |  | 
|------------------------------------------- | --------------------------- |  | --------------------------------- | --- | -- | ------------ | -- | ------- | -- | ------- | -- | ----- | - | ------------ | -- | ------- | - | ------ | -- | ----- | -- | --- | --- | ------- | -- | --- | -- | - | - | - | - | - |  | - |  | 
|                                            | Q3 2003                     |  | Q3 2002                          
|                                            |                             |  |                                  
|                                            |                             |  |                                   |     |    |              |    |         |    | Trading |    |       |   |              |    |         |   |        |    |       |    |     |     | Trading |    |     |    |   |   |   |   |  
|                                            |                             |  |                                   |     |    | Consolidated |    | Systems |    | I.T.S.  |    | Gains |   | Consolidated |    | Systems |   | I.T.S. |    | Gains
|                                            |                             |  |                                   |     |    |              |    |         |    |         |    |       |   |              |    |         |   |        |    |      
|                                            |                             |  | 63                                | %   |    |              | 52 | %       |    |         | 92 | %     |   |              | 62 | %       |   |        | 70 | %     |    |     | 67  | %       |    |     | 89 | % |   |   |  |  
|                                            |                             |  |                                   |     |    |              |    |         |    |         |    |       |   |              |    |         |   |        |    |       |    |     |     |         |    |     |    |   |   |   |   |  
|Gross profit                                |                             |  | 37                                | %   |    |              | 48 | %       |    |         | 8  | %     |   |              | 38 | %       |   |        | 30 | %     |    |     | 33  | %       |    |     | 11 | % |   |   |  |  
|Research and development                    |                             |  | 4                                 | %   |    |              | 7  | %       |    |         | 0  | %     |   |              | 0  | %       |   |        | 7  | %     |    |     | 7   | %       |    |     | 0  | % |   |   |  |  
|Selling, general and administrative expense |                             |  | 19                                | %   |    |              | 22 | %       |    |         | 3  | %     |   |              | 46 | %       |   |        | 16 | %     |    |     | 18  | %       |    |     | 9  | % |   |   |  |  
|Depreciation and amortization               |                             |  | 8                                 | %   |    |              | 11 | %       |    |         | 1  | %     |   |              | 0  | %       |   |        | 7  | %     |    |     | 8   | %       |    |     | 1  | % |   |   |  |  
|                                            |                             |  |                                   |     |    |              |    |         |    |         |    |       |   |              |    |         |   |        |    |       |    |     |     |         |    |     |    |   |   |   |   |  
|                                            |                             |  | Income (loss) from operations     |     |    | 6            | %  |         |    | 8       | %  |       |   | 4            | %  |         |   | (8     | %) |       |    | 0   | %   |         |    | 0   | %  |   |   | 1 | % |   |  |  | 
|                                            |                             |  |                                   |     |    |              |    |         |    |         |    |       |   |              |    |         |   |        |    |       |    |     |     |         |    |     |    |   |   |   |   |  
|Other income (expense):                     |                             |  |                                   |     |    |              |    |         |    |         |    |       |   |              |    |         |   |        |    |       |    |     |     |         |    |     |    |   |   |   |   |  
|                                            | Interest expense, net       |  |                                   | (10 | %) |              |    | (15     | %) |         |    | 0     | % |              |    | 0       | % |        |    | (11   | %) |     |     | (13     | %) |     |    | 0 | % |   |   |  | 
|                                            | Other income (expense), net |  |                                   | 3   | %  |              |    | 5       | %  |         |    | 0     | % |              |    | 0       | % |        |    | 0     | %  |     |     | 0       | %  |     |    | 0 | % |   |   |  | 
|                                            |                             |  |                                   |     |    |              |    |         |    |         |    |       |   |              |    |         |   |        |    |       |    |     |     |         |    |     |    |   |   |   |   |  
|                                            |                             |  | Income (loss) before income taxes |     |    | (1           | %) |         |    | (2      | %) |       |   | 4            | %  |         |   | (8     | %) |       |    | (11 | %)  |         |    | (13 | %) |   |   | 1 | % |   |  |  | 
|Income tax expense (benefit)                |                             |  | 1                                 | %   |    |              | 1  | %       |    |         | 0  | %     |   |              | 1  | %       |   |        | (3 | %)    |    |     | (3  | %)      |    |     | 0  | % |   |   |  |  
|                                            |                             |  |                                   |     |    |              |    |         |    |         |    |       |   |              |    |         |   |        |    |       |    |     |     |         |    |     |    |   |   |   |   |  
|Net income (loss)                           |                             |  | (2                                | %)  |    |              | (3 | %)      |    |         | 4  | %     |   |              | (9 | %)      |   |        | (8 | %)    |    |     | (10 | %)      |    |     | 1  | % |   |   |  |  
|                                            |                             |  |                                   |     |    |              |    |         |    |         |    |       |   |              |    |         |   |        |    |       |    |     |     |         |    |     |    |   |   |   |   |  

|                                                    |                             |                                 |                                   |     |    |              |     |          |    |         |     |       |    |              |     |         |     |        |     |       |    |     |     |         |    |     |     |   |    |   |   |   |   |   |  | 
|--------------------------------------------------- | --------------------------- | ------------------------------- | --------------------------------- | --- | -- | ------------ | --- | -------- | -- | ------- | --- | ----- | -- | ------------ | --- | ------- | --- | ------ | --- | ----- | -- | --- | --- | ------- | -- | --- | --- | - | -- | - | - | - | - | - |  | 
|                                                    |                             |                                 |                                   |     |    | YTD 2003     |     | YTD 2002
|                                                    |                             |                                 |                                   |     |    |              |     |         
|                                                    |                             |                                 |                                   |     |    |              |     |          |    | Trading |     |       |    |              |     |         |     |        |     |       |    |     |     | Trading |    |     |     |   |    |   |   |  
|                                                    |                             |                                 |                                   |     |    | Consolidated |     | Systems  |    | I.T.S.  |     | Gains |    | Consolidated |     | Systems |     | I.T.S. |     | Gains
|                                                    |                             |                                 |                                   |     |    |              |     |          |    |         |     |       |    |              |     |         |     |        |     |      
|Revenue:                                            |                             |                                 |                                   |     |    |              |     |          |    |         |     |       |    |              |     |         |     |        |     |       |    |     |     |         |    |     |     |   |    |   |   |  
|                                                    |                             | Product sales and installations |                                   |     | 54 | %            |     |          | 49 | %       |     |       | 78 | %            |     |         | 0   | %      |     |       | 65 | %   |     |         | 65 | %   |     |   | 69 | % |   |   |  |  
|                                                    |                             | Service                         |                                   |     | 46 | %            |     |          | 51 | %       |     |       | 22 | %            |     |         | 100 | %      |     |       | 35 | %   |     |         | 35 | %   |     |   | 31 | % |   |   |  |  
|                                                    |                             |                                 |                                   |     |    |              |     |          |    |         |     |       |    |              |     |         |     |        |     |       |    |     |     |         |    |     |     |   |    |   |   |  
|                                                    |                             |                                 | 100                               | %   |    |              | 100 | %        |    |         | 100 | %     |    |              | 100 | %       |     |        | 100 | %     |    |     | 100 | %       |    |     | 100 | % |    |   |  |  
|                                                    |                             |                                 |                                   |     |    |              |     |          |    |         |     |       |    |              |     |         |     |        |     |       |    |     |     |         |    |     |     |   |    |   |   |  
|Cost of goods sold (depreciation shown
separately): |                             |                                 |                                   |     |    |              |     |          |    |         |     |       |    |              |     |         |     |        |     |       |    |     |     |         |    |     |     |   |    |   |   |  
|                                                    |                             | Product sales and installations |                                   |     | 33 | %            |     |          | 24 | %       |     |       | 73 | %            |     |         | 0   | %      |     |       | 51 | %   |     |         | 49 | %   |     |   | 61 | % |   |   |  |  
|                                                    |                             | Service                         |                                   |     | 24 | %            |     |          | 23 | %       |     |       | 22 | %            |     |         | 56  | %      |     |       | 20 | %   |     |         | 18 | %   |     |   | 27 | % |   |   |  |  
|                                                    |                             | Depreciation and amortization   |                                   |     | 1  | %            |     |          | 1  | %       |     |       | 0  | %            |     |         | 6   | %      |     |       | 0  | %   |     |         | 1  | %   |     |   | 0  | % |   |   |  |  
|                                                    |                             |                                 |                                   |     |    |              |     |          |    |         |     |       |    |              |     |         |     |        |     |       |    |     |     |         |    |     |     |   |    |   |   |  
|                                                    |                             |                                 | 58                                | %   |    |              | 48  | %        |    |         | 95  | %     |    |              | 62  | %       |     |        | 71  | %     |    |     | 68  | %       |    |     | 88  | % |    |   |  |  
|                                                    |                             |                                 |                                   |     |    |              |     |          |    |         |     |       |    |              |     |         |     |        |     |       |    |     |     |         |    |     |     |   |    |   |   |  
|Gross profit                                        |                             |                                 | 42                                | %   |    |              | 52  | %        |    |         | 5   | %     |    |              | 38  | %       |     |        | 29  | %     |    |     | 32  | %       |    |     | 12  | % |    |   |  |  
|Research and development                            |                             |                                 | 5                                 | %   |    |              | 7   | %        |    |         | 0   | %     |    |              | 0   | %       |     |        | 5   | %     |    |     | 6   | %       |    |     | 0   | % |    |   |  |  
|Selling, general and administrative expense         |                             |                                 | 19                                | %   |    |              | 21  | %        |    |         | 5   | %     |    |              | 46  | %       |     |        | 18  | %     |    |     | 20  | %       |    |     | 7   | % |    |   |  |  
|Depreciation and amortization                       |                             |                                 | 8                                 | %   |    |              | 11  | %        |    |         | 0   | %     |    |              | 0   | %       |     |        | 9   | %     |    |     | 11  | %       |    |     | 1   | % |    |   |  |  
|                                                    |                             |                                 |                                   |     |    |              |     |          |    |         |     |       |    |              |     |         |     |        |     |       |    |     |     |         |    |     |     |   |    |   |   |  
|                                                    |                             |                                 | Income (loss) from operations     |     |    | 10           | %   |          |    | 13      | %   |       |    | 0            | %   |         |     | (8     | %)  |       |    | (4  | %)  |         |    | (5  | %)  |   |    | 4 | % |   |   |  | 
|                                                    |                             |                                 |                                   |     |    |              |     |          |    |         |     |       |    |              |     |         |     |        |     |       |    |     |     |         |    |     |     |   |    |   |   |  
|Other income (expense):                             |                             |                                 |                                   |     |    |              |     |          |    |         |     |       |    |              |     |         |     |        |     |       |    |     |     |         |    |     |     |   |    |   |   |  
|                                                    | Interest expense, net       |                                 |                                   | (11 | %) |              |     | (15      | %) |         |     | 0     | %  |              |     | 0       | %   |        |     | (10   | %) |     |     | (12     | %) |     |     | 0 | %  |   |   |  |  
|                                                    | Other income (expense), net |                                 |                                   | 2   | %  |              |     | 3        | %  |         |     | 0     | %  |              |     | 0       | %   |        |     | 0     | %  |     |     | 0       | %  |     |     | 0 | %  |   |   |  |  
|                                                    |                             |                                 |                                   |     |    |              |     |          |    |         |     |       |    |              |     |         |     |        |     |       |    |     |     |         |    |     |     |   |    |   |   |  
|                                                    |                             |                                 | Income (loss) before income taxes |     |    | 1            | %   |          |    | 1       | %   |       |    | 0            | %   |         |     | (8     | %)  |       |    | (14 | %)  |         |    | (17 | %)  |   |    | 4 | % |   |   |  | 
|Income tax expense (benefit)                        |                             |                                 | 2                                 | %   |    |              | 2   | %        |    |         | 0   | %     |    |              | 1   | %       |     |        | (3  | %)    |    |     | (3  | %)      |    |     | 0   | % |    |   |  |  
|                                                    |                             |                                 |                                   |     |    |              |     |          |    |         |     |       |    |              |     |         |     |        |     |       |    |     |     |         |    |     |     |   |    |   |   |  
|Net income (loss)                                   |                             |                                 | (1                                | %)  |    |              | (1  | %)       |    |         | 0   | %     |    |              | (9  | %)      |     |        | (11 | %)    |    |     | (14 | %)      |    |     | 4   | % |    |   |  |  
|                                                    |                             |                                 |                                   |     |    |              |     |          |    |         |     |       |    |              |     |         |     |        |     |       |    |     |     |         |    |     |     |   |    |   |   |  

Revenue

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

|                                |       |              |        |        |      |   |        |        |        |   |        |        |      |  |        |    |        |   |        |         |  |   |         |         |  |   |         |         |   |  |     |     |   
|------------------------------- | ----- | ------------ | ------ | ------ | ---- | - | ------ | ------ | ------ | - | ------ | ------ | ---- |  | ------ | -- | ------ | - | ------ | ------- |  | - | ------- | ------- |  | - | ------- | ------- | - |  | --- | --- | --
|(dollars in thousands)          |       | Consolidated
|                                |       |             
|                                |       |              | Q3     |        | Q3   |   | $      |        | %      |   | YTD    |        | YTD  |  | $      |    | %     
|                                |       |              | 2003   |        | 2002 |   | Change |        | Change |   | 2003   |        | 2002 |  | Change |    | Change
|                                |       |              |        |        |      |   |        |        |        |   |        |        |      |  |        |    |       
|REVENUE:                        |       |              |        |        |      |   |        |        |        |   |        |        |      |  |        |    |        |   |        |         |  |   |         |         |  |   |         |         |   |  |     |    
|Product sales and installations |       | $            | 32,654 |        |      | $ | 37,087 |        |        | $ | (4,433 | )      |      |  | (12    | %) |        | $ | 89,224 |         |  | $ | 140,107 |         |  | $ | (50,883 | )       |   |  | (36 | %) 
|Service                         |       |              | 28,338 |        |      |   | 25,721 |        |        |   | 2,617  |        |      |  | 10     | %  |        |   | 76,456 |         |  |   | 74,015  |         |  |   | 2,441   |         |   |  | 3   | %  
|                                |       |              |        |        |      |   |        |        |        |   |        |        |      |  |        |    |        |   |        |         |  |   |         |         |  |   |         |         |   |  |     |    
|                                | Total |              | $      | 60,992 |      |   | $      | 62,808 |        |   | $      | (1,816 | )    |  |        | (3 | %)     |   | $      | 165,680 |  |   | $       | 214,122 |  |   | $       | (48,442 | ) |  |     | (23 | %)
|                                |       |              |        |        |      |   |        |        |        |   |        |        |      |  |        |    |        |   |        |         |  |   |         |         |  |   |         |         |   |  |     |    

26



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##### Table of Contents



|                                |       |   |                          |        |      |   |        |        |        |   |         |         |      |  |        |     |        |   |        |         |  |   |         |         |  |   |         |         |   |  |     |     |   
|------------------------------- | ----- | - | ------------------------ | ------ | ---- | - | ------ | ------ | ------ | - | ------- | ------- | ---- |  | ------ | --- | ------ | - | ------ | ------- |  | - | ------- | ------- |  | - | ------- | ------- | - |  | --- | --- | --
|                                |       |   | Trading Systems Division
|                                |       |   |                         
|                                |       |   | Q3                       |        | Q3   |   | $      |        | %      |   | YTD     |         | YTD  |  | $      |     | %     
|                                |       |   | 2003                     |        | 2002 |   | Change |        | Change |   | 2003    |         | 2002 |  | Change |     | Change
|                                |       |   |                          |        |      |   |        |        |        |   |         |         |      |  |        |     |       
|REVENUE:                        |       |   |                          |        |      |   |        |        |        |   |         |         |      |  |        |     |        |   |        |         |  |   |         |         |  |   |         |         |   |  |     |    
|Product sales and installations |       | $ | 18,157                   |        |      | $ | 31,655 |        |        | $ | (13,498 | )       |      |  | (43    | %)  |        | $ | 63,068 |         |  | $ | 115,956 |         |  | $ | (52,888 | )       |   |  | (46 | %) 
|Service                         |       |   | 22,349                   |        |      |   | 22,350 |        |        |   | (1      | )       |      |  | 0      | %   |        |   | 65,056 |         |  |   | 63,143  |         |  |   | 1,913   |         |   |  | 3   | %  
|                                |       |   |                          |        |      |   |        |        |        |   |         |         |      |  |        |     |        |   |        |         |  |   |         |         |  |   |         |         |   |  |     |    
|                                | Total |   | $                        | 40,506 |      |   | $      | 54,005 |        |   | $       | (13,499 | )    |  |        | (25 | %)     |   | $      | 128,124 |  |   | $       | 179,099 |  |   | $       | (50,975 | ) |  |     | (28 | %)
|                                |       |   |                          |        |      |   |        |        |        |   |         |         |      |  |        |     |        |   |        |         |  |   |         |         |  |   |         |         |   |  |     |    

|                                |       |   |                 |        |      |   |        |       |        |   |        |       |      |  |        |    |        |   |        |        |  |   |        |        |  |   |        |        |   |  |     |    |   
|------------------------------- | ----- | - | --------------- | ------ | ---- | - | ------ | ----- | ------ | - | ------ | ----- | ---- |  | ------ | -- | ------ | - | ------ | ------ |  | - | ------ | ------ |  | - | ------ | ------ | - |  | --- | -- | --
|                                |       |   | I.T.S. Division
|                                |       |   |                
|                                |       |   | Q3              |        | Q3   |   | $      |       | %      |   | YTD    |       | YTD  |  | $      |    | %     
|                                |       |   | 2003            |        | 2002 |   | Change |       | Change |   | 2003   |       | 2002 |  | Change |    | Change
|                                |       |   |                 |        |      |   |        |       |        |   |        |       |      |  |        |    |       
|REVENUE:                        |       |   |                 |        |      |   |        |       |        |   |        |       |      |  |        |    |        |   |        |        |  |   |        |        |  |   |        |        |   |  |     |   
|Product sales and installations |       | $ | 14,497          |        |      | $ | 5,432  |       |        | $ | 9,065  |       |      |  | 167    | %  |        | $ | 26,156 |        |  | $ | 24,151 |        |  | $ | 2,005  |        |   |  | 8   | % 
|Service                         |       |   | 1,989           |        |      |   | 3,371  |       |        |   | (1,382 | )     |      |  | (41    | %) |        |   | 7,400  |        |  |   | 10,872 |        |  |   | (3,472 | )      |   |  | (32 | %)
|                                |       |   |                 |        |      |   |        |       |        |   |        |       |      |  |        |    |        |   |        |        |  |   |        |        |  |   |        |        |   |  |     |   
|                                | Total |   | $               | 16,486 |      |   | $      | 8,803 |        |   | $      | 7,683 |      |  |        | 87 | %      |   | $      | 33,556 |  |   | $      | 35,023 |  |   | $      | (1,467 | ) |  |     | (4 | %)
|                                |       |   |                 |        |      |   |        |       |        |   |        |       |      |  |        |    |        |   |        |        |  |   |        |        |  |   |        |        |   |  |     |   

|                                |       |   |                |       |      |   |        |   |        |   |       |       |      |  |        |   |        |   |       |       |  |   |   |   |  |   |       |       |  |  |   |   | 
|------------------------------- | ----- | - | -------------- | ----- | ---- | - | ------ | - | ------ | - | ----- | ----- | ---- |  | ------ | - | ------ | - | ----- | ----- |  | - | - | - |  | - | ----- | ----- |  |  | - | - | 
|                                |       |   | Gains Division
|                                |       |   |               
|                                |       |   | Q3             |       | Q3   |   | $      |   | %      |   | YTD   |       | YTD  |  | $      |   | %     
|                                |       |   | 2003           |       | 2002 |   | Change |   | Change |   | 2003  |       | 2002 |  | Change |   | Change
|                                |       |   |                |       |      |   |        |   |        |   |       |       |      |  |        |   |       
|REVENUE:                        |       |   |                |       |      |   |        |   |        |   |       |       |      |  |        |   |        |   |       |       |  |   |   |   |  |   |       |       |  |  |   |  
|Product sales and installations |       | $ |               |       |      | $ |       |   |        | $ |      |       |      |  |       |   |        | $ |      |       |  | $ |  |   |  | $ |      |       |  |  |  |  
|Service                         |       |   | 4,000          |       |      |   |       |   |        |   | 4,000 |       |      |  |       |   |        |   | 4,000 |       |  |   |  |   |  |   | 4,000 |       |  |  |  |  
|                                |       |   |                |       |      |   |        |   |        |   |       |       |      |  |        |   |        |   |       |       |  |   |   |   |  |   |       |       |  |  |   |  
|                                | Total |   | $              | 4,000 |      |   | $      |  |        |   | $     | 4,000 |      |  |        |  |        |   | $     | 4,000 |  |   | $ |  |  |   | $     | 4,000 |  |  |   |  | 
|                                |       |   |                |       |      |   |        |   |        |   |       |       |      |  |        |   |        |   |       |       |  |   |   |   |  |   |       |       |  |  |   |  

Comparison of Q3 2003 to Q3
2002

Consolidated

The overall decline in the global economy has caused our customers to
extend their planning and implementation cycles. While we expect this downward
trend to continue, there can be no certainty as to the degree or duration of
this downturn. We continue to expect our fiscal year 2003 Trading Systems and
I.T.S. consolidated product sales and installation and service revenues to be
down 12%-16% compared to fiscal year 2002; however, the actual decline could be
greater. We expect Gains to contribute between $4.0 million to $7.0 million of
additional network service revenue in the fourth quarter of the 2003 fiscal
year.

Product Sales and Installations

The decrease in product sales and installation revenue of $4.4 million in
Q3 2003 from Q3 2002 is primarily due to the completion of two large
installation projects (more than $3.0 million each) in Trading
Systems totaling $9.3 million in Q3 2002,
while there were no installations projects of comparable size completed in Q3
2003, as well as a higher volume of small installation projects (less than $1.0
million each) in Trading Systems that were completed in Q3 2002 compared to Q3
2003. This decrease was offset by two large installation projects in I.T.S. for
$13.3 million in Q3 2003, compared to one large installation project for $3.0
million completed in Q3 2002. We expect product sales and installation revenue
to increase by approximately 110%-120% in the last quarter of the 2003 fiscal
year when compared to the average quarterly product sales and installation
revenue during the 2003 fiscal year.

Service

The increase in service revenue of $2.6 million in Q3 2003 from Q3 2002 is
primarily due to a $4.0 million increase associated with the acquisition of
Gains on April 30, 2003, partially offset by a $1.4 million decrease in I.T.S.
service revenue primarily due to a large customer merger in the financial
industry, which resulted in continued but lower service requirements for that
customer. We expect service revenue to increase by 18% to 23% in the last
quarter of the 2003 fiscal year due to the acquisition of Gains.

Trading Systems

Product Sales and Installations

The decrease in product sales and installation revenue of $13.5 million in
Q3 2003 from Q3 2002 is primarily due to the completion of two large
installation projects totaling $9.3 million in Q3 2002, while there were no
installation projects of comparable size completed in Q3 2003, as well as a
higher volume of small installation projects (less than $1.0 million each)
totaling $4.2 million that were completed in Q3 2002 when compared to Q3 2003.

The change in our product sales and installation revenue in Q3 2003 from
Q3 2002 was not significantly affected by a change in the price of our
products; instead, it was principally affected by the number and size of turret
systems purchased by our

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customers. Large projects are not numerous; however,
their occurrence causes fluctuations when comparing period to period,
as revenue is not recognized until completion of the installation. We believe
the demand for new turret systems is primarily event driven, the result of
physical facility moves of trading positions and the addition of new trading
positions due to customer growth. Large facility moves and mergers can also
result in large installation projects, which cause uneven revenue streams
period over period.

Service

Trading Systems service revenue remained consistent from Q3 2003 to Q3
2002. Q3 2003 contained a higher volume of contract maintenance revenue, offset
by a decrease in non-contract MAC services when compared to Q3 2002.

I.T.S.

Product Sales and Installations

The increase in product sales and installation revenue of $9.1 million in
Q3 2003 from Q3 2002 is primarily due to the completion of two large
installation projects totaling $13.3 million completed in Q3 2003, compared to
one large installation project for $3.0 million completed in Q3 2002.

Service

The
decrease in service revenue of $1.4 million in Q3 2003 from Q3 2002 is
primarily due to a large customer merger in the financial industry, which
resulted in continued but lower service requirements for
that customer. In addition, we believe
the decline in service is caused by the general decline in the real estate and
construction activities within our customer base.

Gains

Service

Service revenue for our Gains unit was $4.0 million in Q3 2003. We
received no revenue from Gains in Q3 2002 as we acquired Gains on April 30,
2003.

Comparison of YTD 2003 to YTD 2002

Consolidated

The overall decline in the global economy has caused our customers to
extend their planning and implementation cycles. While we expect this downward
trend to continue, there can be no certainty as to the degree or duration of
this downturn. We continue to expect our fiscal year 2003 Trading Systems and
I.T.S. consolidated product sales and installation and service revenues to be
down 12%-16% compared to fiscal year 2002; however, the actual decline could be
greater. We expect Gains to contribute between $4.0 million to $7.0 million of
additional network service revenue for the rest of the 2003 fiscal year.

Product Sales and Installations

The decrease in product sales and installation revenue of $50.9 million in
YTD 2003 from YTD 2002 is primarily due to the completion of several large
installation projects in YTD 2002 totaling $49.2 million compared to several
large installation projects totaling $23.5 million in YTD 2003. In addition, a
higher volume of medium and small installation projects were completed in YTD
2002 totaling $20.2 million and $70.7 million, respectively, compared to medium
and small installation projects completed in YTD 2003 totaling $16.5 million
and $49.2 million, respectively. The higher volume in YTD 2002 is primarily due
to disaster recovery projects resulting from the events of September 11, 2001.
We expect product sales and installation revenue to increase by approximately
110%-120% in the last quarter of the 2003 fiscal year when compared to the
average quarterly product sales and installation revenue during the 2003 fiscal
year.

Service

The increase in service revenue of $2.4 million in YTD 2003 from YTD 2002
is primarily due to increases of $1.9 million from our Trading Systems unit and
$4.0 million from the acquisition of Gains, partially offset by a $3.5 million
decrease in our I.T.S. unit. We expect service revenue to increase by 18% to
23% in the last quarter of the 2003 fiscal year due to the acquisition of
Gains.

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Trading Systems

Product Sales and Installations

The decrease in product sales and installation revenue of $52.9 million in
YTD 2003 from YTD 2002 is primarily due to the completion in YTD 2002 of five
large installation projects aggregating $38.3 million and a higher volume of
medium (between $1.0 million and $2.0 million each) and
smaller installation projects, primarily resulting from the
events of September 11, 2001, completed in YTD 2002 as compared to one large
installation project completed for $3.7 million and a lower volume of medium
size and smaller size installation projects completed in YTD 2003.

We believe the demand for new turret systems is primarily event driven,
the result of physical facility moves of trading positions and the addition of
new trading positions due to customer growth. Large facility moves and mergers
can also result in large installation projects which cause uneven revenue
streams period over period. The change in our product sales and installation
revenue in YTD 2003 over YTD 2002 was not significantly affected by a change in
the price of our products; instead, we believe it was affected principally by
the number and size of turret systems purchased by our customers.

Service

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

I.T.S

Product Sales and Installations

The increase in product sales and installation revenue of $2.0 million in
YTD 2003 from YTD 2002 is primarily due to two large projects completed
totaling $19.8 million in YTD 2003, offset by three large projects totaling
$10.9 million and a higher volume of medium and small projects completed in
YTD 2002.

Service

The decrease in service revenue of $3.5 million in YTD 2003 from YTD 2002
is primarily due to a large customer merger in the financial industry, which
resulted in continued but lower service requirements for that customer. In addition, we believe
the decline in service is caused by the general decline in the real estate and
construction activities within our customer base.

Gains

Service

Service revenue for our Gains unit was $4.0 million in YTD 2003. We
received no revenue from Gains in YTD 2002 as we acquired Gains on April 30,
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 units. 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 Gains division includes the costs of
leased local and long distance circuit costs and depreciation of the equipment. Cost of revenue for Q3 2002
and YTD 2002 includes a charge resulting from the amortization of the step-up
in inventory of $10.4 million and $34.3 million, respectively, (relating to the
IPC Information Systems Acquisition). This purchase accounting inventory fair
value step-up is a non-cash GAAP adjustment that is recorded when a company is
acquired as we were in December 2001. Since the adjustment has been fully
recognized in income as of September 30, 2002, the cost of inventory in the
2003 fiscal year is not impacted by this adjustment.

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COST OF REVENUE

|                                |       |   |                        |        |      |  |      |    |      |   |        |        |      |  |      |    |      |  |      |    |        |   |        |        |  |  |    |    |   |   |         |         |  |  |    |    |   |  |     |     |   
|------------------------------- | ----- | - | ---------------------- | ------ | ---- |  | ---- | -- | ---- | - | ------ | ------ | ---- |  | ---- | -- | ---- |  | ---- | -- | ------ | - | ------ | ------ |  |  | -- | -- | - | - | ------- | ------- |  |  | -- | -- | - |  | --- | --- | --
|                                |       |   | Consolidated          
|                                |       |   |                       
|                                |       |   | (dollars in thousands)
|                                |       |   | Q3                     |        | % of |  | Q3   |    | % of |   | %      |        | YTD  |  | % of |    | YTD  |  | % of |    | %     
|                                |       |   | 2003                   |        | Rev. |  | 2002 |    | Rev. |   | Change |        | 2003 |  | Rev. |    | 2002 |  | Rev. |    | Change
|                                |       |   |                        |        |      |  |      |    |      |   |        |        |      |  |      |    |      |  |      |    |       
|Product sales and installations |       | $ | 23,374                 |        |      |  | 72   | %  |      | $ | 30,322 |        |      |  | 82   | %  |      |  | (10  | %) |        | $ | 55,308 |        |  |  | 62 | %  |   | $ | 108,643 |         |  |  | 78 | %  |   |  | (16 | %) 
|Service                         |       |   | 14,488                 |        |      |  | 51   | %  |      |   | 13,617 |        |      |  | 53   | %  |      |  | (2   | %) |        |   | 39,417 |        |  |  | 52 | %  |   |   | 42,628  |         |  |  | 58 | %  |   |  | (6  | %) 
|Depreciation and amortization   |       |   | 556                    |        |      |  | 1    | %  |      |   | 248    |        |      |  | 0    | %  |      |  | 1    | %  |        |   | 1,152  |        |  |  | 1  | %  |   |   | 751     |         |  |  | 0  | %  |   |  | 1   | %  
|                                |       |   |                        |        |      |  |      |    |      |   |        |        |      |  |      |    |      |  |      |    |        |   |        |        |  |  |    |    |   |   |         |         |  |  |    |    |   |  |     |    
|                                | Total |   | $                      | 38,418 |      |  |      | 63 | %    |   | $      | 44,187 |      |  |      | 70 | %    |  |      | (7 | %)     |   | $      | 95,877 |  |  |    | 58 | % |   | $       | 152,022 |  |  |    | 71 | % |  |     | (13 | %)
|                                |       |   |                        |        |      |  |      |    |      |   |        |        |      |  |      |    |      |  |      |    |        |   |        |        |  |  |    |    |   |   |         |         |  |  |    |    |   |  |     |    

COST OF REVENUE

|                                |       |   |                          |        |      |  |      |    |      |   |        |        |      |  |      |    |      |  |      |     |        |   |        |        |  |  |    |    |   |   |        |         |  |  |    |    |   |  |     |     |   
|------------------------------- | ----- | - | ------------------------ | ------ | ---- |  | ---- | -- | ---- | - | ------ | ------ | ---- |  | ---- | -- | ---- |  | ---- | --- | ------ | - | ------ | ------ |  |  | -- | -- | - | - | ------ | ------- |  |  | -- | -- | - |  | --- | --- | --
|                                |       |   | Trading Systems Division
|                                |       |   |                         
|                                |       |   | (dollars in thousands)  
|                                |       |   | Q3                       |        | % of |  | Q3   |    | % of |   | %      |        | YTD  |  | % of |    | YTD  |  | % of |     | %     
|                                |       |   | 2003                     |        | Rev. |  | 2002 |    | Rev. |   | Change |        | 2003 |  | Rev. |    | 2002 |  | Rev. |     | Change
|                                |       |   |                          |        |      |  |      |    |      |   |        |        |      |  |      |    |      |  |      |     |       
|Product sales and installations |       | $ | 10,123                   |        |      |  | 56   | %  |      | $ | 25,349 |        |      |  | 80   | %  |      |  | (24  | %)  |        | $ | 30,937 |        |  |  | 49 | %  |   | $ | 87,368 |         |  |  | 75 | %  |   |  | (26 | %) 
|Service                         |       |   | 10,337                   |        |      |  | 46   | %  |      |   | 10,769 |        |      |  | 48   | %  |      |  | (2   | %)  |        |   | 29,820 |        |  |  | 46 | %  |   |   | 32,948 |         |  |  | 52 | %  |   |  | (6  | %) 
|Depreciation and amortization   |       |   | 302                      |        |      |  | 1    | %  |      |   | 248    |        |      |  | 0    | %  |      |  | 1    | %   |        |   | 898    |        |  |  | 1  | %  |   |   | 751    |         |  |  | 0  | %  |   |  | 1   | %  
|                                |       |   |                          |        |      |  |      |    |      |   |        |        |      |  |      |    |      |  |      |     |        |   |        |        |  |  |    |    |   |   |        |         |  |  |    |    |   |  |     |    
|                                | Total |   | $                        | 20,762 |      |  |      | 51 | %    |   | $      | 36,366 |      |  |      | 67 | %    |  |      | (16 | %)     |   | $      | 61,655 |  |  |    | 48 | % |   | $      | 121,067 |  |  |    | 68 | % |  |     | (20 | %)
|                                |       |   |                          |        |      |  |      |    |      |   |        |        |      |  |      |    |      |  |      |     |        |   |        |        |  |  |    |    |   |   |        |         |  |  |    |    |   |  |     |    

COST OF REVENUE

|                                |       |   |                        |        |      |  |      |    |      |   |        |       |      |  |      |    |      |  |      |   |        |   |        |        |  |  |    |    |   |   |        |        |  |  |    |    |   |  |    |   |  
|------------------------------- | ----- | - | ---------------------- | ------ | ---- |  | ---- | -- | ---- | - | ------ | ----- | ---- |  | ---- | -- | ---- |  | ---- | - | ------ | - | ------ | ------ |  |  | -- | -- | - | - | ------ | ------ |  |  | -- | -- | - |  | -- | - | -
|                                |       |   | I.T.S. Division       
|                                |       |   |                       
|                                |       |   | (dollars in thousands)
|                                |       |   | Q3                     |        | % of |  | Q3   |    | % of |   | %      |       | YTD  |  | % of |    | YTD  |  | % of |   | %     
|                                |       |   | 2003                   |        | Rev. |  | 2002 |    | Rev. |   | Change |       | 2003 |  | Rev. |    | 2002 |  | Rev. |   | Change
|                                |       |   |                        |        |      |  |      |    |      |   |        |       |      |  |      |    |      |  |      |   |       
|Product sales and installations |       | $ | 13,251                 |        |      |  | 91   | %  |      | $ | 4,973  |       |      |  | 91   | %  |      |  | 0    | % |        | $ | 24,371 |        |  |  | 93 | %  |   | $ | 21,275 |        |  |  | 88 | %  |   |  | 5  | %
|Service                         |       |   | 1,911                  |        |      |  | 96   | %  |      |   | 2,848  |       |      |  | 84   | %  |      |  | 12   | % |        |   | 7,357  |        |  |  | 99 | %  |   |   | 9,680  |        |  |  | 89 | %  |   |  | 10 | %
|Depreciation and amortization   |       |   |                       |        |      |  | 0    | %  |      |   |       |       |      |  | 0    | %  |      |  | 0    | % |        |   |       |        |  |  | 0  | %  |   |   |       |        |  |  | 0  | %  |   |  | 0  | %
|                                |       |   |                        |        |      |  |      |    |      |   |        |       |      |  |      |    |      |  |      |   |        |   |        |        |  |  |    |    |   |   |        |        |  |  |    |    |   |  |    |  
|                                | Total |   | $                      | 15,162 |      |  |      | 92 | %    |   | $      | 7,821 |      |  |      | 89 | %    |  |      | 3 | %      |   | $      | 31,728 |  |  |    | 95 | % |   | $      | 30,955 |  |  |    | 88 | % |  |    | 7 | %
|                                |       |   |                        |        |      |  |      |    |      |   |        |       |      |  |      |    |      |  |      |   |        |   |        |        |  |  |    |    |   |   |        |        |  |  |    |    |   |  |    |  

COST OF REVENUE

|                                |       |   |                        |       |      |  |      |    |      |   |        |   |      |  |      |   |      |  |      |    |        |   |       |       |  |  |    |    |   |   |   |   |  |  |   |   |   |  |    |    |  
|------------------------------- | ----- | - | ---------------------- | ----- | ---- |  | ---- | -- | ---- | - | ------ | - | ---- |  | ---- | - | ---- |  | ---- | -- | ------ | - | ----- | ----- |  |  | -- | -- | - | - | - | - |  |  | - | - | - |  | -- | -- | -
|                                |       |   | Gains Division        
|                                |       |   |                       
|                                |       |   | (dollars in thousands)
|                                |       |   | Q3                     |       | % of |  | Q3   |    | % of |   | %      |   | YTD  |  | % of |   | YTD  |  | % of |    | %     
|                                |       |   | 2003                   |       | Rev. |  | 2002 |    | Rev. |   | Change |   | 2003 |  | Rev. |   | 2002 |  | Rev. |    | Change
|                                |       |   |                        |       |      |  |      |    |      |   |        |   |      |  |      |   |      |  |      |    |       
|Product sales and installations |       | $ |                       |       |      |  |     | %  |      | $ |       |   |      |  | 0    | % |      |  | 0    | %  |        | $ |      |       |  |  |   | %  |   | $ |  |   |  |  | 0 | % |   |  | 0  | % 
|Service                         |       |   | 2,240                  |       |      |  | 56   | %  |      |   |       |   |      |  | 0    | % |      |  | 56   | %  |        |   | 2,240 |       |  |  | 56 | %  |   |   |  |   |  |  | 0 | % |   |  | 56 | % 
|Depreciation and amortization   |       |   | 254                    |       |      |  | 6    | %  |      |   |       |   |      |  | 0    | % |      |  | 6    | %  |        |   | 254   |       |  |  | 6  | %  |   |   |  |   |  |  | 0 | % |   |  | 6  | % 
|                                |       |   |                        |       |      |  |      |    |      |   |        |   |      |  |      |   |      |  |      |    |        |   |       |       |  |  |    |    |   |   |   |   |  |  |   |   |   |  |    |   
|                                | Total |   | $                      | 2,494 |      |  |      | 62 | %    |   | $      |  |      |  |      | 0 | %    |  |      | 62 | %      |   | $     | 2,494 |  |  |    | 62 | % |   | $ |  |  |  |   | 0 | % |  |    | 62 | %
|                                |       |   |                        |       |      |  |      |    |      |   |        |   |      |  |      |   |      |  |      |    |        |   |       |       |  |  |    |    |   |   |   |   |  |  |   |   |   |  |    |   

Comparison of Q3 2003 to Q3
2002

Consolidated

Product Sales and Installations

Consolidated product sales and installation cost of revenue as a
percentage of revenue decreased by 10% in Q3 2003 as compared to Q3
2002 primarily due to the inclusion of $10.4 million of inventory fair value step-up
in Q3 2002, partially offset by a higher percentage of I.T.S.
installations and third party products
sold compared to Trading System products sold. I.T.S. and third party products have a
higher cost of revenues than Trading Systems manufactured products.

Service

Consolidated service cost of revenue as a percentage of revenue decreased
by 2% in Q3 2003 from Q3 2002 primarily due to an increase in contract
maintenance services, which have a higher gross profit margin than non-contract
MAC services. We anticipate having higher contract maintenance services for
the remainder of fiscal year 2003 and expect service margins to be consistent
for the remainder of the fiscal year. We expect cost of revenue of
55%-60% for
our Gains unit in the 2003 fiscal year.

Trading Systems

Product Sales and Installations

Trading Systems product sales and installation cost of revenue as a
percentage of revenue decreased by 24% in Q3 2003 from Q3 2002 primarily due to
the inclusion of $10.1 million of inventory fair value step-up in Q3 2002.

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The margins relating to our IQMX trading system have stabilized in Q3 2003
as a result of the acceptance in the marketplace of the IQMX trading system. We
expect to continue to have consistent margins in our IQMX trading system for
the remainder of the 2003 fiscal year.

Service

Trading Systems service cost of revenue as a percentage of revenue
decreased by 2% in Q3 2003 from Q3 2002 primarily due to an increase in
contract maintenance services, which have a higher gross profit margin than
non-contract MAC services.

I.T.S.

Product Sales and Installations

I.T.S. product sales and installation cost of revenue as a percentage of
revenue remained consistent in Q3 2003 from Q3 2002, as the
inclusion of $0.3 million of inventory fair value step-up in Q3
2002 was offset by additional discounts in Q3 2003. The
general decline in real estate and construction activities within our customer
base has required additional discounts to remain competitive.

Service

I.T.S. service cost of revenue as a percentage of revenue increased by 12%
in Q3 2003 from Q3 2002 primarily due to the general decline in the real estate
and construction activities within our customer base. As a result of such
business decline, we have experienced a decrease in direct margins to remain
competitive.

Gains

Service

Gains
service cost of revenue as a percentage of revenue was 56% in Q3
2003. We had no cost of revenue for our Gains unit in Q3 2002 as we acquired
Gains on April 30, 2003.

Comparison of YTD 2003 to YTD 2002

Consolidated

Product Sales and Installations

Consolidated product sales and installation cost of revenue as a
percentage of revenue decreased by 16% in YTD 2003 as compared to YTD 2002
primarily due to the inclusion of $33.5 million of inventory fair value step-up
in YTD 2002, partially offset by lower margins attained in our I.T.S. unit and a higher
percentage of I.T.S. installations and third party products sold compared to Trading System
products sold in YTD 2003. I.T.S. installations and third party products have a higher cost
of revenue than Trading Systems manufactured products. We expect product sales
and installation cost of revenue to increase by approximately 2% to 5% in the
last quarter of the 2003 fiscal year when compared to the average product sales
and installation cost of revenue during the 2003 fiscal year.

Service

Consolidated service cost of revenue as a percentage of revenue decreased
by 6% in YTD 2003 from YTD 2002 primarily due to an increase in contract
maintenance services, which have a higher gross profit margin than non-contract
MAC services, as well as the inclusion of $0.8 million of inventory fair value
step-up in YTD 2002. We anticipate service cost of revenue to be consistent in
the last quarter of the 2003 fiscal year when compared to the average service
cost of revenue during YTD 2003. We expect cost of revenue of 55%-60% for our
Gains unit in the 2003 fiscal year.

Trading Systems

Product Sales and Installations

Trading Systems product sales and installation cost of revenue as a
percentage of revenue decreased by 26% in YTD 2003 from YTD 2002 primarily due
to the inclusion of $32.3 million of inventory fair value step-up in YTD 2002,
as well as higher margins generated from the sale of the IQMX trading system in
YTD 2003. The margins relating to our IQMX trading system have

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increased in YTD 2003 when compared to YTD 2002 as a result of the
acceptance in the marketplace of the IQMX and a more cost efficient
manufacturing process.

Service

Trading Systems service cost of revenue as a percentage of revenue
decreased by 6% in YTD 2003 from YTD 2002 primarily due to an increase in
contract maintenance services which have a higher gross profit margin than
non-contract MAC services, as well as the inclusion of $0.7 million of
inventory fair value step-up in YTD 2002.

I.T.S.

Product Sales and Installations

I.T.S. product sales and installation cost of revenue as a percentage of
revenue increased by 5% in YTD 2003 from YTD 2002 primarily due to two large
contracts sold at a higher than normal discount in YTD 2003, partially offset by the
inclusion of $1.3 million of inventory fair value step-up in YTD 2002. The
general decline in real estate and construction activities within our customer
base has resulted in more competitive pricing on installation project bids.

Service

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

Gains

Service

Gains
service cost of revenue as a percentage of revenue was 56% in YTD
2003. We had no cost of revenue for our Gains unit in YTD 2002 as we acquired
Gains on April 30, 2003.

Research and Development Expense

|                         |  |              |       |      |  |        |       |        |  |      |        |      |  |        |      |        |   |   |       |  |  |   |        |  |  |   |        |   |  |  |      |  
|------------------------ |  | ------------ | ----- | ---- |  | ------ | ----- | ------ |  | ---- | ------ | ---- |  | ------ | ---- | ------ | - | - | ----- |  |  | - | ------ |  |  | - | ------ | - |  |  | ---- | -
|(dollars in thousands)   |  | Consolidated
|                         | 
|                         |  | Q3           |       | Q3   |  | $      |       | %      |  | YTD  |        | YTD  |  | $      |      |        | %
|                         |  | 2003         |       | 2002 |  | Change |       | Change |  | 2003 |        | 2002 |  | Change |      | Change
|                         |  |              |       |      |  |        |       |        |  |      |        |      |  |        |      |       
|Research and development |  | $            | 2,784 |      |  | $      | 3,847 |        |  | $    | (1,063 | )    |  |        | (28% | )      |   | $ | 8,447 |  |  | $ | 11,481 |  |  | $ | (3,034 | ) |  |  | (26% | )

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

Comparison of Q3 2003 to Q3 2002

Research and development expenses decreased by $1.1 million in Q3 2003
from Q3 2002 primarily due to planned reductions of both headcount and
discretionary spending.

Comparison of YTD 2003 to YTD 2002

Research and development expenses decreased by $3.0 million in YTD 2003
from YTD 2002 primarily due to planned reductions of both headcount and
discretionary spending.

Selling, General and Administrative Expense

|                                          |  |              |        |      |  |        |        |        |  |      |       |      |  |        |    |        |   |   |        |  |  |   |        |  |  |   |        |   |  |  |      |  
|----------------------------------------- |  | ------------ | ------ | ---- |  | ------ | ------ | ------ |  | ---- | ----- | ---- |  | ------ | -- | ------ | - | - | ------ |  |  | - | ------ |  |  | - | ------ | - |  |  | ---- | -
|(dollars in thousands)                    |  | Consolidated
|                                          | 
|                                          |  | Q3           |        | Q3   |  | $      |        | %      |  | YTD  |       | YTD  |  | $      |    |        | %
|                                          |  | 2003         |        | 2002 |  | Change |        | Change |  | 2003 |       | 2002 |  | Change |    | Change
|                                          |  |              |        |      |  |        |        |        |  |      |       |      |  |        |    |       
|Selling, general & administrative expense |  | $            | 11,384 |      |  | $      | 10,352 |        |  | $    | 1,032 |      |  |        | 10 | %      |   | $ | 30,856 |  |  | $ | 38,357 |  |  | $ | (7,501 | ) |  |  | (20% | )

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Comparison of Q3 2003 to Q3 2002

Selling,
general and administrative expenses increased by $1.0 million in
Q3 2003 from Q3 2002 primarily due to the inclusion of expenses
from our Gains unit totaling $1.8 million, which was offset in part by a decrease in spending
associated with planned reductions for both headcount and discretionary
spending.

Comparison of YTD 2003 to YTD 2002

Selling, general and administrative expenses decreased by $7.5 million in
YTD 2003 from YTD 2002 primarily due to the inclusion of $2.5 million of
employee bonuses related to the IPC Information Systems Acquisition and a $6.9
million charge for corporate related services from Global Crossing in YTD 2002
offset in part by the inclusion of expenses from our Gains unit totaling $1.8 million in
YTD 2003. The Global Crossing corporate related service charges
represented a calculation of
the allocation to IPC Information Systems of services such as treasury,
payroll, tax compliance, legal and other professional fees, which was partially
offset by an increase in headcount and expenses associated with the set-up of
our operations as a stand-alone entity and higher professional fees in YTD
2003.

Depreciation and Amortization

|                              |  |              |       |      |  |        |       |        |  |      |     |      |  |        |   |        |   |   |        |  |  |   |        |  |  |   |        |   |  |  |     |   
|----------------------------- |  | ------------ | ----- | ---- |  | ------ | ----- | ------ |  | ---- | --- | ---- |  | ------ | - | ------ | - | - | ------ |  |  | - | ------ |  |  | - | ------ | - |  |  | --- | --
|(dollars in thousands)        |  | Consolidated
|                              | 
|                              |  | Q3           |       | Q3   |  | $      |       | %      |  | YTD  |     | YTD  |  | $      |   |        | %
|                              |  | 2003         |       | 2002 |  | Change |       | Change |  | 2003 |     | 2002 |  | Change |   | Change
|                              |  |              |       |      |  |        |       |        |  |      |     |      |  |        |   |       
|Depreciation and amortization |  | $            | 4,738 |      |  | $      | 4,535 |        |  | $    | 203 |      |  |        | 4 | %      |   | $ | 14,267 |  |  | $ | 19,935 |  |  | $ | (5,668 | ) |  |  | (28 | %)

Comparison of Q3 2003 to Q3 2002

Depreciation and amortization expense increased by $0.2 million in Q3 2003
from Q3 2002 primarily reflecting depreciation expenses associated
with capital expenditures of approximately $7.6
million for the period from July 1, 2002 to June 30, 2003.

Comparison of YTD 2003 to YTD 2002

Depreciation and amortization expense decreased by $5.7 million in YTD
2003 from YTD 2002 primarily due to the adoption of SFAS 142, in which
goodwill and indefinite lived intangible assets are no longer subject to
periodic amortization. This standard was adopted by us as of the December 20,
2001 acquisition date, resulting in no further amortization subsequent to that
date.

Interest Expense, net

|                       |  |              |       |      |  |        |       |        |  |      |      |      |  |        |      |        |   |   |        |  |  |   |        |  |  |   |        |   |  |  |      |  
|---------------------- |  | ------------ | ----- | ---- |  | ------ | ----- | ------ |  | ---- | ---- | ---- |  | ------ | ---- | ------ | - | - | ------ |  |  | - | ------ |  |  | - | ------ | - |  |  | ---- | -
|(dollars in thousands) |  | Consolidated
|                       | 
|                       |  | Q3           |       | Q3   |  | $      |       | %      |  | YTD  |      | YTD  |  | $      |      |        | %
|                       |  | 2003         |       | 2002 |  | Change |       | Change |  | 2003 |      | 2002 |  | Change |      | Change
|                       |  |              |       |      |  |        |       |        |  |      |      |      |  |        |      |       
|Interest expense, net  |  | $            | 6,008 |      |  | $      | 6,894 |        |  | $    | (886 | )    |  |        | (13% | )      |   | $ | 18,690 |  |  | $ | 20,665 |  |  | $ | (1,975 | ) |  |  | (10% | )

Comparison of Q3 2003 to Q3 2002

Interest expense, net decreased by $0.9 million in Q3 2003 from Q3 2002
reflecting our September 2002 excess cash flow repayment and a prepayment made
on our term loan in March 2003, which reduced our outstanding indebtedness.

Comparison of YTD 2003 to YTD 2002

Interest
expense, net decreased by $2.0 million in YTD 2003 from YTD 2002
reflecting our September 2002 excess cash flow repayment and a prepayment made
on our term loan in March 2003, which reduced our outstanding indebtedness.

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Provision for Income Taxes

Our effective tax rate for Q3 2003 and YTD 2003 were (194.8%) and 301.8%,
respectively, compared to 24.1% and 18.5% for Q3 2002 and YTD 2002,
respectively.

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

Net Loss

|                       |  |              |      |      |  |        |        |        |  |      |        |      |  |        |      |        |   |   |        |   |  |   |         |   |  |   |         |   |  |  |      |  
|---------------------- |  | ------------ | ---- | ---- |  | ------ | ------ | ------ |  | ---- | ------ | ---- |  | ------ | ---- | ------ | - | - | ------ | - |  | - | ------- | - |  | - | ------- | - |  |  | ---- | -
|(dollars in thousands) |  | Consolidated
|                       | 
|                       |  | Q3           |      | Q3   |  | $      |        | %      |  | YTD  |        | YTD  |  | $      |      |        | %
|                       |  | 2003         |      | 2002 |  | Change |        | Change |  | 2003 |        | 2002 |  | Change |      | Change
|                       |  |              |      |      |  |        |        |        |  |      |        |      |  |        |      |       
|Net loss               |  | $            | (967 | )    |  | $      | (5,385 | )      |  | $    | (4,418 | )    |  |        | (82% | )      |   | $ | (1,780 | ) |  | $ | (23,105 | ) |  | $ | (21,325 | ) |  |  | (92% | )

Comparison of Q3 2003 to Q3 2002

Net loss decreased by $4.4 million in Q3 2003 from Q3 2002 due in part to
non-cash GAAP adjustments made to the fair value of our inventory related to
our acquisition of IPC Information Systems in December 2001. These adjustments
increased the carrying value of the inventory to its fair value at the
acquisition date, which effectively reduced the gross profit on the sale of
such inventory to a nominal amount. The amount of inventory fair value
adjustments included as a cost of revenue in Q3 2002 was $10.4 million while
there was no impact in Q3 2003. The impact of these adjustments were
offset in part by the decrease
in revenue for Q3 2003 due to current economic conditions. For the fourth
quarter of the 2003 fiscal year, we expect a return to net income primarily due
to the projected increase in consolidated product sales and installation
revenue. We cannot predict when an economic recovery will occur
in the financial community and likewise cannot predict whether, when and to
what extent we will show an increase in revenue or profitability for the 2004 fiscal year.

Comparison of YTD 2003 to YTD 2002

Net loss decreased by $21.3 million in YTD 2003 from YTD 2002 due in part
to non-cash GAAP adjustments made to the fair value of our inventory related to
the IPC Information Systems Acquisition. The amount of inventory fair value
adjustments included as cost of revenue for YTD 2002 was $34.3 million while
there was no impact in YTD 2003. There will be no impact to net income in
fiscal year 2003 and beyond for these adjustments. In addition, the net loss in
YTD 2002 was unfavorably impacted by corporate related service charges from
Global Crossing, which represented an allocation to IPC Information Systems,
Inc. for the cost of services, such as treasury, payroll, tax compliance, legal
and other professional fees, totaling $6.9 million, as well as the decrease in
revenue in YTD 2003 due to current economic conditions. For the full 2003
fiscal year, we expect a return to net income primarily due to the projected
increase in consolidated product sales and installation revenue, the completion
of the inventory fair value adjustments charged to cost of revenue in FY 2002
and a reduction in selling, general and administrative costs
primarily due to the
exclusion of the intercompany charges we received in the past from Global
Crossing. We cannot predict when an economic recovery will occur in the
financial community and likewise cannot predict whether, when and to what
extent we will show an increase in revenue or profitability for the 2004 fiscal year.

Liquidity and Capital Resources

On March 3, 2003, we voluntarily prepaid $14.0 million in debt on our
$120.0 million senior secured credit facility. Mandatory prepayments of the
senior secured credit facilities are required upon the occurrence of certain
events, including asset sales and equity issuances, as well as for 75% of our
excess free cash flow at each fiscal year end. Excess cash flow is defined in
our credit agreement, as amended, as: (1) the sum of net income, interest
expense, provisions for taxes, depreciation expense, amortization expense,
other non-cash items affecting net income and to the extent included in
calculating net income, expenses incurred by us in connection with the first
amendment of the credit agreement, plus (2) a working capital
adjustment less (3)
repayments of debt, capital expenditures, cash interest expense and provisions
for taxes based on income. There is no required amortization on the revolving
credit facility, and no amounts are outstanding on such facility at
June 30, 2003.

Simultaneously with the prepayment, we amended our credit facility to
modify the senior secured leverage, total leverage, interest coverage and
capital expenditures covenants to be less restrictive and secured consent from
our lenders for the acquisition of the shares of Gains International (US) and
Gains International (Europe) Limited. In addition, the credit facility was
amended to reduce the mandatory excess cash flow payments by the $14 million
prepayment on a dollar for dollar basis as well as any payments made relating
to the acquisition of Gains. Following the prepayment, we had approximately
$55.4 million outstanding under the credit facility. We expect net interest
savings from the $14.0 million prepayment to be approximately $0.3 million in

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the 2003 fiscal year. As a result of the prepayment, there is a pro rata
reduction of the quarterly amortization payments required by the credit
agreement. The original amortization payment schedule prior to the prepayment
was $1.8 million per quarter from March 31, 2003 through December 31, 2005 and
$11.9 million per quarter thereafter through December 31, 2006. Due to the pro
rata reduction of required amortization payments, the revised payment schedule
is $1.5 million per quarter from March 31, 2003 through December 31, 2005 and
$9.5 million thereafter through December 31, 2006.

On March 13, 2003, we entered into a settlement and rejection agreement
with Global Crossing. Pursuant to the settlement and rejection agreement, all
of the remaining obligations under the purchase agreement relating to the IPC
Information Systems Acquisition were terminated. In addition, we and Global
Crossing mutually released each other for all prior claims. The bankruptcy
court entered an order on March 14, 2003 approving the settlement and rejection
agreement.

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

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

As a result of the termination of the purchase agreement, Global Crossing
has been relieved of all of its obligations under the purchase agreement,
including, among other things, indemnifying us for tax liabilities that may be
imposed upon IPC Information Systems, Inc. and its subsidiaries for periods
prior to and including the date of the IPC Information Systems Acquisition.
Therefore, in the event that any tax liabilities are imposed, as a result of an
audit or otherwise, on IPC Information Systems, Inc. and/or its subsidiaries
for these periods prior to and including the date of the IPC Information
Systems Acquisition, we may be required to pay those taxes and are no longer
able to recover indemnification from Global Crossing. As of the date of this
filing, the aggregate amount of taxes for which we have received notices of
taxes due from various jurisdictions and recognized as tax liabilities under
purchase accounting is approximately $6.5 million. We estimate that the range
of our exposure for additional tax liabilities is from $0 to $36 million. In
computing 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 IPC
Information Systems Acquisition. Global Crossing is also required to pay us any
future tax refunds or credits it receives applicable to IPC Information
Systems, Inc. and its subsidiaries for these periods.

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

Comparison of YTD 2003 to YTD 2002

Cash provided by operating activities was $11.0 million for YTD 2003 as
compared to $42.0 million for YTD 2002. This decrease of $31.0 million is
primarily due to decreases from changes in accounts receivable and inventory as
compared with the

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prior period, offset in part by increases in cash from increased customer advances
and the lower net loss. In the YTD 2002 period, we benefited from cash inflows
from the improvement of working capital through the decrease of accounts
receivable and inventory balances. The improvement of accounts receivable for
YTD 2002 was a direct result of improved collections both in the US and
internationally. The progress in this area during YTD 2002 plateaued during
YTD 2003 and balances are being maintained at a more comparable level. The
change in inventory balances relates to the timing of the completion of jobs
under contract until they are completed and realized through the statement of
income. The inventory balance at June 30, 2003 reflects several projects
currently underway versus no installation projects of comparable size in YTD
2002. These factors were partially offset by the increase in customer advances
compared with the prior period, which represent collections on billings for
jobs that have not yet been completed, combined with a smaller net loss in YTD
2003 as compared to YTD 2002.

Cash provided by investing activities was $4.5 million for YTD 2003 as
compared to cash used of $350.4 million for YTD 2002. Cash provided by
investing activities for YTD 2003 related to the net cash received of
$4.2 million as a result of the settlement and rejection agreement with Global
Crossing, combined with the cash provided by our acquisition of Gains on April
30, 2003 totaling $4.1 million relating to the existing cash on hand of Gains
at the date of acquisition. The acquisition of Gains provided cash to us as
the consideration for the transaction was non-cash and paid in our common
stock. Upon acquisition of Gains, the existing cash on Gains balance sheet
results in a cash inflow. This activity was partially offset by capital
expenditures of $3.9 million in YTD 2003. Cash used in investing activities for
YTD 2002 related almost exclusively to cash used to fund the IPC Information
Systems Acquisition.

Cash used in financing activities was $18.9 million for YTD 2003 as
compared to cash provided by financing activities of $357.1 million for YTD
2002. Cash used in financing activities in YTD 2003 represented the voluntary
prepayment of $14.0 million of principal on our senior secured credit
facilities in addition to the normal amortization repayment of principal as
required under the terms of our senior secured credit facilities. $0.3 million
of cash used in financing activities related to debt issuance costs from the
amendment to our credit facilities. Cash provided by financing activities in
YTD 2002 included $140 million of common equity contribution from a group led
by GSCP 2000 and its affiliates, the proceeds from
the sale of $150 million of senior subordinated notes, and the borrowing of
$105 million under our senior secured credit facilities. These inflows were
partially offset by outflows of $15.1 million of intercompany activity that
occurred prior to the IPC Information Systems Acquisition and issuance costs
for the financing of the IPC Information Systems Acquisition.

The effect of exchange rate changes on cash represents increases and
decreases in various currencies when translated into US dollars. As an
international company, we are subjected to currency fluctuation risk, which
resulted in a net decrease of cash of approximately $0.9 million in YTD 2003 as
compared to a decrease of $0.8 million in YTD 2002. Currently our largest
currency exposure is to the British Pound and the Canadian Dollar, although we
have additional exposure, 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 2003 will be
approximately $7.0 million, however, actual capital expenditures for fiscal
year 2003 may be greater. We expect to increase spending on capital
expenditures in subsequent years, but are limited to the amount of capital
expenditures in any fiscal year by our capital expenditure covenant in our
credit agreement, as amended. The limits imposed by our credit agreement are
$8.0 million for fiscal 2003 and $12.0 million thereafter. We have no off
balance sheet arrangements.

Our primary future uses of cash will be to fund interest expense and
principal repayments on our debt, capital expenditures, research and
development efforts and working capital as needed for potential strategic
acquisitions and/or alliances. Our primary future sources of cash will be cash
flows from operations, primarily the design, manufacture, installation and
service of turret systems for the trading operations of investment and
commercial banks, foreign exchange and commodity brokers and dealers, market
exchanges, mutual and hedge fund companies, asset managers and insurance
companies, and, if necessary, borrowings under the revolving credit facility.
At June 30, 2003, we had $21.0 million of unrestricted cash. The amount of
unrestricted cash on our balance sheet was affected by both the voluntary
prepayment of debt under our senior secured credit agreement and the settlement
agreement with Global Crossing mentioned above. Additionally, we had liquidity
available to us of $10.7 million through our $15.0 million revolving credit
facility under our senior secured credit facilities, under which there were no
amounts outstanding at June 30, 2003 ($15.0 million revolving credit facility
reduced by outstanding letters of credit of $4.3 million at June 30, 2003).

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

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

Contractual Obligations and Other Commercial Commitments

The following summarizes our contractual obligations at June 30, 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    |        |  |   |       
|Contractual Obligations:         |                                    | Total                  |         | 1 year  |  | years |           | years  |     | After 5 years
|                                 |                                    |                        |         |         |  |       |           |        |     |              
|Deferred Compensation Agreements |                                    | $                      | 5,322   |         |  | $     | 633       |        |     | $             | 1,491  |        |  | $ | 955    |        |  | $ | 2,243   |        
|Deferred
purchase consideration  |                                    |                        | 3,128   |         |  |       | 3,128     |        |     |               |       |        |  |   |       |        |  |   |        |        
|Long-Term Debt                   |                                    |                        | 202,446 |         |  |       | 5,827     |        |     |               | 27,680 |        |  |   | 18,939 |        |  |   | 150,000 |        
|Operating Leases                 |                                    |                        | 29,951  |         |  |       | 5,964     |        |     |               | 9,673  |        |  |   | 8,156  |        |  |   | 6,158   |        
|                                 |                                    |                        |         |         |  |       |           |        |     |               |        |        |  |   |        |        |  |   |         |        
|                                 | Total Contractual Cash Obligations |                        | $       | 240,847 |  |       | $         | 15,552 |     |               | $      | 38,844 |  |   | $      | 28,050 |  |   | $       | 158,401 | 
|                                 |                                    |                        |         |         |  |       |           |        |     |               |        |        |  |   |        |        |  |   |         |        

|                                          |                              |           |                                            |        |           |       |       |       |     |              |       |       |  |   |   |   |  |   |   |   | 
|----------------------------------------- | ---------------------------- | --------- | ------------------------------------------ | ------ | --------- | ----- | ----- | ----- | --- | ------------ | ----- | ----- |  | - | - | - |  | - | - | - | 
|                                          |                              |           | Amount of Commitment Expiration Per Period
|                                          |                              |           |                                           
|                                          |                              |           | Total Amounts                              |        | Less than |       | 1-3   |       | 4-5 |              |       |       | 
|Other Commercial Commitments:             |                              | Committed |                                            | 1 year |           | years |       | years |     | Over 5 years
|                                          |                              |           |                                            |        |           |       |       |       |     |             
|Line of Credit                            |                              | $         |                                           |        |           | $     |      |       |     | $            |      |       |  | $ |  |   |  | $ |  |  
|Standby Letters of Credit                 |                              |           | 4,250                                      |        |           |       | 4,250 |       |     |              |      |       |  |   |  |   |  |   |  |  
|Guaranties for Global Crossing Affiliates |                              |           | 5,230                                      |        |           |       | 2,256 |       |     |              | 2,974 |       |  |   |  |   |  |   |  |  
|                                          |                              |           |                                            |        |           |       |       |       |     |              |       |       |  |   |   |   |  |   |   |  
|                                          | Total Commercial Commitments |           | $                                          | 9,480  |           |       | $     | 6,506 |     |              | $     | 2,974 |  |   | $ |  |  |   | $ |  | 
|                                          |                              |           |                                            |        |           |       |       |       |     |              |       |       |  |   |   |   |  |   |   |  

Recent Accounting Pronouncements

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

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

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

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In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities which nullified EITF Issue No.
94-3, Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). SFAS 146 requires that a liability for a cost associated with
an exit or disposal activity be recognized when the liability is incurred,
whereas EITF No. 94-3 had recognized the liability at the commitment date to an
exit plan. We are required to adopt the provisions of SFAS 146 effective for
exit or disposal activities initiated after December 31, 2002. We adopted SFAS
146 on January 1, 2003. The adoption of this standard did not have a material
impact on our condensed consolidated financial statements.

In November 2002, the EITF reached a consensus on Issue 00-21,
Multiple-Deliverable Revenue Arrangements. EITF 00-21 addresses how to
account for arrangements that may involve the delivery or performance of
multiple products, services, and/or rights to use assets. The consensus
mandates how to identify whether goods or services or both which are to be
delivered separately in a bundled sales arrangement should be accounted for
separately because they are separate units of accounting. The guidance can
affect the timing of revenue recognition for such arrangements, even though it
does not change rules governing the timing or pattern of revenue recognition of
individual items accounted for separately. The final consensus will be
applicable to agreements entered into in fiscal 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. We are still assessing the impact of the
adoption of EITF 00-21, but do not believe it will have a material impact on our
condensed 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 applied FIN 45 in connection with the March 13, 2003 settlement
and rejection agreement with Global Crossing. We have reflected the fair value
of guarantees on behalf of Global Crossing in our June 30, 2003 condensed
consolidated financial statements.

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

In January 2003, the FASB issued FASB Interpretation No. 46,
Consolidation of Variable Interest Entities, which requires variable interest
entities (commonly referred to as SPEs) to be consolidated by the primary
beneficiary of the entity if certain criteria are met. FIN 46 is effective
immediately for all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired before
February 1, 2003, the provisions of FIN 46 become effective for us during the
fourth quarter of our 2003 fiscal year. For variable interest entities acquired prior to
February 1, 2003, any difference between the net amount added to the balance
sheet and the amount of any previously recognized interest in the variable
interest entity will be recognized as a cumulative effect of an accounting
change. We are currently evaluating the provisions of FIN 46, but do not believe
the adoption will have a significant impact on our condensed consolidated
financial statements. In connection with the Purple Voice
transaction, the guidance in FIN 46 will require us to
consolidate Purple Voice into the condensed consolidated financial
statements starting August 1, 2003.

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 is not expected to have a material impact on
our condensed consolidated financial statements.

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In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity.
SFAS 150 establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. SFAS 150 applies specifically to a number of financial instruments that
companies have historically presented within their financial statements either
as equity or between the liabilities section and the equity section, rather than as liabilities. SFAS 150 is effective for
financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. The adoption of SFAS 150 is not expected to
have an impact on our condensed consolidated financial statements.

Summary of Critical Accounting Policies

The discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
the United States. The preparation of these financial statements requires us to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an ongoing basis, we continually evaluate our estimates. We
base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates.

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

Revenue Recognition

Revenue from product sales and installation is recognized upon completion
of the installation 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
Gains unit, 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 is usually one year.

Inventories

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

Impairment of Long-Lived Assets

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

Income Taxes

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

For periods prior to the acquisition of IPC Information Systems, we had
filed a consolidated federal tax return and separate and combined state tax
returns with our parent. For purposes of the accompanying combined financial
statements for the period

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October 1, 2001 to December 20, 2001, income taxes
have been prepared in accordance with SFAS No.109, Accounting for Income
Taxes and SEC Staff Accounting Bulletin Topic 1B, Allocation of Expenses and
Related Disclosure in Financial Statements of Subsidiaries, utilizing the
separate return method. Resulting payables for taxes have been recorded as
adjustments to the intercompany accounts. For periods subsequent to December 20, 2001,
we are required to file separate stand-alone tax returns.

Other Matters

We do not have any off balance sheet financial arrangements.




Item 3.     Quantitative and Qualitative Disclosure About Market Risk

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

The following table provides information about our financial instruments
that are sensitive to changes in interest rates. For debt obligations, the
table presents principal cash flows and related weighted average interest rates
by expected maturity dates. The fair value of our long-term debt is shown
below. Due to current economic conditions, the fair value of our senior
subordinated notes and our senior secured credit facilities are below their
carrying amounts. Although there were reductions in the prime and LIBOR
interest rates in the period from issuance on December 20, 2001 to June 30,
2003, they did not affect the interest rate on our senior secured credit
facilities.

|                      |                |                                                                      |  |            |       |                           |  |      |     |      |  |      |     |            |  |       |     |  |  |   |      |  |  |   |     |  |  |   |       |  |  |   |       | 
|--------------------- | -------------- | -------------------------------------------------------------------- |  | ---------- | ----- | ------------------------- |  | ---- | --- | ---- |  | ---- | --- | ---------- |  | ----- | --- |  |  | - | ---- |  |  | - | --- |  |  | - | ----- |  |  | - | ----- | 
|                      |                |                                                                      |  | Fair Value |       | Future Principal Payments
|                      |                |                                                                      |  | on June    |       |                          
|(dollars in millions) |                | 30, 2003                                                             |  | 2003       |       | 2004                      |  | 2005 |     | 2006 |  | 2007 |     | 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 (7.50% at June 30, 2003)  |  | $          | 51.9  |                           |  | $    | 1.4 |      |  | $    | 5.8 |            |  | $     | 5.8 |  |  | $ | 29.9 |  |  | $ | 9.5 |  |  | $ |      |  |  | $ | 52.4  | 
|                      |                |                                                                      |  |            |       |                           |  |      |     |      |  |      |     |            |  |       |     |  |  |   |      |  |  |   |     |  |  |   |       |  |  |  




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

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






|Item 2. |  | Changes in Securities and Use of Proceeds
|------- |  | -----------------------------------------



| |  | On April 30, 2003, the Company issued an aggregate of 664,380 shares of its common stock to Goldman
Sachs Capital Partners 2000 and its affiliates in connection with its purchase of Gains
International (US) Inc. and Gains International (Europe) Limited from Goldman Sachs Capital Partners
2000 and its affiliates. These shares were issued in reliance upon Section 4(2) of the Securities
Act of 1933, as amended.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------






|Item 3. |  | Defaults Upon Senior Securities
|------- |  | -------------------------------



| |  | None
| |  | ----






|Item 4. |  | Submission of Matters to a Vote of Security Holders
|------- |  | ---------------------------------------------------



| |  | None
| |  | ----






|Item 5. |  | Other Information
|------- |  | -----------------



| |  | None
| |  | ----






|Item 6. |  | Exhibits and Reports on Form 8-K
|------- |  | --------------------------------



| | (A) |  | EXHIBITS
| | --- |  | --------



| | 10.1 |  | Employment agreement between the
Company and Lance Boxer, dated June 19, 2003.                                                                              
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 10.2 |  | Share Purchase Agreement, dated
January 22, 2003, between Gains Acquisition Corp., Gains Asia
Acquisition Corp. and Gains International Infocom Holdings BV.
|
| | 10.3 |  | Call Option Deed, dated
January 22, 2003, between Gains International Infocom Holdings BV, IPC
Acquisition Corp. and IPC Information Systems, Inc.          
|
| | 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
| | --- |  | -------------------



| |  |  | The Company filed a report on Form 8-K on June 20, 2003. The Form 8-K was for the purpose of
announcing that on June 20, 2003, the Company announced the appointment of Lance Boxer to the newly
created position of chief executive officer, effective July 15, 2003, and that its president Greg
Kenepp will take on the additional title of chief operating officer.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Company filed a report on Form 8-K on May 7, 2003. The Form 8-K was for the purpose of
announcing that on May 6, 2003, the Company issued a press release regarding its financial results
for its second quarter ended March 31, 2003.                                                                                                                             

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| |  |  | The Company filed a report on Form 8-K on May 5, 2003. The Form 8-K was for the purpose of
announcing that on April 30, 2003, the Company exercised its option to purchase Gains International
(US) Inc. and Gains International (Europe) Limited from Goldman Sachs Capital Partners 2000 and
other private equity funds affiliated with Goldman, Sachs & Co.,
who own substantially all of the Companys common stock.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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: August 14, 2003 |  | By: /s/  TIMOTHY WHELAN
|                       |  |                         | Timothy Whelan
Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)

43